2012 July 02 Monday
Get There First To Influence Choices

First come, first served or bought or joined.

We experience the world serially rather than simultaneously. A century of research on human and nonhuman animals has suggested that the first experience in a series of two or more is cognitively privileged. We report three experiments designed to test the effect of first position on implicit preference and choice using targets that range from individual humans and social groups to consumer goods. Experiment 1 demonstrated an implicit preference to buy goods from the first salesperson encountered and to join teams encountered first, even when the difference in encounter is mere seconds. In Experiment 2 the first of two consumer items presented in quick succession was more likely to be chosen. In Experiment 3 an alternative hypothesis that first position merely accentuates the valence of options was ruled out by demonstrating that first position enhances preference for the first even when it is evaluatively negative in meaning (a criminal). Together, these experiments demonstrate a “first is best” effect and we offer possible interpretations based on evolutionary mechanisms of this “bound” on rational behavior and suggest that automaticity of judgment may be a helpful principle in clarifying previous inconsistencies in the empirical record on the effects of order on preference and choice.

There's something to be said for managing what you see first. For example, when shopping for some kind of item you might want to make the first thing you look at be something unappealing. That way you'll reject it and therefore consider all the remaining items more objectively.

Put first what you want people to choose.

The authors say their findings may have practical applications in a variety of settings including in consumer marketing.

"The order of individuals performing on talent shows like American Idol. The order of potential companies recommended by a stockbroker. The order of college acceptance letters received by an applicant. All of these firsts have privileged status," says Carney. "Our research shows that managers, for example in management or marketing, may want to develop their business strategies knowing that first encounters are preferable to their clients or consumers."

The study found that especially in circumstances under which decisions must be made quickly or without much deliberation, preferences are unconsciously and immediately guided to those options presented first. While there are sometimes rational reasons to prefer firsts, e.g. the first resume is designated on the top of the pile because that person wanted the job the most, Carney says the "first is best" effect suggests that firsts are preferred even when completely unwarranted and irrational.

The study's first experiment asked 123 participants to evaluate three groups: (a) two teams, (b) two male salespersons, and (c) two female salespersons. First, participants were asked to join one of the two teams and were introduced to the Hadleys and the Rodsons. Immediately following the introduction, they decided which team to join. Next, participants were told they were buying a car and introduced to two male salespersons: Jim and Jon. Immediately following the introduction, they selected the salesperson from whom they preferred to buy a car. Finally, participants were told they needed to re-make their car-buying decision and that they would be introduced to two new salespersons; this time, female: Lisa and Lori. After sequential introduction they, again, decided which person they'd like to buy a car from.

We've got so many biases built into our reasoning ability it is amazing we do as well as we do.

By Randall Parker    2012 July 02 10:37 PM   Entry Permalink | Comments (10)
2012 April 26 Thursday
Think In A Foreign Language To Make Better Decisions

Those who have read Daniel Kahneman's book Thinking, Fast And Slow will not find these results surprising: Thinking in a foreign language causes people to make better decisions. The need to think more deliberately (with the brain's system 2 in Kahneman's book) when thinking with a foreign language leads to more rational decisions.

In a study with implications for businesspeople in a global economy, researchers at the University of Chicago have found that people make more rational decisions when they think through a problem in a non-native tongue.

People are more likely to take favorable risks if they think in a foreign language, the new study showed. "We know from previous research that because people are naturally loss-averse, they often forgo attractive opportunities," said UChicago psychologist Boaz Keysar, a leading expert on communication. "Our new findings demonstrate that such aversion to losses is much reduced when people make decisions in their non-native language."

"A foreign language provides a distancing mechanism that moves people from the immediate intuitive system to a more deliberate mode of thinking," wrote Keysar, professor of psychology at UChicago, in the paper, "The Foreign Language Effect: Thinking in a Foreign Tongue Reduces Decision Biases." The paper, which appears in the current issue of Psychological Science, was co-authored by UChicago graduate students Sayuri Hayakawa and Sun Gyu An.

Most of us do not know foreign languages. Most of those who do will rarely get problems presented to them in non-native languages. So what other techniques could be used to cause more rational decision-making? How to kick the more rational part of your mind into action when the results most matter?

By Randall Parker    2012 April 26 11:16 PM   Entry Permalink | Comments (5)
2012 January 22 Sunday
Recessions Lower Pressure For Status Spending

People who aren't made poorer by recessions spend less for status signaling when others have to cut back on their own status-driven spending. If others can't flash as many status signals then people feel less need to do their own spending to signal higher status.

"Even when their consumption budget is unaffected by a recession, consumers will change their expenditure patterns because some of these expenses depend on social standards that shift with economic conditions," write authors Wagner A. Kamakura (Duke University) and Rex Yuxing Du (University of Houston).

So a recession allows some people to voluntarily take a breather from status spending.

The authors analyzed U.S. household expenditure data for more than two decades, using a model that allowed them to separate budget and positionality effects. "As one would expect, we find that the share of consumption budget devoted to nonessentials (apparel, jewelry and watches, recreation, traveling) drops, while shares devoted to essentials (food at home, housing, utilities) increase during a recession due to the budget effect," the authors write.

Wealthy consumers don't necessarily spend less out of empathy for those who are less well off. Instead, they perceive a reduction in others' expenditures on positional goods and services and feel they don't need to spend as much to maintain the same status relative to their peers, the authors explain.

During hard times, visible luxuries are hit twice, because people generally have less to spend and those who can consume feel less compelled to show off. "Keeping up with the Joneses is less onerous when they are not keeping up," the authors conclude.

People with a lower instinctive (or even practical) need to flash status symbols are relatively more free to live the way they want to live. I am reminded of a piece that Marty Cortland wrote about 4 years ago on how he had to buy a Lexus because his wife thought they weren't rich enough to drive around in a mere Buick. The tyranny of upper middle classness: you've got to flash status symbols because you aren't known as a billionaire.

“I’m not driving a Buick,” she declared. “There is no way I’m showing up at playgroup at Brook Hollow in a Buick.”

“But what about Ross Perot?” I argued. “He drives a Crown Vic.”

“Ross Perot is a billionaire,” she shrieked. “He can afford to drive anything he wants!”

I bet there are genetic variants that cause different levels of desire to have status. A combination of a low desire for status and a high desire for savings would seem the best combination for a lower stress life. Though one might still feel stress about not having saved enough.

By Randall Parker    2012 January 22 09:19 PM   Entry Permalink | Comments (4)
2011 December 20 Tuesday
Maximizers And Satisficers

Do you put a lot of effort into making decisions and still feel dissatisfied afterward?

You're in search of a new coffee maker, and the simple quest becomes, well, an ordeal. After doing copious amounts of research and reading dozens of consumer reviews, you finally make a purchase, only to wonder: "Was this the right choice? Could I do better? What is the return policy?"

Reality check: Is this you?

If so, new research from Florida State University may shed some light on your inability to make a decision that you'll be happy with.

Joyce Ehrlinger, an assistant professor of psychology, has long been fascinated with individuals identified among psychologists as "maximizers." Maximizers tend to obsess over decisions — big or small — and then fret about their choices later. "Satisficers," on the other hand, tend to make a decision and then live with it.

Happily.

I maximize and then forget. I sometimes spend a lot of time analyzing choices before I make them. I subscribe to Consumer Reports on the web. I go looking for reviews and comments. Just spent an inordinate amount of time reading to choose books for a friend for Christmas presents for example. But once I've ordered stuff I forget about it. When I order online for myself and the stuff shows up a week later in many cases I have to open the box to find out what my final decisions were. Don't have enough mental space to dwell on my purchases beyond the point I made them. Got to think about work, blog posts, chores, conversations with friends, and other demands on my time.

BTW, companies that expire online shopping carts after a few hours (or even less) are losing out sales to me. I put stuff in the cart with some indecision, go to sleep, and then a day or two later return and ask "Do I really want that stuff?". It helps to let the mind get over the initial desire. Items in the shopping cart basically become finalists for a potential buy.

Do marriages of maximizers end up in divorce court more often?

"Because maximizers want to be certain they have made the right choice," the authors contend, "they are less likely to fully commit to a decision." And most likely, they are less happy in their everyday lives.

By Randall Parker    2011 December 20 10:00 PM   Entry Permalink | Comments (13)
2011 December 17 Saturday
Do Not Mix Cheap Gifts With Expensive Gifts

If it isn't too late already then you can get better results from your Christmas giving by not mixing cheap gifts with expensive gifts.

The paper, which will be published in an upcoming issue of the Journal of Consumer Research, found that consumers don't like packages that pair something expensive with something cheap. Think of the Dutch oven and the mitt. Or an iPod that comes with a single free song. To a consumer, the add-ons aren't a nice bonus. Instead, they devalue the entire deal.

Read Jordan Weissman's whole piece at The Atlantic for the explanation why.

An interesting thing to keep in mind when evaluating stuff to buy, accomplishments of others, and other stuff: Don't let the presence of something cheap cause you to undervalue something expensive. The human mind has many built in biases to reasoning that make us evaluate people, goods, and services incorrectly.

By Randall Parker    2011 December 17 09:15 PM   Entry Permalink | Comments (2)
2011 December 13 Tuesday
Desire For Immediate Rewards Tied To Low Credit Scores

Okay, some of you will respond by saying this is a study that finds what you'd predict with high confidence. Okay. Still, sometimes it helps to study and quantify the obvious. People who go for immediate rewards rather than holding out for more later tend to have lower credit scores.

NEW YORK – December 13, 2011 – A study conducted by Columbia Business School's Prof. Stephan Meier, Regina Pitaro Associate Professor of Business, Management, and Charles Sprenger, Assistant Professor, Stanford University Department of Economics, determines that there may be a psychological reason for why people default on their mortgages. The research, which will be featured in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science, finds that the participants in the study with poor credit scores were more impatient and were more likely to choose immediate rewards rather than wait for a larger reward in the future.

My take: The study provides the occasion to discuss some interesting things about human nature. First off, surely there are genetic variants that govern time preference. People more willing to wait longer to get more probably have genetic variants that make them different in this regard. Second, once those genetic variants are discovered prospective parents will be able touse the information once offspring genetic engineering (or even just pre-implantation embryo selection using genetic tests) becomes popular). Okay, will they opt to make their kids have longer or shorter time horizons? To be more or less patient than themselves?

While working at the Federal Reserve's Center for Behavioral Economics and Decisionmaking in Boston, Massachusetts, the researchers created a study that would help determine if there are factors beyond the screening for mortgage applicants or other institutional reasons that leads to people to make the decision to default. Meier and Sprenger recruited 437 low-to-moderate income people at a community center in Boston that offered tax preparation help. Each person was given a questionnaire that featured choices between a smaller, immediate reward and a larger reward they would receive in the future. The participants also agreed to let the researchers access their FICO credit scores.

The study shows that time discounting and FICO scores were significantly correlated, and that this correlation was comparable to previously found correlations between time discounting and health behavior. Participants who were the most willing to delay rewards and exhibited more patience had FICO scores that were approximately 30 points higher than those of participants who were the least willing to delay. Also, the impatient participants fell below the subprime lending cutoff of 620. At this score, individuals generally face substantially elevated borrowing rates.

I'd like to see this repeated with an IQ test to adjust for IQ. People with greater capacity to understand the long term consequences of their choices are probably more likely to make choices with greater long term pay-off at the expense of getting less now.

Another point: the impulsive buyers with shorter time horizons probably make less optimal buying choices between competing products. If you are in a rush to buy you'll invest less time in production comparisons. So then does advertising work more powerfully on those impulsive buyers? I would expect so. So then is advertising increasing the amount of impatience and increasing impulsive spending?

By Randall Parker    2011 December 13 09:50 PM   Entry Permalink | Comments (21)
2011 October 04 Tuesday
Utilitarianism Embraced By Psychopaths, Rational Empaths?

If your empathy and desire to minimize suffering brings you to the same conclusions as a psychopaths should you be alarmed? Or should psychopaths feel vindicated?

NEW YORK – September 30, 2011 – A study conducted by Daniel Bartels, Columbia Business School, Marketing, and David Pizarro, Cornell University, Psychology found that people who endorse actions consistent with an ethic of utilitarianism—the view that what is the morally right thing to do is whatever produces the best overall consequences—tend to possess psychopathic and Machiavellian personality traits.

In the study, Bartels and Pizarro gave participants a set of moral dilemmas widely used by behavioral scientists who study morality, like the following: "A runaway trolley is about to run over and kill five people, and you are standing on a footbridge next to a large stranger; your body is too light to stop the train, but if you push the stranger onto the tracks, killing him, you will save the five people. Would you push the man?" Participants also completed a set of three personality scales: one for assessing psychopathic traits in a non-clinical sample, one that assessed Machiavellian traits, and one that assessed whether participants believed that life was meaningful. Bartels and Pizarro found a strong link between utilitarian responses to these dilemmas (e.g., approving the killing of an innocent person to save the others) and personality styles that were psychopathic, Machiavellian or tended to view life as meaningless.

