There are Free Lunches Statement of Intentions

There are Free Lunches: Behavioral Clues to Live Happy in the Economic World is a blog that intends to present updated and relevant information about the "hidden" and only recently uncovered dimensions of the economic science: the behavioral factors. With this blog we intend to promote in Europe and in the rest of the World, the top research articles and perspectives on behavioral economics, decision making, consumer behavior, and general behavioral science. We aim to be followed by journalists, academics, managers, civil servants, and everyone who wishes to improve their daily interaction with the economic world and consequently, their lives' happiness.

Thursday, 26 May 2011

Principle 6: Think About What You’re Not Thinking About

According to a recent poll, a majority of adult Canadians dream of owning a vacation home, preferably by a lake (Gilmer & Casser, 2009). The features they highlight as important for their dream cottage include peace and quiet, access to fishing and boating, and sunset vistas. These are features that are central to the very essence of a lakeside cottage, and they naturally come to mind when people envision owning a vacation home. But, taking a broader view, there are many other, less essential aspects of cottage ownership that are likely to influence owners’ happiness, from the mosquitoes buzzing just outside, to the late-night calls about a plumbing disaster in the lakeside area, to the long drives back home after a vacation weekend with sleepy children scratching their mosquito bites. Cast in the soft light of imagination, these unpleasant, inessential details naturally recede from view, potentially biasing consumers’ predictions about the degree of happiness that their purchases will provide. This phenomenon stems from a peculiar property of imagination. The farther away an experience lies in time, the more abstractly we tend to think of it (Liberman, Sagrastino, & Trope, 2002). This oversight matters because happiness is often in the details (Kahneman, Krueger, Schkade, Schwarz, & Stone, 2004; Kanner, Coyne, Schaefer, & Lazarus, 1981). On any given day, affective experience is shaped largely by local features of one’s current situation—such as experiencing time pressure at work or having a leisurely dinner with friends—rather than by more stable life circumstances (e.g., having high job security, being married; Kahneman et al., 2004). Over time, psychological distress is predicted better by the hassles and “uplifts” of daily life than by more major life events (Kanner et al., 1991). Thus, in thinking about how to spend our money, it is worthwhile to consider how purchases will affect the ways in which we spend our time. For example, consider the choice between a small, well-kept cottage and a larger “fixer upper” that have similar prices. The bigger home may seem like a better deal, but if the fixer upper requires trading Saturday afternoons with friends for Saturday afternoons with plumbers, it may not be such a good deal after all. Of course, after buying a new home, our happiness will depend not only on the ripple effects associated with home ownership, but also on the many aspects of daily life that are simply unrelated to home ownership, from birthday cakes and concerts to faulty hard drives and burnt toast. Yet, because such “irrelevant” details of daily life are obscured from view when we focus our mental telescopes on an important future event, we may frequently overestimate the emotional impact of a focal event (Wilson, Wheatley, Meyers, Gilbert, & Axsom, 2000). Wilson et al. (2000) found evidence for this idea by surveying football fans at the University of Virginia (UVA) prior to a big game against a rival school. Asked to imagine how they would feel in the days following the game, football fans expected that they would be much happier if their team won than if they lost. The day after UVA won this game, however, football fans were not nearly as ecstatic as they had expected to be. Prior to making their affective forecasts, another group of participants were asked to imagine what they would doing, hour-by-hour, on the Monday following the football game, and these participants made more moderate affective forecasts, apparently recognizing that the joy stemming from their team’s victory would be offset by the mundane activities of daily student life (e.g., eating, studying, attending class) that are unrelated to football. This suggests that consumers who expect a single purchase to have a lasting impact on their happiness might make more realistic predictions if they simply thought about a typical day in their life.

Wednesday, 25 May 2011

The Science of Compassion (via Big Think)

When people are less focused on self and the problems of the self, there is a kind of alleviation of stress. There’s nothing like reaching out and contributing to the lives of others to give a person, first of all a sense of significance and purpose. The idea of the helper’s high has been around since the early 1990’s. Allen Lukes, a psychologist, had individuals going out and helping others in various ways, at low thresholds, a couple of hours of activity at a soup kitchen or helping down the block or whatever it might be. And about half of the individuals, and this is a kind of half full/half empty paradigm, reported a feeling of elation; a kind of emotional buoyancy, if you will. Forty-three percent reported a sense of warmth and tranquility. Certainly many of them reported a sense of significance and meaning in life. And interestingly, even 13 percent said they felt an alleviation of chronic aches and pains.

If you have 2:48m you can check it all here:

Monday, 23 May 2011

There are Free Lunches @ SimoleonSense

There are Free Lunches post about "Buying Insurance and Happiness" is on the Weekly Roundup of SimoleonSense - - one of the most important blogs in the world about Behavioral Finance!
Thanks Miguel for showing your interest and keep up with the good work!!

