We study the welfare properties of small individual investors of the type that trade on free platforms such as Robinhood in a framed field experiment. Our design allows us to assess the extent to which investor’s choices further their own objectives by comparing the choices they make to those they would have made if they fully comprehended the implications of their actions. On average, investors are willing to give up up to 20% of the principal to achieve the return distribution they like best relative to the one they generated through their trades.

This paper explores the limitations of widely used happiness measures in survey banks and individuals' reluctance to express their true feelings. We present robust findings: individuals tend to exaggerate their happiness levels after anticipating negative future events, as well as after experiencing negative events in the past. There is a notable disparity between reported present and past happiness. The reporting effect varies across events, with no exaggeration observed for positive events. Relying solely on happiness measures can be problematic for policy evaluation, as individuals accurately report positive effects while underestimating negatives, leading to an exaggerated perception of policy benefits.

In this project we explore the possibility that individuals use motivated reasoning to justify present-focused behavior. When facing an intertemporal choice involving the present and the future, we convince ourselves that enjoying today (less investment, more leisure, unhealthy food, etc.) is optimal because things will be easier in the future. This generates a specific set of predictions: when choosing today whether to exert effort today or tomorrow, we convince ourselves that we can do less today because the returns to effort will be higher tomorrow relative to today. But when we choose for tomorrow vs. the day after, we do not need to distort our beliefs as there are no immediate actions to be taken today. We develop and run an experiment where we find preliminary evidence of this type of belief distortion.