Anyone familiar with how a Machiavellian differs from a psychopath?

Do rational empaths end up reaching the same conclusions as psychopaths but due to different emotional motivations?

These results (which recently appeared in the journal Cognition) raise questions for psychological theories of moral judgment that equate utilitarian responses with optimal morality, and treat non-utilitarian responses as moral "mistakes". The issue, for these theories, is that these results would lead to the counterintuitive conclusion that those who are "optimal" moral decision makers (i.e., who are likely to favor utilitarian solutions) are also those who possess a set of traits that many would consider prototypically immoral (e.g., the emotional callousness and manipulative nature of psychopathy and Machiavellianism).

While some might be tempted to conclude that these findings undermine utilitarianism as an ethical theory, Prof. Bartels explained that he and his co-author have a different interpretation: "Although the study does not resolve the ethical debate, it points to a flaw in the widely-adopted use of sacrificial dilemmas to identify optimal moral judgment. These methods fail to distinguish between people who endorse utilitarian moral choices because of underlying emotional deficits (like those captured by our measures of psychopathy and Machiavellianism) and those who endorse them out of genuine concern for the welfare of others." In short, if scientists' methods cannot identify a difference between the morality of a utilitarian philosopher who sacrifices her own interest for the sake of others, and a manipulative con artist who cares little about the feelings and welfare of anyone but himself, then perhaps better methods are needed.

This raises an important question: Are economists Machiavellians hiding as rational empaths? Or psychopaths who like to manipulate the minds of undergrads?

By Randall Parker    2011 October 04 06:09 AM   Entry Permalink | Comments (23)
2011 July 31 Sunday
Avoid Relaxation When Shopping

Feeling tense or worried or critical? Then you are in a perfect mood to bid on eBay. Relaxed people were willing to bid higher prices than the non-relaxed.

NEW YORK – July 28, 2011 – A forthcoming paper in the American Marketing Association's Journal of Marketing Research by Professor Michel Tuan Pham, Kravis Professor of Business, Marketing, Columbia Business School; Iris W. Hung, Assistant Professor of Marketing, NUS Business School, National University of Singapore; and Gerald J. Gorn, Wang Seng Liang Professor of Business, Marketing Area Chair Professor at the School of Business, Faculty of Business and Economics, the University of Hong Kong, finds that states of relaxation consistently increase the monetary valuations of products, actually inflating these valuations by about 10 percent.

Relaxation methods used included music and video known to induce a state of greater relaxation. The result: A willingness to pay more for products than they are worth.

After being put in either of these two states, participants were asked to assess the monetary value of a variety products through various methods. In six studies involving more than 670 participants, relaxed individuals were consistently found to value the products more highly than their less relaxed counterparts. For example, in one simulated bidding study, relaxed participants bid about 11 percent higher for a digital camera than less-relaxed participants. Whereas the less-relaxed participants' bids were close to the product's estimated market price on online auction sites, relaxed participants' bids were about 15 percent higher than the estimated market price. The same effect was observed across a large variety of products in other studies.

We need to manage our own emotions in order to optimize our capacity to make decisions in our own interest. Meanwhile, in the opposing corner of the marketplace boxing match marketers are busy trying to achieve the opposite goal.

By Randall Parker    2011 July 31 08:03 PM   Entry Permalink | Comments (4)
2011 May 25 Wednesday
Optimistic Areas Economically Stronger?

Does optimism increase economic growth?

Coral Gables, Fla. – May 25, 2011 – Economic recessions are weaker, expansions are stronger, and economic recovery is faster in U.S. states where people are more optimistic says a new study from the University of Miami School of Business Administration. Further, the effects are stronger in states where people are older, less educated and less socially connected.

"Previous studies have shown that economic conditions affect mood – people would expect this, it's more obvious," said Alok Kumar, the Gabelli Asset Management Professor of Finance at the University of Miami School of Business and one of the study's researchers. "Our study is unique in that it shows, for the first time, that mood and optimism can directly affect overall economic activity."

Sunny weather triggers serotonin which brightens mood and boosts optimism. Cloudy weather has the opposite efect via melatonin release.

Weather: Average temperature and cloud cover. Sunny weather triggers the release of serotonin in the brain that causes people to be more alert and cheerful. The opposite is true for bad weather because it releases melatonin that makes people feel tired and down.

So should Seattle companies install very bright artificial lighting? Also, if more people took anti-depressants would the economy grow faster?

One needs optimism to try to start or expand a business. Is irrational optimism necessary for progress?

The above report seems like further evidence you should Always Look On The Bright Side of Life . Another upbeat ditty: Galaxy Song.

By Randall Parker    2011 May 25 11:21 PM   Entry Permalink | Comments (11)
2010 December 14 Tuesday
Single Purchase Can Cause Aesthetic Disharmony

If you want to keep your spending down then avoid buying something that looks too fancy compared to your existing possessions.

The problem starts with the purchase of a new item, particularly those among designer product lines, luxury branded items, or consumer goods of high-end design. Once home, these items – graced with what researchers call salient design elements, such as a unique pattern or interesting color scheme – can look out of place when compared to other possessions. The most obvious solution to this aesthetic mismatch would be to return the item to the store.

But instead of making a return, consumers who were surveyed said they would make more purchases in an effort to try to surround their designer purchase with other luxury items and restore aesthetic harmony, according to marketing professors Vanessa Patrick of the University of Houston and Henrik Hagtvedt of Boston College, whose study is forthcoming in the Journal of Marketing Research. In fact, this additional string of purchases may represent a far larger expenditure than the initial purchase

Of course, if you enjoy aesthetic harmony then you might be able to get away with buying an item that does not fit with everything else you own.

Update: A friend comments that images on a TV set also disrupt aesthetic harmony. They show goods that are out of place with what is in the house or apartment.

By Randall Parker    2010 December 14 10:37 PM   Entry Permalink | Comments (3)
2010 October 07 Thursday
Thinking About Time Or Money

People who think about time decide to socialize more while people who think about money want to work more.

Does thinking about time or money make you happier? A new study published in Psychological Science, a journal of the Association for Psychological Science, finds that people who are made to think about time plan to spend more of their time with the people in their lives while people who think about money fill their schedules with work, work, and—you guessed it—more work. 

To find out how thinking about time or money makes people feel, Cassie Mogilner of the University of Pennsylvania designed an experiment, carried out online with adults from all over the United States, in which they concentrated on money or time. In this experiment, volunteers were asked to unscramble a series of sentences. Some participants were presented with sentences containing words related to time (e.g., “clock” and “day”), whereas others’ sentences contained words related to money (e.g., “wealth” and “dollar”). Next all participants were asked how they planned to spend their next 24 hours. The ones who had been primed to think about time planned to spend more time socializing. People who’d been primed to think about money planned to spend more time working. 

Can one motivate oneself to work harder by putting money cues in one's environment? Say, a dollar bill in a picture frame on a shelf? I am interested in the more general topic of how to construct one's personal environment to cause one to behave more to one's liking. Have any interesting tricks for motivating yourself?

Poor people did not react the same way.

She also carried out the experiment on low-income people and found that having them think about time had the same effect, but having them think about money did not. This may mean that low-income people already live concerned about and, therefore, highly focused on money, Mogilner speculates.

Another interpretation: For some their poverty is caused by less desire to work. They are not easily motivated to work. Another similar possibility: Poor people feel too inefficacious and do not think they can raise their living standards by working harder.

By Randall Parker    2010 October 07 10:08 PM   Entry Permalink | Comments (1)
2010 May 30 Sunday
Human Brains Not Wired For Consumer Credit

An article in the The Star of Toronto about Canadian debt quotes CalTech behavioral economics researcher Colin Camerer on how we just aren't adapted to modern consumer credit and humans clearly can't handle it. Governments, also made up of humans, similarly can't handle debt rationally either.

How were consumers expected to fare in, if not a free-money environment, certainly an easy-money environment here at home? “The idea that you can walk into a store with a piece of plastic — you may even be a college student with no income — and buy $5,000 worth of stuff is unbelievable,” Camerer continues. “Thinking like a neuroscientist, nothing in our brain evolution has equipped us to make the right decision in that case.”

When we buy on credit the part of our brain that registers that we are acquiring some good experiences a stronger stimulus than the part of our brain that registers that we are taking on a debt or future obligation.

The brain, in other words, isn’t really up to the task. “We’re not well equipped to say if I give this piece of plastic to this person and scribble my name, 10 years from now I might owe $67,000. It’s sort of a battle between this highly evolved acquisitive nature and the ability to imagine owing a lot of money years from now. The acquisitive nature part of the brain wins.”

When he says “imagine owing,” Camerer is referring to the magic of compound interest. “We’re pretty good intuitively at linear extrapolation,” he says — if you pay $100 each year for 10 years how much will you have paid at the end of that period? “But we’re not very good at the numeracy of compound interest.”

From an evolutionary perspective this is not surprising. For only a very very small portion of our evolutionary history did most goods and services come to us as a result of market transactions. Middle Ages subsistence farmers did not have bank accounts or credit cards.

The article quotes another researcher who argues that humans tend to overestimate good things happening to them and underestimate bad things happening to them. That sounds about right. For that reason humans have failed to prepare one of the worst coming developments of the next 20 years. How can things possibly go that bad? There's the expectation of continuity in a good way.

By Randall Parker    2010 May 30 06:15 PM   Entry Permalink | Comments (48)
2010 April 29 Thursday
Competition Or Rewards More Important?

Does the possibility of winning and losing drive competitive people more than the rewards for winning?

Whether it’s for money, marbles or chalk, the brains of reward-driven people keep their game faces on, helping them win at every step of the way. Surprisingly, they win most often when there is no reward.

That’s the finding of neuroscientists at Washington University in St. Louis, who tested 31 randomly selected subjects with word games, some of which had monetary rewards of either 25 cents or 75 cents per correct answer, others of which had no money attached.

Personality tests were used to measure competitiveness and the degree to which each subject was driven by monetary rewards. But on trials where no rewards were offered the competitive personalities did even better than in trials where rewards were offered.

But the researchers found a paradoxical result: The performance of the most reward-driven individuals actually was most improved — relative to the less reward-driven — in the trials that paid nothing, not the ones in which there was money at stake.

Even more striking was that the brain scans taken using functional Magnetic Resonance Imaging (fMRI) showed a change in the pattern of activity during the non-rewarded trials within the lateral prefrontal cortex (PFC), located right behind the outer corner of the eyebrow, an area that is strongly linked to intelligence, goal-driven behavior and cognitive strategies. The change in lateral PFC activity was statistically linked to the extra-behavioral benefits observed in the reward-driven individuals.

One explanation is that competing in trials where rewards were offered got the competitive people into a competitive mood that carried over to other trials.

The researchers suggest that this change in lateral PFC activity patterns represents a flexible shift in response to the motivational importance of the task, translating this into a superior task strategy that the researchers term “proactive cognitive control.”

In other words, once the rewarding motivational context is established in the brain indicating there is a goal-driven contest at hand, the brain actually rallies its neuronal troops and readies itself for the next trial, whether it’s for money or not.

What I wonder: How strong is the link between competitiveness and the desire for rewards? Perhaps competitiveness is most important as a characteristic that drives people to succeed.

Highly competitive people who do not have jobs that allow them to compete probably do not work as effectively as they otherwise would. For someone who gets thrill from winning against others what's needed is an environment where most tasks are competitions, where lots of wins and losses happen every day.

Does a different subset of people feel driven to achieve goals without the need to feel like they are competing against others? Is there a winning orientation separate from a goal achievement orientation?

By Randall Parker    2010 April 29 11:56 PM   Entry Permalink | Comments (4)
2010 April 24 Saturday
Peers Do Not Like Your Possessions

Hide your stuff if you want to be well liked. Or hang out with people even richer than you are. Of course, then you might not like your rich friends with all their expensive gadgets, luxury goods, and big houses.

People who pursue happiness through material possessions are liked less by their peers than people who pursue happiness through life experiences, according to a new study led by University of Colorado at Boulder psychology Professor Leaf Van Boven.

Van Boven has spent a decade studying the social costs and benefits of pursuing happiness through the acquisition of life experiences such as traveling and going to concerts versus the purchase of material possessions like fancy cars and jewelry.

"We have found that material possessions don't provide as much enduring happiness as the pursuit of life experiences," Van Boven said.

The "take home" message in his most recent study, which appears in this month's edition of the Personality and Social Psychology Bulletin, is that not only will investing in material possessions make us less happy than investing in life experiences, but that it often makes us less popular among our peers as well.