Subliminal messages: we buy and we don't know why, or how our brain can associate "Money=KFC"

Subliminal messaging is illegal in the UK because it breaks the rules of your statutory rights as a consumer to make your own uninfluenced decisions on products. In the US it seems not to work like that, at least if we take a note at this KFC commercial.

This commercial makes your brain processing an image of both the product and a dollar bill. Seeing them together, your brain processes it as 'money= KFC' and so a few days later you might walk past KFC and decide to buy the product. Seemingly of your own choice, but actually you've ended up making a decision that KFC influenced your brain to make.

You can check how real it is here:

Tuesday, 17 May 2011

What is "Gross National Happiness"?

Bhutan, a country located at south-west of China, has a unique and commendable practice that you will find nowhere else in the world. One of the erstwhile kings thought that, while it was alright to strive towards economic progress, he must also know that people were actually becoming “happier” because of this progress. He talked about GNH (Gross National Happiness) besides measuring GNP (Gross National Product). I bet he was one of the visionaries who felt out of his wisdom that increasing wealth does not always result in proportionate increase in “happiness”.

The whole idea is quite interesting, you can check it here in 3 minutes:

Does justice depend on eating a sandwich? (via

Are judicial rulings based solely on laws and facts? Legal formalism holds that judges apply legal reasons to the facts of a case in a rational, mechanical, and deliberative manner. In contrast, legal realists argue that the rational application of legal reasons does not sufficiently explain the decisions of judges and that psychological, political, and social factors influence judicial rulings. We test the common caricature of realism that justice is “what the judge ate for breakfast” in sequential parole decisions made by experienced judges. We record the judges’ two daily food breaks, which result in segmenting the deliberations of the day into three distinct “decision sessions.” We find that the percentage of favorable rulings drops gradually from ≈65% to nearly zero within each decision session and returns abruptly to ≈65% after a break. Our findings suggest that judicial rulings can be swayed by extraneous variables that should have no bearing on legal decisions.

You can check this study from Shai Danziger, Jonathan Levav & Liora Avnaim-Pesso (2011) here:

Monday, 16 May 2011

Canadian researchers find a simple cure for cancer, but major pharmaceutical companies are not interested. Why?

Pharmaceutical companies are not investing in this research because DCA method cannot be patented, without a patent they can’t make money, like they are doing now with their AIDS Patent. Since the pharmaceutical companies won’t develop this, other independent laboratories should start producing this drug and do more research to confirm the findings and produce drugs. All the groundwork can be done in collaboration with the Universities, who will be glad to assist in such research and can develop an effective drug for curing cancer.

You can check everything abou this research program here:

Sunday, 15 May 2011

Principle 5: Pay Now and Consume Later

The shift toward immediate enjoyment and delayed payment represents a fundamental change in our economic system that undermines well-being in two important ways. The first and most obvious is that the “consume now and pay later” heuristic leads people to engage in shortsighted behavior—to rack up debts, to save little for retirement, etc. In the end, the piper must be paid, and when that happens, lives are often ruined. Vast literatures on delay of gratification, intertemporal choice, and delay discounting show that when people are impatient, they end up less well off. But there is a second reason why “consume now, pay later” is a bad idea: it eliminates anticipation, and anticipation is a source of “free” happiness. The person who buys a cookie and eats it right away may get X units of pleasure from it, but the person who saves the cookie until later gets X units of pleasure when it is eventually eaten plus all the additional pleasure of looking forward to the event. Of course, memory can be a powerful source of happiness too, and if anticipation and reminiscence were equal partners in promoting pleasure then there would be no reason to delay consumption because each day of looking forward could simply be traded for a day of looking backward. There is reason to believe, however, that anticipation is the Batman to the Robin of reminiscence. Research shows that thinking about future events triggers stronger emotions than thinking about the same events in the past. For example, students felt happier while anticipating an upcoming vacation than while reminiscing about the same vacation and bought a more expensive thank-you gift for someone who was going to do them a favor than for someone who had already done them a favor. Just as positive events that lie in the future seem better than the same events in the past, negative events that lie in the future appear worse than those in the past: mock-jurors awarded more money to an accident victim who was going to suffer for a year than who had already suffered for a year. Why, then, does consumer behavior so often reflect an apparent drive for immediate consumption? it is suggest that while the future may be more emotionally compelling than the past, nothing is as powerful as the present. Indeed, people exhibit future anhedonia, believing that their emotional responses will be less intense in the future than in the present. For example, participants believed that they would experience more pleasure on the day they received a gift if it were delivered today rather than three months later. If future feelings really were less intense than present feelings, then one could maximize benefits by consuming in the present (when the pleasure of consumption is at its zenith) and paying in the future (when the pain of paying is at its nadir). Of course, future feelings are not less intense than current ones, and thus future anhedonia is an affective forecasting error that causes people to consume immediately and thus miss out on the pleasures of anticipation.