This all reminds me of Geoffrey Miller's book Spent: Sex, Evolution, and Consumer Behavior. People who buy high status goods overestimate the benefits these goods have on their status. Either people don't even notice the expensive watch or they resent you for owning it.

Take home lesson: Emphasize the trips you've been on in conversations. Or talk about near accidents or fist fights in bars or how you almost got mauled by a bear (one almost got me once btw). Stay away from talk about your second home or that 50 foot boat you've got parked down in Florida or the house boat on Lake Mead. Definitely absolutely do not mention your private island. We do not want to hear about it. Besides, I'll just tell you it is going to get wiped out by rising seas.

Okay, in the comments do you want to list some expensive possessions and make people hate you like you condescend and look down on their poor inferior asses? Or do you want to regale them with tales of how you almost died in the Kalahari desert or maybe in the Serengeti? Or maybe you escaped from kidnappers in Rio? If you bribed your way out of a prison in Mexico it implies you had the money need to do the bribery. So that's somewhat of a mixed bag.

War stories about Iraq or Afghanistan are better if a government sent you there at low pay as an enlisted man. If you went to the same area on your own dime it implies more wealth. Though if you are poor today that's probably okay to talk about.

By Randall Parker    2010 April 24 05:05 PM   Entry Permalink | Comments (5)
2010 April 14 Wednesday
Brain Circuit Resists Instant Gratification

There are at least two parts of the brain that influence whether you go for instant gratification.

New research reveals a brain circuit that seems to underlie the ability of humans to resist instant gratification and delay reward for months, or even years, in order to earn a better payoff. The study, published by Cell Press in the April 15 issue of the journal Neuron, provides insight into the capacity for "mental time travel," also known as episodic future thought, that enables humans to make choices with high long-term benefits.

If the anterior cingulate cortex (ACC) influences how we trade off between instant gratification and larger long term reward then will offspring be genetically engineered in the future to make future generations more future oriented and with larger instinctive desires to save and accumulate wealth? Will you opt for a treatment that increases the link between your ACC and hippocampus in a way that increases your motive to save?

Imagining the future causes a shift in emphasis away from immediate gratification and toward longer term bigger rewards. So it stands to reason that reading and writing FuturePundit makes us all more prone to save.

Human subjects had to make a series of choices between smaller immediate and larger delayed rewards while brain activity was measured with fMRI. Importantly, in addition to this standard control condition, the participants were presented with "cues" that referred to real subject-specific future events planned for the respective day of reward delivery. The researchers observed that the more the cues induced spontaneous episodic imagery, the more subjects changed their preferences toward patient, future-minded choice behavior.

Further, the neuroimaging data revealed that signals in the anterior cingulate cortex (ACC), a part of the brain implicated in reward-based decision making, and functional coupling of this region with the hippocampus, linked with imagining the future, predicted the degree to which forward thinking modulated individual preference functions.

"Taken together, our results reveal that vividly imagining the future reduced impulsive choice," concludes Dr. Peters. "Our data suggest that the ACC, based on episodic predictions involving the hippocampus, supports the dynamic adjustment of preference functions that enable us to make choices that maximize future payoffs."

I'm changing your time preference.

For example: If you spend less and save lots of money every year for rejuvenation therapies you'll be able to afford to buy the earliest life extending and rejuvenating therapies. You might need to travel to China or perhaps a Caribbean country to buy new treatments before they are approved in more developed and regulated countries. So think more about your future sexy, smarter, rejuvenated self and spend less today.

By Randall Parker    2010 April 14 10:52 PM   Entry Permalink | Comments (9)
2010 April 01 Thursday
With More Information People Make Worse Choices?

The better the trade-offs of smaller short term versus bigger long term gain were explained the more the experimental subjects preferred the short term immediate but smaller rewards.

When faced with a choice that could yield either short-term satisfaction or longer-term benefits, people with complete information about the options generally go for the quick reward, according to new research from University of Texas at Austin psychologists.

The findings, available online in the journal Judgment and Decision Making, could help better explain the decisions people make on everything from eating right and exercising to spending more on environmentally friendly products.

"You'd think that with more information about your options, a person would make a better decision. Our study suggests the opposite," says Associate Professor Bradley Love, who conducted the research with graduate student Ross Otto. "To fully appreciate a long-term option, you have to choose it repeatedly and begin to feel the benefits."

Humans apply too large a discount rate to the future. We are in an environment where a smaller discount rate would work better for us. But we evolved in environments where higher discount rates were adaptive. What I'd like to know: which genetic variants influence discount rates humans use when making various types of decisions. When offspring genetic engineering becomes possible will people decide to give their children stronger preferences for deferred consumption?

With better understanding of the choices the experimental subjects went for the immediate reward.

As part of the study, 78 subjects were repeatedly given two options through a computer program that allowed them to accumulate points. For each choice, one option offered the subject more points. But choosing the other option could lead to more points further along in the experiment.

A small cash bonus was tied to the subjects' performance, providing an incentive to rack up more points during the 250 trial questions.

However, subjects who were given full and accurate information about what they would have to give up in the short term to rack up points in the long term, chose the quick payoff more than twice as often as those who were given false information or no information about the rewards they would be giving up.

By Randall Parker    2010 April 01 12:10 AM   Entry Permalink | Comments (9)
2010 March 22 Monday
Being Richer Than Others Key To Happiness

Relative advantage is key. It is all about status striving. This poses an obvious obstacle in the way of making everyone very happy.

A study by researchers at the University of Warwick and Cardiff University has found that money only makes people happier if it improves their social rank. The researchers found that simply being highly paid wasn’t enough – to be happy, people must perceive themselves as being more highly paid than their friends and work colleagues.

Now, if most people could spend time in virtual worlds where lots of simulated people are poorer than them think of the potential for increased happiness. The problem with The Matrix is that all shared the same common simulated reality. To enable real people to all experience high status it is necessary for simulated people to pose as the poor.

All that economic growth did not increase happiness.

The researchers were seeking to explain why people in rich nations have not become any happier on average over the last 40 years even though economic growth has led to substantial increases in average incomes.

Lead researcher on the paper Chris Boyce from the University of Warwick’s Department of Psychology said:

“Our study found that the ranked position of an individual’s income best predicted general life satisfaction, while the actual amount of income and the average income of others appear to have no significant effect. Earning a million pounds a year appears to be not enough to make you happy if you know your friends all earn 2 million a year”

I view socialism as an attempt to reduce the number of people one has to feel inferior to. Hence its enduring popularity.

Another possibility going forward: genetically engineer some humans to feel happy from sacrifice, poverty, and very hard work. One problem for the wealthier naturals: What's the sense of having more than others if others are genetically engineered to not feel lower in status when you cruise by in your Bentley? Genetic engineering to feel happy about low status seems necessary to make this work.

Speaking strictly for myself: I'd rather have a perpetually young body than higher status. But I expect people with higher status will get access to rejuvenation therapies before the masses do. I'm saving to pay for the first rejuvenation therapies. Fewer status-enhancing posessions now. Younger body later.

By Randall Parker    2010 March 22 09:30 PM   Entry Permalink | Comments (28)
2010 March 02 Tuesday
Darkness Spurs Selfishness

Selfishness comes out at night.

Psychological scientists Chen-Bo Zhong, Vanessa K. Bohns (both of University of Toronto’s Rotman School of Management), and Francesca Gino (University of North Carolina at Chapel Hill) conducted three experiments to test whether darkness can license dishonest and self-interested behaviors. In the first experiment, participants were placed in a dimly or well-lit room and received a brown envelope that contained $10 along with one empty white envelope. They were then asked to complete a worksheet with 20 matrices, each consisting of 12 three-digit numbers. The participants had five minutes to find two numbers in each matrix that added up to 10. The researchers left it up to the participants to score their own work and for each pair of numbers correctly indentified they could keep $0.50 from their supply of money. At the end of the experiment, the participants were asked to place the remainder of their money into the white envelope on their way out. While there was no difference in actual performance, participants in the slightly dim room cheated more and thus earned more undeserved money than those in a well-lit room.

People who wear sunglasses are more selfish.

In the second experiment, some participants wore a pair of sunglasses and others wore clear glasses while interacting with an ostensible stranger in a different room (in actuality participants interacted with the experimenter). Each person had $6 to allocate between him-or herself and the recipient and could keep what he or she didn’t offer. Participants wearing sunglasses behaved more selfishly by giving significantly less than those wearing clear glasses.

People who wear sunglasses feel more anonymous.

In the third experiment, the scientists replicated the previous experiment and then measured the extent to which participants felt anonymous during the experiment. Once again, those wearing sunglasses gave significantly less money and furthermore, those wearing sunglasses reported feeling more anonymous during the study.

One can see this as an argument against shopping for used cars in the evening. Oh, and don't trust the sales guy wearing sunglasses.

But what about ethical selfishness? If you find it hard to say no to a manipulative person then put on some shades.

By Randall Parker    2010 March 02 09:59 PM   Entry Permalink | Comments (9)
2010 February 25 Thursday
High Status Means More Brain Striatum Dopamine Receptors

If you have high social status you are more likely to enjoy rewards and feel motivations due to higher dopamine receptor concentrations.

Philadelphia, February 3, 2010 - People have typically viewed the benefits that accrue with social status primarily from the perspective of external rewards. A new paper in the February 1st issue of Biological Psychiatry, published by Elsevier suggests that there are internal rewards as well.

Dr. Martinez and colleagues found that increased social status and increased social support correlated with the density of dopamine D2/D3 receptors in the striatum, a region of the brain that plays a central role in reward and motivation, where dopamine plays a critical role in both of these behavioral processes.

The researchers looked at social status and social support in normal healthy volunteers who were scanned using positron emission tomography (PET), a technology that allowed them to image dopamine type 2 receptors in the brain.

This data suggests that people who achieve greater social status are more likely to be able to experience life as rewarding and stimulating because they have more targets for dopamine to act upon within the striatum.

What's the direction of cause and effect here? Might the higher dopamine receptor concentration motivate people do to more to raise their status? Or does the brain grow more dopamine receptors once higher status has been achieved?

By Randall Parker    2010 February 25 11:17 PM   Entry Permalink | Comments (7)
2010 February 24 Wednesday
Bigger Brain Reaction For Poor Getting Money

Humans have an instinctive desire to redistribute some of the wealth?

PASADENA, Calif.—The human brain is a big believer in equality—and a team of scientists from the California Institute of Technology (Caltech) and Trinity College in Dublin, Ireland, has become the first to gather the images to prove it.

Specifically, the team found that the reward centers in the human brain respond more strongly when a poor person receives a financial reward than when a rich person does. The surprising thing? This activity pattern holds true even if the brain being looked at is in the rich person's head, rather than the poor person's.

These conclusions, and the functional magnetic resonance imaging (fMRI) studies that led to them, are described in the February 25 issue of the journal Nature.

"This is the latest picture in our gallery of human nature," says Colin Camerer, the Robert Kirby Professor of Behavioral Economics at Caltech and one of the paper's coauthors. "It's an exciting area of research; we now have so many tools with which to study how the brain is reacting."

I always wonder how much people hold some opinion or preference due to reasoning that they claimed to have used to arrive at their conclusion. When is logical reasoning the cause of an opinion versus a rationalization produced produced after conscious awareness of the preference? My guess is that most of the time we are not aware of our rationalizing and we tend to want to believe that our conscious reasoning brought us to some point of view.

By Randall Parker    2010 February 24 10:35 PM   Entry Permalink | Comments (17)
2009 December 11 Friday
Hourly Pay Brings More Joy Than Salary?

Happiness comes by the hour.

Los Angeles, London, New Delhi, Singapore and Washington DC (December 10, 2009) People paid by the hour exhibit a stronger relationship between income and happiness, according to a study published in the current issue of Personality and Social Psychology Bulletin (PSPB), the official journal of the Society for Personality and Social Psychology.

Researchers explored the relationship between income and happiness by focusing on the organizational arrangements that make the connection between time and money. They found that the way in which an employee is paid is tied to their feeling of happiness.

Thinking that you are primarily working to earn a medium of exchange makes you more happy?

The researchers theorize that hourly wage-earners focus more attention on their pay than those who earn a salary. That concrete, consistent focus on the worth of the employee's time in each paycheck influences the level of happiness the employee feels.

"Much of our day-to-day lives are subject to various organizational practices of payment that can prime different ways of thinking, such as the monetary value of one's time," write authors Sanford E. DeVoe of the University of Toronto and Jeffrey Pfeffer of Stanford University. "It is important to consider the broader context in which people live and work in order to gain a better understanding of the determinants of happiness."

Would you rather make $500 per hour or $1 million per year? I would prefer the $500 per hour if I thought I could be sure of getting enough billable hours.

By Randall Parker    2009 December 11 09:35 PM   Entry Permalink | Comments (29)
2009 December 10 Thursday
Fairness Perceptions Differ When Money Involved

Goods that have perceived innate value elicit a different mental state and sense of morality than mediums of exchange do.

A study to be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science, shows that when it comes to distributing resources, people’s ideas about what’s fair change depending on what’s being handed out. If it’s something that has its own intrinsic value – in-kind goods such as food or vacation days – people are more likely to see equal distribution of such items as fair.

But if it’s something that is only valuable when it’s exchanged – such as money or even credit card reward points – ideas of fairness shift to a more market-based attitude. In that case, the thinking is that people should receive according to what they’ve contributed.

“What exactly is it about money that causes people to treat it so differently than other resources?” asks Sanford DeVoe, an assistant professor of organizational behaviour, at the University of Toronto’s Rotman School of Management who co-wrote the paper with Columbia University’s Sheena Iyengar.

“The paper shows that it is the property of money being a medium of exchange,” Prof. De Voe says. “When you allocate something that only has its value in what it can be exchanged for, that is what activates a market mindset and really invokes these strong norms about input and effort leading to reward.”

So then do we have an innate market mindset capacity that was selected for? Can we manipulate our environment to cause us to spend more or less time with a market mindset? Do people who make more money spend more of their mental time with a market mindset?

By Randall Parker    2009 December 10 10:55 PM   Entry Permalink | Comments (7)
2009 December 09 Wednesday
Testosterone Increases Fairness In Game-Playing?

Testosterone caused economic game players to make better offers.

For the study, published in the renowned journal Nature, some 120 test subjects took part in a behavioral experiment where the distribution of a real amount of money was decided. The rules allowed both fair and unfair offers. The negotiating partner could subsequently accept or decline the offer. The fairer the offer, the less probable a refusal by the negotiating partner. If no agreement was reached, neither party earned anything.

Before the game the test subjects were administered either a dose of 0.5 mg testosterone or a corresponding placebo. "If one were to believe the common opinion, we would expect subjects who received testosterone to adopt aggressive, egocentric, and risky strategies – regardless of the possibly negative consequences on the negotiation process," Eisenegger elucidates.

Fairer with testosterone

The study's results, however, contradict this view sharply. Test subjects with an artificially enhanced testosterone level generally made better, fairer offers than those who received placebos, thus reducing the risk of a rejection of their offer to a minimum. "The preconception that testosterone only causes aggressive or egoistic behavior in humans is thus clearly refuted," sums up Eisenegger. Instead, the findings suggest that the hormone increases the sensitivity for status. For animal species with relatively simple social systems, an increased awareness for status may express itself in aggressiveness. "In the socially complex human environment, pro-social behavior secures status, and not aggression," surmises study co-author Michael Naef from Royal Holloway London. "The interplay between testosterone and the socially differentiated environment of humans, and not testosterone itself, probably causes fair or aggressive behavior".

Maybe testosterone causes people to make more precise calculations of their self-interest? Might higher testosterone levels signal to the brain that one has higher status and that one needs to offer good deals to those with lower status in order to stay on top of the status heap?

By Randall Parker    2009 December 09 08:41 PM   Entry Permalink | Comments (7)
2009 September 18 Friday
Tightwads And Spendthrifts Attracted To Each Other

Scott Rick of Michigan's Ross School of Business find that tightwads and big spenders are attracted to each other and then make unhappy marriages.

Rick and colleagues Deborah Small of the University of Pennsylvania and Eli Finkel of Northwestern University surveyed more than 1,000 married and unmarried adults in three separate studies to find out whether feelings toward spending money predict who people will marry and whether spousal differences in feelings toward spending money influence marital well-being.

They found that both tightwads and spendthrifts are unhappy with their emotional reactions toward spending money—and the more dissatisfied they are, the more likely they are to be attracted to people with opposing views toward spending.

"However, this complementary attraction ultimately appears to hurt marriages, as it is associated with greater conflicts over money and diminished marital well-being," Rick said. "The more spouses differ on the tightwad-spendthrift dimension, the more likely they are to argue over money and the less satisfied they are with the marriage.

"This remains true even when income, debt and savings are controlled for. That is, even though a spendthrift will have greater debt when married to another spendthrift than when married to a tightwad, the spendthrift is still less likely to argue about money with the other spendthrift."

No wonder so many marriages end in divorce. People enter into marriage with incompatible desires about money. But they choose the incompatibility.

Not married yet? If you are a tightwad then marry a fellow tightwad. If you are a spendthrift then I do not know what to advise. You are headed for financial disaster.

By Randall Parker    2009 September 18 10:48 AM   Entry Permalink | Comments (14)
2009 September 04 Friday
Financially Impulsive Are Generally Impulsive

People who are impulsive show impulsive tendencies in multiple areas.

The study, conducted through the BBC website with over 40,000 participants, measured people's financial impulsivity by asking whether they would they prefer to receive £45 in three days or £70 in three months. The survey asked a related series of questions about other behaviours. Nearly half of those who responded preferred the smaller-sooner sum of money, and these people were more likely to show a raft of other impulsive behaviours.

Dr Stian Reimers, ESRC Centre for Economic Learning and Social Evolution at UCL, says: "One of the big questions about people's financial planning is whether decisions to spend or save come from personal knowledge and experience of money matters or whether they reflect someone's personality more generally.

"Our research shows that people with an impulsive money-today attitude ignore the future in other ways. For example, they are more likely to smoke and more likely to be overweight, which may reflect a preference for immediate pleasure of nicotine and food over long-term good health. People who chose to take the smaller-sooner amount of money were also more likely to admit to having had an affair in recent years, suggesting another manifestation of desire for immediate gratification."

So impulsiveness tends to express itself in many ways in the same person. I wonder if some readers though would admit to impulsiveness in only very narrow areas of behavior. Anyone have untypical impulsiveness?

Someone who takes the £45 now is turning down a 56% return in just 3 months. You can't expect such a person to save for their rent let alone for their retirement. The rest of us end up paying thru taxes and other means to support the most impulsive.

Imagine credit card issuers were allowed to somehow measure impulsiveness. What would they do with the results? On the one hand, impulsive people are more likely to run up debts they can not pay. On the other hand, credit card companies make money by charging high interest rates to people who insist on immediate gratification. Credit card issuers would probably ideally like to prey on people who have moderate impulsiveness and substantial earnings capability.

The most surprising thing I've read lately related to impulsiveness is that men who have had fewer sexual partners have more babies. I take that to mean that at least monogamy is being selected for. Possibly lower impulsiveness is also getting selected for. I'd like to see an impulsiveness study on middle aged men and women where they are questioned about their offspring. Do less impulsive people have more babies? That'd be good news if so.

By Randall Parker    2009 September 04 02:17 PM   Entry Permalink | Comments (3)
2009 March 27 Friday
Vindictive People Make Less Money

Some German researchers find that people who use more negative reciprocity in their dealings with others spend more time unemployed, have fewer friends, and are less satisfied. Don't count every reason you think others are unfair.

Vindictiveness doesn't pay. This has been demonstrated by a current study at Bonn and Maastricht Universities. According to this study, a person inclined to deal with inequity on a tit-for-tat basis tends to experience more unemployment than other people. Vindictive people also have less friends and are less satisfied with their lives. The study appears in the current edition of the Economic Journal.

We tend to live by the motto "tit for tat". We repay an invitation to dinner with a counter-invitation; when a friend helps us to move house, we help to move his furniture a few months later. On the other hand, we repay meanness in the same coin. Scientists speak here of reciprocity. A person who repays friendly actions in a like manner is said to behave with positive reciprocity, and one who avenges unfairness acts with negative reciprocity.

Positive and negative reciprocity are interdependent traits: many people incline to positive reciprocity, others more to negative; others, again, incline to both. The researchers from Bonn and Maastricht wanted to discover what influence these traits of character have on parameters such as "success" or "satisfaction with life". For this, they resorted to data from the so-called "socio-economic panel". This contains information gathered by the Deutsche Institut für Wirtschaftsforschung (German Institute for economic Research) in its annual surveys. These involve around 20,000 respondents from all over Germany and cover a diversity of topics.

Positively reciprocal people work more and make more money.

The researchers then related these data to other results of the survey, whereby they stumbled upon a number of interesting correlations: "Thus, positively reciprocal people tend on average to perform more overtime, but only when they find the remuneration fair", declares Professor Dr. Thomas Dohmen of Maastricht University. "As they are very sensitive to incentives, they also tend to earn more money".

Stay away from vindictive people. Of course, if you are one then that's hard to do.

This is in stark contrast to vindictive people. With these people, the equation "more money = more work" does not always apply. Even pay cuts are not an effective means of bringing negatively reciprocal people back into line. Ultimately the danger arises that they will take revenge – for example, by refusing to work, or by sabotage. "On the basis of these theoretical considerations it would be natural to expect that negatively reciprocal people are more likely to lose their jobs", Falk explains: "A supposition which coincides with our results. Consequently, negatively reciprocal people experience a significantly higher rate of unemployment".

I say strive to be constructive and productive. Works for me.

By Randall Parker    2009 March 27 12:58 AM   Entry Permalink | Comments (28)
Fear And Romantic Desire Prompt Opposite Views Of Crowds

Advertisers who use popularity of a product or location as a selling point should stop and ask whether they are selling to people who fear or people driven by romantic desire. The emotional state of a person influences whether they see safety in numbers.

In the forthcoming paper "Fear and Loving in Las Vegas: Evolution, Emotion, and Persuasion," Griskevicius and his co-authors find that the emotion we are currently feeling has a strong effect on whether we decide to conform or to go against the grain "Being afraid especially leads people to go along with the crowd, activating a 'safety-in-numbers' psychology," said Griskevicius. "A feeling of lust, however, motivates people to go it alone, activating a desire to be seen as unique. Feeling scared or amorous can greatly change the way people make decisions."

To test the idea, the researchers had people watch a short clip from a frightening or a romantic film. Afterward, people viewed ads for Las Vegas that contained commonly used persuasive appeals either rooted in conformity ("over a million sold") or rooted in uniqueness ("stand out from the crowd"). After watching a scary film, people were especially persuaded by conformity-based appeals that presented the trip as a popular option. In contrast, after people watched a romantic film clip, they were not only less persuaded by the same conformity-based appeal, but such appeals were counter-persuasive. The romantically minded individuals especially did not want to visit Las Vegas if they knew that many others are already going. Instead, people in a romantic state were much more persuaded by appeals that presented the trip as a unique, unusual, or exotic choice that others might not make.

Since I generally eschew crowds I guess I'm more romantic than fearful. Of course, whether the crowd is the safe place to be depends on who's in the crowd.

By Randall Parker    2009 March 27 12:47 AM   Entry Permalink | Comments (2)
2009 March 24 Tuesday
Expert Financial Advice Cuts Brain Activity

All the people who watch financial news channels and then decide how to invest are probably thinking less than those who do not watch those shows. Brain scans show expert advice reduces brain activity in areas active when doing decision-making.

ATLANTA– A study using functional magnetic resonance imaging (fMRI) shows that expert advice may shut down areas of the brain responsible for decision-making processes, particularly when individuals are trying to evaluate a situation where risk is involved. The study was published in the March 2009 issue of the Public Library of Science (PLOS One).

People just say "Hey, I got answers. I can stop thinking about it." There's a lesson here.

Study participants were asked to make a series of financial choices between a guaranteed payment and a lottery while undergoing fMRI scanning. During portions of the testing, the participants had to make decisions on their own; during other portions, they received advice from a financial expert about which choice to make.

"Results showed that brain regions consistent with decision-making were active in participants when making choices on their own; however, there occurred an offloading of the decision-making process in the presence of expert advice," says Jan B. Engelmann, PhD, Emory research fellow in the Department of Psychiatry and Behavioral Sciences, and first author of the study.

"The expert provided very conservative advice, which in our experiment did not lead to the highest earnings. But the brain activation results suggested that the offloading of decision making was driven by trust in the expert," explains C. Monica Capra, PhD, an economist in the Department of Economics at Emory and coauthor of the study.

"This study indicates that the brain relinquishes responsibility when a trusted authority provides expertise, says Berns. "The problem with this tendency is that it can work to a person's detriment if the trusted source turns out to be incompetent or corrupt."

It is hard to know whether someone is an expert. Those confident-sounding types might just be wishful bettors. Sometimes they stand to profit if they can get more people to listen to them and so they strive to sound credible.

You can not escape the need to think - at least not without paying a price.

By Randall Parker    2009 March 24 10:58 PM   Entry Permalink | Comments (4)
2009 March 18 Wednesday
Wishful Bettors Draw Others Into Dubious Investment Choices

Overly optimistic people end up drawing more knowledgeable investors into unwise investment positions.

AUSTIN, Texas—Wishful bettors, those who make overly optimistic investments, will ultimately harm themselves financially, but they can harm entire markets as well, new research shows.