Wednesday, 11 May 2011

Is the World Becoming Short-Sighted (via Simoleon Sense)

As individuals, it sometimes feels that way. Information is streamed in ever greater volumes and at ever rising velocities. Timelines for decision-making appear to have been compressed. Pressures to deliver immediate results seem to have intensified. Tenure patterns for some of our most important life choices (marriage, jobs, money) are in secular decline. Some have called this the era of “quarterly capitalism”.

These forces may be altering not just the way we act, but also the way we think. Neurologically, our brains are adapting to increasing volumes and velocities of information by shortening attention spans. Technological innovation, such as the world wide web, may have caused a permanent neurological rewiring, as did previous technological revolutions such as the printing press and typewriter. Like a transistor radio, our brains may be permanently retuning to a shorter wave-length.

You can check here this very interesting speech by a Bank of England official on the vanishing idea of long term:

Tuesday, 10 May 2011

There are Free Lunches Achieves 1000 Views

Only 3 weeks have gone but the magic number was achieved. I want to thank all the readers and followers of There are Free Lunches. I promess to continue to spread words of happiness in the economic world! Thank you all, Diogo

Monday, 9 May 2011

Principle 4: Buy Less Insurance

If the bad news is that we adapt to good things. The good news is that we adapt to bad things as well. Research on how well people cope with a wide variety of traumas and tragedies—from heart attacks to terrorist attacks—suggests that people are not the emotionally fragile creatures they often imagine themselves to be (Bonanno, 2004; Ubel, 2006). Just as the physical immune system wards off maladies, the “psychological immune system” wards off malaise by marshalling the remarkable human capacities of reconstrual and rationalization (Gilbert, 2006). But research suggests that people don’t know much about their own psychological immune systems (Gilbert, Pinel, Wilson, Blumberg, & Wheatley, 1998), and as a result they overestimate their vulnerability to negative affect. Businesses often trade on that ignorance by offering various forms of insurance against unhappiness, from extended warranties to generous return policies. With price tags reaching as high as 50% of a product’s original cost, extended warranties sold by retailers and manufacturers provide huge benefits to the seller and are widely acknowledged to be “bad bets” for the buyer (Berner, 2004; Chen, Kalra, & Sun, 2009). Why are consumers willing to pay so much for these overpriced warranties? Owning something instantly makes it more delightful (Kahneman, Knetsch, & Thaler, 1990; Morewedge, Shu, Gilbert, & Wilson, 2009), and as such, a plasma TV that has just become my plasma TV may seem worthy of protection. The prospect of loss is highly aversive to people, who expect the pain of losing $5 to exceed the pleasure of gaining $5 (Kahneman & Tversky). But research shows that this expectation is wrong. Kermer et al. (2006) gave participants $5, and then flipped a coin. Participants were told that if the coin came up one way they would get an additional $5, and if it came up the other way they would lose $3 of their initial endowment. Although participants expected to be more emotionally affected by the loss of $3 than by the gain of $5, they were not. Participants who lost $3 out of their initial $5 endowment were significantly less upset than they expected because they instantly framed the event as a $2 gain. Research like this suggests that buying expensive extended warranties to guard against the loss of consumer goods may be unnecessary emotional protection. The psychological immune system also provides the key to understanding the ability to “spin” events in a positive direction after they have occurred—thereby dodging regret. Recent research demonstrates that ordinary people are remarkably adept at reconstruing events in order to avoid self-blame and the regret that accompanies it, a capacity that these same individuals may fail to appreciate in prospect. When passengers on a train were asked to estimate how much regret they would feel have felt if they had missed the train by five minutes or by one minute, they estimated that they would have felt more regret in the latter case than the former. And yet, passengers who had actually missed their trains by one and five minutes reported remarkably little regret, and equally little regret regardless of whether they had missed the train by five minutes or by one (Gilbert, Morewedge, Risen, and Wilson, 2004). What explains this discrepancy? When passengers who had made their trains were asked to imagine having missed them by a minute, they imagined blaming themselves for the near miss (e.g., ―I would not have missed the train if only I’d woken up earlier and gotten out of the house faster‖). Passengers who had actually missed their trains, however, tended to blame anyone or anything but themselves (e.g., "I would have missed the train if only all the gates were open instead of just one"). Because people are highly skilled at dodging self-blame, they experience less regret than they predict. Unfortunately, this handy mental mechanism may actually be short-circuited by generous return policies. Gilbert and Ebert (2002) offered participants the choice between prints of paintings by artists ranging from Van Gogh to El Greco. After participants made their selection, half of them were presented with the equivalent of a generous store return policy: they were told, “If you change your mind about which poster you want to take home before you leave today or even any time in the next month, you can just let me know and we will exchange it for you”. The remaining participants were informed that no such exchange would be possible and that their choice was final. Participants who knew they were stuck with the poster they had chosen responded by inflating their appreciation of it, seeing the poster in a more positive light than they had initially. In contrast, participants who knew they could exchange their poster anytime were deprived of this emotional benefit of commitment and found the poster no more attractive than they had before selecting it (see also Frey, 1981; Frey, Kumpf, Irle, & Gniech, 1984; Girard, 1968; Jecker, 1964). Interestingly, however, participants failed to predict this difference and thought they would be equally happy whether they could exchange their poster or not. People seek extended warranties and generous return policies in order to preclude the possibility of future regret, but research suggests that the warranties may be unnecessary for happiness and the return policies may actually undermine it.