In the paper, "Contagion of Wishful Thinking in Markets," researchers from The University of Texas at Austin and Cornell University demonstrate how wishful betting can contaminate beliefs throughout markets, as other market participants infer wishful bettors possess more favorable information than they do. As a consequence, investors who initially held accurate beliefs become overly optimistic about stock values. The research will be published in a forthcoming issue of Management Science.

"The findings of our studies contradict what many people assume about markets, that wishful thinkers will be identified and disciplined by more sophisticated investors," said Nicholas Seybert, an assistant professor of finance at the McCombs School of Business at The University of Texas at Austin. "Instead, investors fail to recognize the existence of wishful betting even though most of them do it. As a result, wishful thinking can be contagious in financial markets."

Over the years I've gradually dialed down in my mind my assumptions about the levels of competence in others in higher status positions. One of the biggest mistakes to avoid: just because someone is very competent about topic A that does not mean when they make equally confident statements about topic B that they have a clue as to what they are talking about. So many experts do not realize how ignorant they are outside of their areas of real expertise.

People expect others must know better what they are doing. I think we are all looking for leaders to follow.

Investors started with a short position in half of the stocks and a long position in the other half. The researchers reasoned that investors in short positions would desire low stock values, while those in long positions would desire high stock values. Despite all investors' initially holding unbiased beliefs about intrinsic stock values, those in short positions sold too many shares and those in long positions purchased too many shares. More surprisingly, investors did not anticipate this wishful betting behavior on the part of others. Even though they themselves purchased or sold too many shares of stock, they believed that other investors' trades were based on fundamental information about intrinsic value. By the end of trade, market prices were too extreme and the average investor appeared to be a "wishful thinker" – holding overly optimistic beliefs about intrinsic value.

Beware the confident.

By Randall Parker    2009 March 18 11:51 PM   Entry Permalink | Comments (5)
2009 February 10 Tuesday
Short Serotonin Transporter Gene Makes People Risk Averse

It helps to have a long serotonin transporter gene if you want to find the will to take a big financial risk.

People with the short serotonin transporter gene, 5-HTTLPR (two copies of the short allele), relative to those with the long version of that polymorphism (at least one copy of the long allele), invested 28 percent less in a risky investment. Similarly, people who carry the 7-repeat allele of the DRD4 gene in the dopamine family, relative to those carrying other versions of that gene, invested about 25 percent more in a risky investment.

"Our research pinpoints, for the first time, the roles that specific variants of the serotonin transporter gene and the dopamine receptor gene, play in predicting whether people are more or less likely to take financial risks," said Camelia M. Kuhnen, assistant professor of finance, Kellogg School of Management at Northwestern. "It shows that individual variability in our genetic makeup effects economic behavior."

"Genetic Determinants of Financial Risk Taking will be published online Wednesday, Feb. 11, by the open-access journal PLoS ONE. The study's co-investigators are Kuhnen and Joan Y. Chiao, assistant professor of psychology at Northwestern.

Prior research linking the two genetic variants of 5-HTTLPR and DRD4 to, respectively, negative emotion and addiction behaviors suggested to the Northwestern researchers that those particular brain mechanisms could play a role in financial risk-taking. But until the Northwestern study, the identification of specific genes underlying financial-risk preferences remained elusive.

When people gain the ability to choose genes for their offspring will they opt for a shorter or longer version of this gene? How will future humans differ from present humans genetically?

By Randall Parker    2009 February 10 11:06 PM   Entry Permalink | Comments (2)
2008 October 23 Thursday
Temperature Of Held Objects Influences Behavior

Free will is an illusion. Even a cup of coffee manipulates you in ways you can't tell. Even a cold or hot cup of coffee temporarily held in a person's hands can act like a puppeteer manipulating human emotions and behavior.

In the first study, Williams and John A. Bargh, a psychology professor at Yale University, found that holding a hot cup of coffee leads people to judge a stranger to be a warmer person, in terms of such traits as generosity and kindness, compared with a group of people who held a cup of iced coffee.

In a second study, they had people hold either a warm or cold object (therapeutic hot or cold pads), and then gave them a choice of reward for participating in the study: either a gift for a friend, or a reward for themselves.

"We found that people who held the hot pad were more likely to choose the gift for a friend, and people who held the cold pack were more likely to choose the reward for themselves," Williams said. "Both of these effects occurred without people's awareness of the possible effects of temperature."

Hand a friend something hot to hold before you ask for a favor.

"We found that people who held the hot pad were more likely to choose the gift for a friend, and people who held the cold pack were more likely to choose the reward for themselves," Williams said. "Both of these effects occurred without people's awareness of the possible effects of temperature."

People are incredibly sensitive to cues in their physical environments, Williams said. "The metaphorical relationship between physical temperatures and interpersonal warm or cold feelings is not haphazard or accidental, but reveals something interesting about the way the mind works, in that a cue from the physical domain can have such a meaningful impact on psychological outcomes," he said.

Never mind that old saying "cold hands, warm heart". The truth of the matter is "cold hands, cold heart".

In a similar study, Williams repeated the same experiment using not coffee, but hot and cold compress pads. To eliminate any inadvertent influence on the experiment by the confederate, the study subjects were asked to retrieve either a hot or cold pad and to evaluate it under the guise of a product test.

After rating the effectiveness of the pads, the study subjects were given a choice of reward for participating in the study: either a Snapple beverage or a $1 gift certificate to a local ice cream shop. In some cases the reward offer was framed as a gift to "treat a friend" and in others as a personal reward. Regardless of which gift was offered, those primed with coldness were more likely to choose a gift for themselves, while those primed with warmth were more likely to choose the gift for a friend.

"Experiences of physical temperature per se affect one's impressions of and pro-social behavior toward other people, without one's awareness of such influences," said Williams. "At a board meeting, for instance, being willing to reach out and touch another human being, to shake their hand, those experiences do matter although we may not always be aware of them. In a restaurant, it's been shown that wait staff who touch customers usually get a better tip. It's a nice gesture, but it also has a warming effect."

Williams said the research could have marketing implications because it shows just how strong the bond is between the physical and the psychological world.

"In a point-of-service or communications interaction, paying attention to the fact that customers are tied to the physical world in which buying behavior occurs is important," said Williams. "If you are running a promotion outdoors on a cold day, maybe giving away a warm cookie will help you make connections with consumers. It gives marketers and managers more tools to work with."

Scientists will find many more ways that environmental cues can alter human behavior.

By Randall Parker    2008 October 23 09:43 PM   Entry Permalink | Comments (9)
2008 October 09 Thursday
Risk Appetite Measurable With Brain Scans

Imagine employers scanning people's brains to choose more or less risk averse depending on job needs. Functional magnetic resonance imaging allows identification of more and less risk tolerant people.

That familiar pull between the promise of victory and the dread of defeat – whether in money, love or sport – is rooted in the brain's architecture, according to a new imaging study.

Neuroscientists at the USC Brain and Creativity Institute have identified distinct brain regions with competing responses to risk.

Both regions are located in the prefrontal cortex, an area behind the forehead involved in analysis and planning.

By giving volunteers a task that measures risk tolerance and observing their reactions with functional magnetic resonance imaging (fMRI), the researchers found that activity in one region identified risk-averse volunteers, while activity in a different region was greater in those with an appetite for risk.

The study appeared online Oct. 8 in the journal Cerebral Cortex.

"We can see risk as a battle between two forces," said Antoine Bechara, professor of psychology at USC. "There is always a lure of reward. There's always a fear of failure. These are the two forces that are always battling each other."

What will be even more interesting: A way to dial one's risk aversion up or down. Of course, if someone dialed their own risk enjoyment way way down they'd probably keep it low due to the risk aversion that would accompany the low setting on the knob. Some types of brain engineering will cause people to strongly prefer some states of mind. So brain engineering will tend to push populations toward the personality types that will most resist change.

By Randall Parker    2008 October 09 11:30 PM   Entry Permalink | Comments (2)
2008 September 29 Monday
Higher Testosterone Men Greater Financial Risk Takers

In the future will genetically engineered male offspring have higher testosterone and greater risk taking tendencies? Will we see more financial disasters as a result but also a higher rate of innovation? Higher testosterone correlates with more risk taking behavior with money.

CAMBRIDGE, Mass., September 29, 2008 – Higher levels of testosterone are correlated with financial risk-taking behavior, according to a new study in which men's testosterone levels were assessed before participation in an investment game. The findings help to shed light on the evolutionary function and biological origins of risk taking.

The study was jointly led by Anna Dreber, of the Program in Evolutionary Dynamics at Harvard University and the Stockholm School of Economics, and Coren Apicella, of Harvard's Department of Anthropology. The results are available online in Evolution and Human Behavior.

This is an unsurprising result for anyone who doesn't buy the idea that environment programs all of our sexual differences in behavior.

These were Harvard students. What I'd like to know: How do testosterone levels vary as a function of degree of exclusivity of a college? Does State U have lower or higher testosterone guys than Harvard or Yale? Also, do MIT and CalTech have lower or higher testosterone males than the Ivy League? What about the females? I'm betting female English students have lower testosterone than female engineering students.

In the study, saliva samples were taken from 98 males, ages 18 to 23, who were mostly Harvard students. The samples were taken before participation in the investment game, so the researchers were certain that testosterone levels were not elevated as a result of the game. The researchers also assessed facial masculinity, associated with testosterone levels at puberty.

All of the participants were given $250, and were asked to choose an amount between $0 and $250 to invest. The participants kept the money that was not invested. A coin toss determined the investment's outcome, and if the participant lost the coin toss, the money allocated to the investment was lost. However, if the coin toss was won, the participant would receive two and a half times the amount of their investment. At the end of the study, one person was selected by lottery to receive the cash amount of their investment, which created a monetary incentive for the participants.

The researchers found that a man whose testosterone levels were more than one standard deviation above the mean invested 12 percent more than the average man into the risky investment. A man with a facial masculinity score of one standard deviation higher than the mean invested 6 percent more than the average man.

Do investment bankers and hedge fund operators have higher testosterone than commercial bank executives? Do the former CEOs of failed banks have higher or lower testosterone than CEOs of successful banks?

Men take risks in order to raise their wealth and appeal in the eyes of women.

"Financial risk might be comparable to other risky male behaviors associated with reproduction," says Apicella. "Men may be more willing to take financial risks because the payoffs, in terms of attracting mates, could be higher for them. This is because women value wealth more than men when choosing for a mate."

So then if men cause financial disasters women made them do it.

Here is the abstract. You can find the full article at that link. Note the 2D:4D probably refers to fingers whose lengths differ based on fetal testosterone exposure.

Many human behaviors, from mating to food acquisition and aggressiveness, entail some degree of risk. Testosterone, a steroid hormone, has been implicated in a wide range of such behaviors in men. However, little is known about the specific relationship between testosterone and risk preferences. In this article, we explore the relationship between prenatal and pubertal testosterone exposure, current testosterone, and financial risk preferences in men. Using a sample of 98 men, we find that risk-taking in an investment game with potential for real monetary payoffs correlates positively with salivary testosterone levels and facial masculinity, with the latter being a proxy of pubertal hormone exposure. 2D:4D, which has been proposed as a proxy for prenatal hormone exposure, did not correlate significantly with risk preferences. Although this is a study of association, the results may shed light on biological determinants of risk preferences.

By Randall Parker    2008 September 29 01:36 PM   Entry Permalink | Comments (0)
2008 September 22 Monday
Traditionalist Men Make More Money

Old fashioned guys bring home more cash.

WASHINGTON – When it comes to sex roles in society, what you think may affect what you earn. A new study has found that men who believe in traditional roles for women earn more money than men who don't, and women with more egalitarian views don't make much more than women with a more traditional outlook.

I can see a few reasons for this result. First off, traditionally minded guys might have more testosterone and basically be more driven than modern egalitarian guys. Second, a traditionally minded guy is going to think his job is bread-winning. He'll work longer at work and less at home because he feels a stronger obligation to bring home the bacon. Even if the wife works he's going to see that as more optional.

Of course, the obligation to be the breadwinner might itself be at least partially biologically caused.

There's another possibility: guys who didn't feel confident at being successful embraced the equal partnership idea between husband and wife in order to lessen their feeling of being unable to fulfill their work obligations. Guys who can't make the grade might be more inclined to rationalize that the grade isn't worth making.

Of course, none of my speculations are politically correct explanations since they don't involve sexual discrimination. But what I see around me in the men and women I meet through work are men and women juggling home and work obligations with the men tending to feel far more often than the women that they've got to come down on the side of giving their all to work. I know men who don't feel that obligation and women who do. But on average I see more work mania in men than women.

Timothy Judge, PhD, and Beth Livingston from the University of Florida, analyzed data from a nationally representative study of men and women who were interviewed four times between 1979 and 2005. A total of 12,686 people, ages 14 to 22 at the beginning of the study, participated; there was a 60 percent retention rate over the course of the study. Results were published in the September issue of the Journal of Applied Psychology, published by the American Psychological Association.

At each of the four interviews, participants were asked about their views on gender roles in the work force and at home. They answered questions such as whether they believed a woman's place is in the home, whether employing wives leads to more juvenile delinquency, if a man should be the achiever outside the home and if the woman should take care of the home and family. Participants were also asked about their earnings, religious upbringing, education, whether they worked outside the home and their marital status, in addition to other topics. Prior studies have shown that men tend to hold more traditional gender roles than do women, though this gap has narrowed over time.

The researchers looked specifically at gender role views as a predictor of a person's earnings. They controlled for job complexity, number of hours worked and education. Their analyses showed that men in the study who said they had more traditional gender role attitudes made an average of about $8,500 more annually than those who had less traditional attitudes.

Marriage and children both increase the odds that male scientists will advance in their careers. Got the wife and kids to support. Gotta work harder. Women are more likely than men to take off from work when a child is sick. Does anyone find that the least bit surprising? Warren Farrell says women who make more work decisions like men make more money. Farrell also says a larger percentage of men than women say that money is their primary motivator at work.

What I want to know: what instincts cause this difference? Are men more driven to compete or more driven to fulfill obligations? Are both instincts responsible for the longer hours worked by men and by the choices that drive them more toward job choices that have higher pay? Are still other drives the cause? The greater male desire for performance-related pay suggests testosterone is the biggest cause.

By Randall Parker    2008 September 22 10:18 PM   Entry Permalink | Comments (2)
2008 September 09 Tuesday
Same Brain Region For IQ And Financial Self Control

The anterior prefrontal cortex is key to both intelligence and the ability to delay gratification in order to get more.

If you had a choice between receiving $1,000 right now or $4,000 ten years from now, which would you pick? Psychologists use the term “delay discounting” to describe our inability to resist the temptation of a smaller immediate reward in lieu of receiving a larger reward at a later date. Discounting future rewards too much is a form of impulsivity, and an important way in which we can neglect to exert self-control.

Previous research suggests that higher intelligence is related to better self-control, but the reasons for this link are unknown. Psychologists Noah A. Shamosh and Jeremy R. Gray, from Yale University, and their colleagues, were interested in testing the idea that certain brain regions supporting short-term memory play a critical role in this relationship.

"It has been known for some time that intelligence and self-control are related, but we didn't know why. Our study implicates the function of a specific brain structure, the anterior prefrontal cortex, which is one of the last brain structures to fully mature,” said Dr. Shamosh.

In this study, 103 healthy adults were presented with a delay discounting task to assess self-control: a series of hypothetical choices where they had to choose between two financial rewards, a smaller one which they would receive immediately or another, larger reward which would be received at a later time. The participants then underwent a variety of tests of intelligence and short term memory. On another day, subjects’ brain activity was measured using fMRI, while they performed additional short-term memory tasks.

The results show that participants with the greatest activation in the brain region known as the anterior prefrontal cortex also scored the highest on intelligence tests and exhibited the best self-control during the financial reward test. This was the only brain region to show this relation. The results appear in the September issue of Psychological Science, a journal of the Association for Psychological Science.

Previous studies have shown that the anterior prefrontal cortex plays a role in integrating a variety of information. The authors suggest that greater activity in the anterior prefrontal cortex helps people not only to manage complex problems, resulting in higher intelligence, but also aids in dealing with simultaneous goals, leading to better self-control.

A smarter society is a society where people will have more self control and pursue longer term goals. The declining cost of DNA sequencing will soon bring us many of the genetic alleles that cause different levels of capability in the anterior prefrontal cortex. Then individuals will start considering genetic profiles and likely offspring intelligence when choosing mates. Also, in vitro fertilization (IVF) with pre-implantation genetic diagnosis (PIGD or PGD) will become popular among those who recognize the importance of making their offspring as smart as possible.

If a smarter person has a more powerful anterior prefrontal cortex which allows the person to control their impulse to act on immediate desires then does a smarter person have more free will?

By Randall Parker    2008 September 09 11:07 PM   Entry Permalink | Comments (5)
2008 April 16 Wednesday
Brain Scans Show Reactions To Fairness And Unfairness

In experiments similar to studies on altruistic punishment, people will sacrifice their economic interests in order to express their contempt at unfairness.

UCLA psychologist Golnaz Tabibnia, and colleagues Ajay Satpute and Matthew Lieberman, used a psychological test called the “ultimatum game" to explore fairness and self-interest in the laboratory. In this particular version of the test, Person A has a pot of money, say $23, which they can divide in any way they want with Person B. All Person B can do is look at the offer and accept or reject it; there is no negotiation. If Person B rejects the offer, neither of them gets any money.

Whatever Person A offers to Person B is an unearned windfall, even if it’s a miserly $5 out of $23, so a strict utilitarian would take the money and run. But that’s not exactly what happens in the laboratory. The UCLA scientists ran the experiment so sometimes $5 was stingy and other times fair, say $5 out of a total stake of $10. The idea was to make sure the subjects were responding to the fairness of the offer, not to the amount of the windfall. When they did this, and asked the subjects to rate themselves on scales of happiness and contempt, they had some interesting findings: Even when they stood to gain exactly the same dollar amount of free money, the subjects were much happier with the fair offers and much more disdainful of deals that were lopsided and self-centered.

The psychologists wanted to know if there is something inherently rewarding about being treated decently. So, they scanned several parts of the participants’ brains while they were in the act of weighing both fair and miserly offers. Consistent with previous results, the researchers found that a region previously associated with negative emotions such as moral disgust (the anterior insula) was activated during unfair treatment. However, interestingly, they also found that regions associated with reward (including the ventral striatum) were activated during fair treatment even though there was no additional money to be gained.

So people get a high off of being treated fairly. Keep that in mind when deciding how to treat others.

When you are disgusted your anterior insula buzzes.

The psychologists wanted to know if there is something inherently rewarding about being treated decently. So, they scanned several parts of the participants’ brains while they were in the act of weighing both fair and miserly offers. Consistent with previous results, the researchers found that a region previously associated with negative emotions such as moral disgust (the anterior insula) was activated during unfair treatment. However, interestingly, they also found that regions associated with reward (including the ventral striatum) were activated during fair treatment even though there was no additional money to be gained.

Your emotions rule your rational mind.

As reported in the April issue of the journal Psychological Science, a journal of the Association for Psychological Science, the brain finds self-serving behavior emotionally unpleasant, but a different bundle of neurons also finds genuine fairness uplifting. What’s more, these emotional firings occur in brain structures that are fast and automatic, so it appears that the emotional brain is overruling the more deliberate, rational mind. Faced with a conflict, the brain’s default position is to demand a fair deal.

But if you can manage to suppress feelings of pride and contempt you can make a rational calculation of what is in your best interest.

Furthermore, when the scientists scanned the brains of those who were “swallowing their pride” for the sake of cash, the brain showed a distinctive pattern of neuronal activity. It appears that the unconscious mind can temporarily damp down the brain’s contempt response, in effect allowing the rational, utilitarian brain to rule, at least momentarily.

I bet that there's genetic variability in the extent to which people feel contempt or let their rational mind rule.

By Randall Parker    2008 April 16 11:06 PM   Entry Permalink | Comments (2)
2008 March 17 Monday
People More Easily Convinced To Spend Time Than Money?

Are people less easily influenced to spend more or less money than they are influenced to spend more or less time?

In a series of experiments, Ritesh Saini (George Mason University) and Ashwani Monga (University of Texas, San Antonio) demonstrate that a qualitatively different form of decision making gains prominence when consumers work with time instead of money. Specifically, consumers thinking about expenditure of time are more likely to rely on heuristics: intuitive, quick judgments based more on prior experience than on analysis of the information presented.

For example, one experiment had participants consider the purchase of a used car. They were told that a search on a used-car website had yielded 80 cars meeting their criteria but that viewing each accident record would take either $1 or 5 minutes of time. They were then asked how many records they would like to view, with a catch: the researchers used classic experimental “anchoring” techniques to manipulate the answers.

Participants were asked whether they would view “up to 2” or “up to 40” records, before indicating the specific number of records they would view. The use of an anchor, for those thinking in terms of time expenditure, turned out to have a significant impact.

When the anchor value was high in the time condition, consumers chose to view an average of 23.7 accident reports, versus 9.1 when the anchor value was low. The number of records consumers in the money condition chose to view was statistically the same, irrespective of whether the anchor value was high or low.

“People face difficulties in accounting for time because they do not routinely transact in time as they do in money,” explain the researchers. “Although people in some professions (e.g., lawyers) do keenly monitor their time expenditures, most other people are not trained to do so.”

Does this line of reasoning sound correct to you?

Look at people in office settings. I see them waste each others' time on a daily basis. Seems that it is more easy to get people to waste time than money.

How easily one can be influenced to spend money depends on whether one is a tightwad or a spendthrift. Surprisingly the tightwad's spending habits are more easy to influence.

Whether one is a spendthrift or a tightwad also predicts a wide range of spending behavior, the researchers found. Spendthrifts are no more likely than tightwads to use credit cards, but spendthrifts who use credit cards are three times more likely to carry debt than tightwads who use credit cards.

Annual income differs little between tightwads and spendthrifts, suggesting that the observed differences in debt are largely driven by differences in spending habits.

Interestingly, the researchers also found that tightwads are also most sensitive to marketing ploys designed to reduce the pain of paying. In one experiment, participants were asked whether they would be willing to pay $5 to have DVDs shipped overnight. The cost was either framed as a “$5 fee” or a “small $5 fee.” Spendthrifts were completely insensitive to the manipulation, but tightwads were 20 percent more likely to pay the fee when it was less painfully presented as “small.”

When offspring genetic engineering becomes possible will more people genetically engineer their kids to be tightwads or spendthrifts? Will they make their kids less likely to waste time?

By Randall Parker    2008 March 17 11:03 PM   Entry Permalink | Comments (2)
2008 March 05 Wednesday
Genetic Component Detected For Trust

Researchers at MIT, UCSD, and the Karolinska Institutet in Stockholm Sweden conducted two sets of studies on twins and found that part of human trust and trustworthiness seem due to genetic influences (PDF at PNAS site). (and thanks to one of the researchers, MIT's David Cesarini, for the heads up)

To investigate whether humans are endowed with genetic variation that could help account for individual differences in trust game behavior, two separate teams of researchers independently conceived and executed a very similar experiment on twins [see supporting information (SI) for experimental procedures]. These teams became aware of each other for the first time after all data had been collected. One team recruited 658 subjects from the population-based Swedish Twin Registry, and the other team recruited 706 subjects from the 2006 and 2007 Twins Days Festivals in Twinsburg, OH. Both teams administered the trust game to (identical) monozygotic (MZ) and (nonidentical) dizygotic (DZ) same-sex twin pairs. The game was played with real monetary payoffs and between anonymous partners.

They looked at both how much trust people had in strangers and also how much people lived up to the expectations of those who trusted them.

The results of our mixed-effects Bayesian ACE analysis suggest that variation in how subjects play the trust game is partially accounted for by genetic differences (Tables 2 and 3 and Fig. 2). In the ACE model of trust, the heritability estimate is 20% (C.I. 3–38%) in the Swedish experiment and 10% (C.I. 4–21%) in the U.S. experiment. The ACE model of trust also demonstrates that environmental variation plays a role. In particular, unshared environmental variation is a much more significant source of phenotypic variation than genetic variation (e2 = 68% vs. c2 = 12% in Sweden and e2 = 82% vs. c2 = 8% in the U.S.; P < 0.0001 in both samples). In the ACE model of trustworthiness, heritability (h2) generates 18% (C.I. 8–30%) of the variance in the Swedish experiment and 17% (C.I. 5–32%) in the U.S. experiment. Once again, environmental differences play a role (e2 = 66% vs. c2 = 17% in Sweden and e2 = 71% vs. c2 = 12% in the U.S.; P < 0.0001 in both samples).

The researchers found more trust in their Swedish participants (which is what I'd expect from such a high trust society). They also found a higher heritability of trust in their Swedish participants. See figure 2.

Heritability (h2) of trust is estimated to be (a) 20% in Sweden and (b) 10% in the U.S. Heritability of trustworthiness is estimated to be (a) 18% in Sweden and (b) 17% in the U.S.

That difference in trust between US and Swedish participants might be due to genetic differences.

They suspect their results understate extent of heritability for a couple of reasons including the very plausible idea that people are more likely to mate with people who have similar levels of trust. So the DZ twins and MZ twins are not as different in their genetic sequences which influence trust as would be the case if matings were more random.