Friday, 6 May 2011

Physician-Assisted Suicide and Behavioral Economics (via

As the American population ages, the debate about the ethics of physician-assisted suicide for terminal patients becomes more important. Proponents of legalizing of physician-assisted suicide argue the practice is ethically justifiable because it can alleviate prolonged physical and emotional suffering associated with debilitating terminal illness. Opponents claim that legally sanctioned lethal prescriptions might destroy any remaining desire to continue living – a sign of society having “given up” on the patient. Ultimately, these arguments rest on differing opinions regarding the effect of this policy on the patient’s wellbeing. The challenge, then, is to determine how legalization of physician-assisted suicide would affect the wellbeing of terminally ill patients and their medical decision-making. Outside of philosophical arguments, examination of an interesting finding regarding physician-assisted suicide – know as “The Oregon Paradox” – can add an interesting dimension to the debate. The paradox is the finding that when terminal patients in Oregon receive lethal medication (under Oregon’s Death with Dignity Act), they often feel a sense of greater wellbeing and a desire to live longer. In 2010, of 96 patients requested lethal medication, only 61 actually took it. Even more interesting are the many anecdotal accounts of terminal patients, upon receiving lethal medication, that feel a surge of wellbeing and a desire to persevere through their illness. Why is this this the case? Looking at this question from an expected-utility perspective suggests that given the option to terminate their own life, terminal patients will decide how long they want to live by comparing the value they expect to gain from the rest of their lives to the expected intensity of their suffering. At the point where future utility is expected to be negative – that is, when the patient’s condition becomes so intolerable that living any longer is not worth the cost – the patient would choose to end life if the option were available. The critical point from this perspective is that patients choose the amount of time they are willing to continue living with their illness, which will depend how quickly they deteriorate. If the rate of deterioration is slower than expected, then patients should delay terminating their lives; if the rate of deterioration is faster than expected, patients should desire to end their lives quicker. But now let us say that patients have been prescribed lethal medication and have the option of ending their lives at any point of their choosing. As before, patients don’t want to choose a time too soon or too distant, but with the power to control the end of their lives they no longer have a reason to err on the side of haste! The patients can now wake up every day with the comfort of knowing that they do not have to suffer through pain or stress they might find intolerable. Being given the option to determine the time of our own death can transform patients from powerless victims of their illness to willing survivors of it. Together, the importance of feeling in control and the ability to reduce (but not eliminate) uncertainty about rate of deterioration adds an interesting new dimension to the underlying ethical debate and seems to provide credence to the benefits of legalized physician-assisted suicide. It is clear is that we need a greater understanding of the decision-making of patients at the end of their lives, and that with this improved understanding we can construct policy to better protect their wellbeing (for an interesting recent movie on this topic see “How to Die in Oregon”).

Tuesday, 3 May 2011

Happiness is Arriving to Portugal

Today I met the First Portuguese Happiness Club, which is located at NOVA School of Business and Economics. According to the founders, the club is a student-created, administration-supported club which believes that "happiness should be our full time job". Their goal is to increase the well-being of NOVA's community. By taking the subject of happiness seriously, the NOVA Happiness Club aims to contribute to a better society where the world of education is oriented towards a meaningful and value-based development of human well-being.
They have an internet place:; they are hosting the first Portuguese Positive Conference today:; and I feel happier after doing this post :))))))))

An Emotional Letter from a Friend at Carnegie Mellon

So I was meeting a behavioral economist in CMU Today. He actually works on online behavior and all...and he mentioned and advised me to follow a certain new blog :)...can you guess the name ? ha ha...I just told him, that the moderator is one of my greatest friends from Portugal and some day I will also contribute there :)...the moderator knows me very well...and then the professor and also a grad student told me ...tell you friend ...he is famous now...:) and I said...I am a friend of a famous man :)...(but I also told him,...that this blog is not to make anyone famous...Diogo never thought of it and neither did I ...we are friends because we have a common ideology. And that is " we hate the economists who are destroying the world with their futile effort to model everything with mathematics"... :) :)