Moreover, we believe that the reported estimates indicate a lower bound on heritability and shared environment for two reasons. First, the estimate of the variance explained by the unshared environmental differences includes all idiosyncratic error, including measurement error. If our subjects had each played several rounds of the trust game with different individuals, our measures of trust and trustworthiness may have been more precise, which would have yielded higher estimates of heritability and common environmental influences. Second, one assumption of the ACE model is that there is no assortative mating with respect to the trait of interest. If preferences for cooperation are indeed heritable, and if people who cooperate tend to mate with other cooperative individuals, then this will increase the similarity in cooperative behavior in their children. This inflates the correlation of the genotypes of DZ siblings, making it harder to detect differences in MZ and DZ twins. As a result, the more assortativity, the more it biases downward the estimate of heritability.

The problem is that it is easier to compare twins than to compare any two random individuals to tease out genetic influences. We don't know how much two random individuals differ in their genetic sequences. Using twins studies researchers can detect the presence of genetic influences on behavior. That's important because that detection is the first step toward finding the actual genetic variations that cause people to behave differently from each other.

In the last couple of years the rate of detection of the meaning of genetic differences greatly sped up. The rapid decline in DNA testing costs and the development of more extensive maps of genetic differences (e.g. as done in the International Haplotype Map project) has made this task much easier. Within 10 years at most studies such as this one will routinely include genetic testing information on all test subjects.

Cheap DNA sequencing will probably increase the optimal size of trust studies and other behavioral studies of twins. Much larger groups of participants are needed to better control for all the genetic variations in order to identify which genetic variations contribute to behavioral differences.

Studies of this sort demonstrate that natural selection played a major role in shaping human behavior. Economic behavior is not simply the result of rational calculations by humans. The extent of willingness to engage in exchanges and enter into business deals is influenced by our evolutionary past. That notion doesn't sit well with people who imagine they have total free will and control over their decisions.

The results of this study understate the extent to which genetic sequences control our economic behavior. The study tried to measure differences in behavior. Many genetic sequences identical in all study participants didn't cause differences and yet did influence behavior of all the study participants.

Cesarini and Swedish researchers have previously published work in this area. See my previous post Large Genetic Component To How People Play Economic Game.

What I most want to know: once all the genetic alleles which influence trust and trustworthiness are identified and offspring genetic engineering becomes possible will people choose genes that make their offspring more or less trusting and more or less trustworthy?

By Randall Parker    2008 March 05 11:46 PM   Entry Permalink | Comments (1)
2008 March 04 Tuesday
Placebos More Effective If More Expensive?

People don't expect cheap drugs to help them much. No wonder the price of drugs has risen. People want more effective results.

DURHAM, N.C. -- A 10-cent pill doesn't kill pain as well as a $2.50 pill, even when they are identical placebos, according to a provocative study by Dan Ariely, a behavioral economist at Duke University.

"Physicians want to think it's the medicine and not their enthusiasm about a particular drug that makes a drug more therapeutically effective, but now we really have to worry about the nuances of interaction between patients and physicians," said Ariely, whose findings appear as a letter in the March 5 edition of the Journal of the American Medical Association.

Ariely and a team of collaborators at the Massachusetts Institute of Technology used a standard protocol for administering light electric shock to participants’ wrists to measure their subjective rating of pain. The 82 study subjects were tested before getting the placebo and after. Half the participants were given a brochure describing the pill as a newly-approved pain-killer which cost $2.50 per dose and half were given a brochure describing it as marked down to 10 cents, without saying why.

In the full-price group, 85 percent of subjects experienced a reduction in pain after taking the placebo. In the low-price group, 61 percent said the pain was less.

The conclusion here is obvious: Medical professionals need to go to greater lengths to deceive patients into believing that ineffective treatments really will work. At least for chronic pain this might help. I'm at least half serious.

By Randall Parker    2008 March 04 09:17 PM   Entry Permalink | Comments (5)
2008 February 18 Monday
Inaccurate Predictions Of Enjoyment When Compared

If you compare something you might do with either something you enjoyed or disliked in the past you'll underestimate or overestimate how much you like it. Comparisons can make you less able to predict enjoyment of an experience.

CAMBRIDGE, Mass. – Researchers have identified a key reason why people make mistakes when they try to predict what they will like. When predicting how much we will enjoy a future experience, people tend to compare it to its alternatives—that is, to the experiences they had before, might have later, or could have been having now. But when people actually have the experience, they tend not to think about these alternatives and their experience is relatively unaffected by them.

In new research funded by the National Science Foundation and presented at the annual meeting of the American Association for the Advancement of Science, Daniel Gilbert, professor of psychology in the Faculty of Arts and Sciences at Harvard University, shares the findings in a presentation titled, “Why People Misimagine the Future: The Problem of Attentional Collapse.” The research was done with Carey Morewedge of Carnegie Mellon University, Karim Kassam of Harvard, Kristian Myrseth of the University of Chicago, and Timothy Wilson of the University of Virginia.

The actual experience distracts you from the alternatives you could have done.

Gilbert presents the results of four experiments, all involving predicted versus actual enjoyment of a very simple experience—eating potato chips. In three of the experiments, participants predicted how much they would like eating potato chips before, after, or instead of eating a much better food (chocolate) or a much worse food (sardines). They then ate the chips and reported how much they liked them. The results showed that the chocolate and the sardines had a large impact on participants’ predictions, but no impact whatsoever on their actual experiences. Those participants who compared the chips to sardines overestimated how much they’d enjoy eating the chips, and those who compared them to chocolate underestimated how much they’d enjoy eating the chips.

Why does this happen? “Experience typically demands our attention,” says Gilbert, “leaving us little time to think about the alternatives to it.”

But if you slow down and think about the alternatives while having the experience the alternatives will affect how much you enjoy the experience. So slow down and think about lousy alternatives.

To demonstrate this, participants in a fourth experiment were asked to eat the potato chips to the beat of a metronome. Those participants who ate the chips at a normal pace made the same mistake as did participants in the previous experiments. But participants who ate the chips at an unusually slow pace did not. Specifically, participants who ate slowly actually did enjoy the chips more when the alternative was sardines than when the alternative was chocolate—just as they had predicted.

Gilbert argues that slowing down the experience of eating gave participants the opportunity to think about the chocolates or the sardines.

“A very slow family reunion may well be worse if the alternative was Bermuda than if the alternative was working an extra shift,” says Gilbert. “When experiences don’t demand our attention, our minds are free to wander to all the other things we might have been doing instead. If those things are better, we feel worse, and if they are worse, we feel better.”

Should ice cream parlours and candy stores heighten the customer experience by putting pictures of asparagus and broccoli on their walls? Should resort hotels show pictures of traffic jams and pollution on their walls to remind people of worse places they are escaping from? But what sorts of pictures do you want to see on the wall at your mother-in-law's?

By Randall Parker    2008 February 18 10:23 PM   Entry Permalink | Comments (3)
2008 February 12 Tuesday
People Sense Scarcity Of Whatever They Desire

Some scientists have come up an interesting way of measuring whether people tend to overestimate or underestimate desired goods. They give the experimental subjects some reason to desire one or another of two things. Then they show an equal mix of those two things and then ask the subjects which did they see more of: What they desired or what they didn't desire. People always think they see less of what they really desire even if they are viewing equal amounts of two things.

Xianchi Dai, Klaus Wertenbroch and Miguel Brendl from INSEAD, the international business school with campuses in France and Singapore, have been studying what they call the “value heuristic.” A heuristic is a sort of cognitive short cut or “rule of thumb” that we use when we are unable to make a truly informed decision. The psychologists’ research suggests that many mate-seekers are unwittingly subbing something clear and simple -- their yearning for a potential mate -- for a complicated and unknowable statistic (i.e., how many of the relationship-worthy bachelors and bachelorettes are still available).

The connection between scarcity and value is something we all know; for example, gold is considered precious because it is rare, not because it makes for a poor construction material. The psychologists’ research suggests that this link has become deep-wired into our neurons, so that even its inverse is unconsciously called upon for life decisions -- what’s valuable must be scarce.

To test their value heuristic theory, the researchers had a group of young people view nearly one hundred pictures, half of birds and half of flowers, in random order. They then told participants that they would get paid a few cents either for each bird picture or for each flower picture they had seen. To determine whether a participant would be paid for bird or for flower pictures, the researchers let each participant flip a coin. Before being paid accordingly, all participants were asked to estimate the total number of bird pictures and the total number of flower pictures they had seen.

The results were unambiguous. As described in the January issue of Psychological Science, a journal of the Association for Psychological Science, people who were paid for spotting flower pictures thought there were fewer flowers than birds, and likewise, those who were made to value birds determined they were scarcer than flowers. Nobody knew that in fact there were exactly the same number of flowers and birds.

So in effect, their experimentally-induced yearning caused them to wrongly perceive scarcity.

So if you really want something that'll tend to make you think you can't get enough of it. Learn how to enjoy what you don't want? Do people who want the most feel the most sense of scarcity?

People viewing pictures of men and women also tended to believe there were fewer of the opposite sex even when there were equal numbers of each sex.

To increase the validity of their findings, the scientists ran several other experiments. In one, participants of both sexes viewed portraits of men and women, some attractive and some not. When questioned later, both men and women believed that there were fewer attractive people of the opposite sex than there were of the same sex.

If the portraits were unattractive, they tended not to perceive a sense of scarcity. As in the first experiment, the participants appeared to be substituting their emotional desire for calculation, and ended up believing that what they wanted was less likely to be found.

I hear Dwight Yockum singing "I ain't ever satisfied".

By Randall Parker    2008 February 12 08:46 PM   Entry Permalink | Comments (4)
2007 November 11 Sunday
Optimism Best In Moderation

Optimism is more adaptive than pessimism. But too much optimism is destructive.

Optimists, the Duke finance scholars discovered, worked longer hours every week, expected to retire later in life, were less likely to smoke and, when they divorced, were more likely to remarry. They also saved more, had more of their wealth in liquid assets, invested more in individual stocks and paid credit-card bills more promptly.

Yet those who saw the future too brightly -- people who in the survey overestimated their own likely lifespan by 20 years or more -- behaved in just the opposite way, the researchers discovered.

Rather than save, they squandered. They postponed bill-paying. Instead of taking the long view, they barely looked past tomorrow. Statistically, they were more likely to be day traders. "Optimism is a little like red wine," said Duke finance professor and study co-author Manju Puri. "In moderation, it is good for you; but no one would suggest you drink two bottles a day."

When people start genetically engineering their offspring I hope prospective parents don't become too optimistic about what optimism can accomplish. Sure, give your kids some leaning toward an optimistic outlook. But don't create reckless children who gamble and ring up debts.

The article also describes recent research about optimism coming from the rostral anterior cingulate cortex (rACC) of the brain. I've previously reported about that .

By Randall Parker    2007 November 11 11:38 AM   Entry Permalink | Comments (4)
2007 October 17 Wednesday
Investment Bubbles Caused By Status Loss Fearing Peers?

Are investment bubbles caused by herds all seeking to maintain relative status vis a vis their perceived peers.

Why do people herd around risky investments, causing "bubbles" that inevitably burst and leave most investors losers in the game? Couldn't the players in the dot.com bust, for example, have seen disaster looming on the horizon? Why did more investors not get out earlier, and why did they continue to pump money into already over-inflated stocks? Similar questions surround the recent bust in the subprime mortgage market.

Two Stanford Graduate School of Business researchers say that what investors fear the most is not the risk of a loss per se, but the risk that they may do poorly relative to their peers. That means even though investments in areas such as new technology may be particularly risky, investors tend to cluster around such pie-in-the-sky opportunities to avoid being the only one in the neighborhood to miss out on the "next big thing."

Think of this in terms of relative status versus absolute wealth. People strongly desire to keep up with and preferably to rise above their peers. When peers are all doing something that might earn big returns this drives the desire to do the same thing in order to avoid falling behind.

If you run with the herd when making investments and you all invest in a big bubble your risk of falling relative to the others in your peer group is decreased. Even though you are investing in a bubble so are your peers. So if you lose they lose. If you all lose equally then you experience no fall in relative status.

If your friends acquaintances get rich they will drive up the price of housing and daycare. You've got to get rich right along side of them or risk getting squeezed out by them.

In three related theoretical studies, Peter DeMarzo and Ilan Kremer, along with Ron Kaniel at Duke University, have discerned that individual investors care deeply about how their level of wealth compares to that of others in their peer group and community. "Investors fear being poor when everyone around them is rich," says DeMarzo, Mizuho Financial Group Professor of Finance at the Stanford Graduate School of Business.

A primary reason for people's concern, they explain, is that the cost of living in any community may depend on the wealth of its residents. The more money people have, the more expensive houses, real estate, daycare, and other necessities and amenities will be. "It's worse to have a lower income in an area where everyone is wealthy than it is in an area where everyone has a similar income as you," says Kremer, Associate Professor of Finance at Stanford Business School.

Using economic models, the researchers have discovered that such external worries have implications for how people invest. Specifically, they motivate people to choose portfolios that look a lot like those of others in their community or professional cohorts. "Such herding around certain investments allows you to combat the fear that everyone else might be betting on the winner while you're not," says DeMarzo.

One of my worries for the future is that as communications technologies enable people to see how more upper class people live then the average feeling of one's internal sense of status ranking will drop. People will tend to see themselves as having lower status than they would have in an earlier era because they'll have more people to compare themselves to. Upper class people get far more media recording them and their possessions. So lower class people will see far more images of upper class people than of lower class people. So lower class people will see more images of people who have higher status. Given the basic human instinctual desire for higher status this . Instead of just comparing oneself to one's neighbors one can feel inferior to a much larger world of higher status people.

Aside: I think one of the reasons some people are doomsters about the future is that a lot of doom fantasies involve bigger losses of status for the wealthy than for the poor. The wealthy have further to fall and in event of an economic collapse the wealthy would experience a much larger decline in status than would poorer people. So a doom fantasy gives some doomsters a form of psychological relief. That doomsters should feel the need for such fantasies demonstrates how market economies fail to supply a way everyone to feel higher in status.

Maybe market economies will some day supply drugs or other therapies that cause people to feel they have higher status even when they don't.

By Randall Parker    2007 October 17 10:22 PM   Entry Permalink | Comments (26)
2007 October 01 Monday
Large Genetic Component To How People Play Economic Game

Genes may play a big role in determining how people make economic choices.

An international team of researchers including an MIT graduate student has demonstrated for the first time that genes exert influence on people's behavior in a very common experimental economic game.

Traditionally, social scientists have been quite hesitant to acknowledge a role for genes in explaining economic behavior. But a study by David Cesarini, a Ph.D. student in MIT's Department of Economics, and by colleagues in Sweden indicates that there is a genetic component to people's perception of what is fair and what is unfair.

The paper, published in the Oct. 1 advanced online issue of the Proceedings of the National Academy of Sciences, looked at the ultimatum game, in which a proposer makes an offer to a responder on how to divide a sum of money. This offer is an ultimatum; if the responder rejects it, both parties receive nothing.

Because rejections in the game entail a zero payoff for both parties, theories of narrow self-interest predict that any positive amount will be accepted by a responder. The intriguing finding in the laboratory is that responders routinely reject free money, presumably in order to punish proposers for offers perceived as unfair.

To study genetic influence in the game, Cesarini and colleagues took the unusual step of recruiting twins from the Swedish Twin Registry, and had them play the game under controlled circumstances. Because identical twins share the same genes but fraternal twins do not, the researchers were able to detect genetic influences by comparing the similarity with which identical and fraternal twins played the game.

The researchers' findings suggest that genetic influences account for as much as 40 percent of the variation in how people respond to unfair offers. In other words, identical twins were more likely to play with the same strategy than fraternal twins.

"Compared to common environmental influences such as upbringing, genetic influences appear to be a much more important source of variation in how people play the game," Cesarini said.

This result makes more plausible an argument of Gregory Clark that selective pressures helped create the conditions that brought about the industrial revolution. Yes, there are genetic differences out there that influence economic decision making. So there are genetically caused behavioral differences upon which natural selection can act. See Clark's book A Farewell To Alms and the Gene Expression Interview of Clark.

What I want to know: Did they test the IQs of the players? I'd expect smarter people to make different judgments about the choices of how to play the game. How much of the genetic factor they measured is intelligence and how much is it a wired in algorithm for how to make choices or maybe some wired in emotional reaction?

I would also like to know whether the twins who made smarter choices in the game have lower discount rates for their decision making.

Looking to the future (hey, isn't that the point of my writings?) what I would really like to know: Once the genetic variations that influence economic decisions are identified and offspring genetic engineering becomes possible will people choose genetic variations that will improve the economic performance of their kids? Sure, many will opt for intelligence enhancement. But will they also go for, say, genetic variations that make people put more effort toward longer term goals? Will they thrill to the idea of choosing genes to make Johnny and Jill into little misers and workaholics? Will genes that make us goal oriented be chosen over the genes that make people happy in Margaritaville?

Also, will the choices parents make vary by economic class? Will the upper classes embrace offspring genetic engineering for maximal economic success while lower classes go for looks, athletic ability, and just plain fun happy attitudes? Will the economic classes therefore grow even further apart than they are already growing now?

By Randall Parker    2007 October 01 07:39 PM   Entry Permalink | Comments (0)
2007 July 29 Sunday
Humanitarians Do Not Like Slackers Either

Christina Fong at Carnegie Mellon University finds that people who have stronger humanitarian impulses are just as reluctant to donate to the lazy poor as are those who score lower on humanitarianism.

The study by Christina Fong, a research scientist in the Department of Social and Decision Sciences at Carnegie Mellon, supports previous findings that people are more likely to give money to the poor when they believe that poverty is a result of misfortune rather than laziness. What's surprising is that this effect is largest among people who claim to have more humanitarian or egalitarian beliefs. In fact, humanitarians give no more than others when recipients are deemed to be poor because of laziness.

Nobody likes slackers (except for mutual protection slacker leagues I have run into in work places). So why do opinions about the welfare state vary? I can think of a few reasons:

  • People differ in their judgments on whether most poor people are poor due to laziness or factors not under their control.
  • People differ in how much empathy they feel for perceived suffering of others. When I say "empathy" read that as "pain". Attempts to help others are, to some extent, an attempt to relieve the pain one feels at the sight of their suffering.
  • Not everyone will look at the same living conditions and agree on which circumstances constitute actual suffering.
  • People differ in how much moral hazard (in terms of less responsible behavior on the part of those helped) they think comes from helping others. The risk of reducing incentives to avoid and emerge from poverty cause many to see some degree of suffering as necessary to motivate both actual and potential poor people. Judgments differ both on how much such motivation is necessary and about which conditions constitute enough motivation to avoid the moral hazard side effects that come from helping poor people.
  • Some see helping others as beneficial also as a universally needed expression of love.

A welfare state can only work well if the overwhelming majority feel strongly motivated to work and to avoid risks. Otherwise the accumulating moral hazard side effects become an unfair burden on those who are more productive and social pathologies grow in frequency. More from this study's press release:

Fong conducted an experiment in which subjects were given $10 and asked to decide how much, if any, to give to a real-life welfare recipient. A few days prior to the experiment, participants completed surveys about their values and beliefs, including beliefs about whether lack of effort or bad luck cause poverty. The survey also included questions designed to measure whether participants considered themselves to be humanitarians.

During the experiment, donors were randomly matched with three different welfare recipients with varying work histories and desires for full-time work. This information, combined with the participants' individual beliefs about the causes of poverty, had a major impact on giving. People who believed that their recipient was poor because of bad luck gave six and a half times as much as people who believed that their recipient was poor because of laziness.

Those who scored high on the humanitarian measure gave more money to recipients judged to be victims of bad luck than those who scored low - but the two groups made the same offers to welfare recipients judged to be lazy. Fong terms this desire to help people on the condition that they appear to deserve it "empathetic responsiveness."

Will advances in scientific understanding of human brains cause people to become more or less supportive of the welfare state? I see several factors to consider in attempting to answer this question:

  • We will be able to identify health impairments much more accurately. Got chronic fatigue syndrome? Eventually we'll have much better ways to ascertain that a person really does have CFS or chronic pain or some other claimed ailment or injury.
  • Intellectual abilities will be easier to measure. Is a person really too dumb to be productive enough to earn a decent wage? Does someone have some other mental impairment? We will know.
  • People with organically caused motivational problems will be easier to separate out from those who just want to be parasites.
  • Under which environmental conditions do people with a given type of mental limitation or disability cease to be able to cope and economically support themselves?
  • Will we be able to predict from genetic profiles who will produce children who can't cope with modern society?

But the use of more accurate scientific knowledge does not lead automatically to correct answers. Take, for example, obsessive compulsive and addictive behaviors. Even if we can know that a particular person feels a huge compulsion to gamble that does not mean we should necessarily subsidize them. The size of the compulsion might even argue for forcing them to endure greater suffering so that the size of the pain becomes large enough to outweigh the urge to gamble.

We aren't just going to gain greater knowledge of how the brain works and why people act the way they do. Suppose we can discover why, say, some people have behavioral problems that get them fired from jobs or prevent them from looking for work. Then suppose scientists come up with effective treatments to change that group of mentally dysfunctional people to make them capable of supporting themselves. Once those treatments become available would you be willing to tell some group of welfare recipients that they can get treatments (e.g. neural stem cells or neural gene therapy) for their conditions at taxpayer expense but can't get welfare payments any more?

By Randall Parker    2007 July 29 07:57 PM   Entry Permalink | Comments (4)
2007 April 11 Wednesday
People Will Spend Money To Make Wealthier Poorer

James Fowler at UC San Diego and colleagues have performed an interesting study about the willingness of people to spend their own money to lower the wealth of others. (PDF format)

Participants in laboratory games are often willing to alter others’ incomes at a cost to themselves, and this behaviour has the effect of promoting cooperation1–3. What motivates this action is unclear: punishment and reward aimed at promoting cooperation cannot be distinguished from attempts to produce equality4. To understand costly taking and costly giving, we create an experimental game that isolates egalitarian motives. The results show that subjects reduce and augment others’ incomes, at a personal cost, even when there is no cooperative behaviour to be reinforced. Furthermore, the size and frequency of income alterations are strongly influenced by inequality. Emotions towards top earners become increasingly negative as inequality increases, and those who express these emotions spend more to reduce above-average earners’ incomes and to increase below-average earners’ incomes. The results suggest that egalitarian motives affect income-altering behaviours, and may therefore be an important factor underlying the evolution of strong reciprocity5 and, hence, cooperation in humans.

It is no wonder that redistributive taxes are popular. Economists argue against highly progressive taxes by claiming (probably accurately) that such taxes reduce economic growth. But the participants in this experiment showed themselves willing to reduce their own net worths in order to reduce the net worths of wealthier people. The economists therefore are arguing against a harm that many people are in fact quite willing to inflict on themselves. I see this as driven by a need to lower the status of others who have much higher status. The feeling of one's status position is a relative feeling. If the money spent lowering status of others is less than the money lost by others then policies that do offer considerable appeal.

To separate motives, we use a simple experimental design to examine whether individuals reduce or augment others’ incomes when there is no cooperative norm to advance (see Methods). We call these behaviours ‘taking’ and ‘giving’ instead of ‘punishment’ and ‘reward’ to indicate that income alteration cannot change the behaviour of the target. Subjects are divided into groups having four anonymous members each. Each player receives a sum of money randomly generated by a computer. Subjects are shown the payoffs of other group members for that round and are then provided an opportunity to give ‘negative’ or ‘positive’ tokens to other players. Each negative token reduces the purchaser’s payoff by one monetary unit (MU) and decreases the payoff of a targeted individual by three MUs; positive tokens decrease the purchaser’s payoff by one monetary unit (MU) and increase the targeted individual’s payoff by three MUs. Groups are randomized after each round to prevent reputation from influencing decisions; interactions between players are strictly anonymous and subjects know this. Also, by allowing participants more than one behavioural alternative, the experiment eliminates possible experimenter demand effects12—if subjects were only permitted to punish, they might engage in this behaviour because they believe it is what the experimenters want.

Over the five sessions income alteration was frequent. Among participants, 68% reduced another player’s income at least once, 28% did so five times or more, and 6% did so ten times or more. Also, 74% of participants increased another player’s income at least once, 33% did so five times or more, and 10% did so ten times or more. Most (71%) negative tokens were given to above-average earners in each group, whereas most (62%) positive tokens were targeted at below-average earners in each group.

I see a lesson here that is applicable to the immigration debate: Human societies have a limit to the amount of inequality that people will tolerate. Given that many of the forces that generate inequality do so by incentivizing the most productive to generate wealth we should ask whether we should avoid other policies that generate inequality without generating much wealth.

To put it another way: Think of societies as having inequality budgets. A society has a fixed amount of inequality to spend. In my view it is better to spend that inequality on policies that cause economies to generate the most wealth per person and the most new technology and science. Policies that generate a lot of inequality with little increase in productivity of wealth creators (e.g. immigration of people who have low skills and low earnings power) essentially waste inequality that would be better spent on incentive systems for those with the most potential to generate wealth.

Beyond some level of inequality the masses will demand taxes and other measures to limit the extent of inequality. The masses probably wont' show fairness or wisdom when they demand such taxes and other restrictions on the power of wealth. But by supporting such policies they are catering to their own very deeply felt needs for higher relative status and a reduction in the feeling that wealthier people control their lives.

One of the fundamental problems I see in the world: Globalization is making people part of much larger status hierarchies. In an earlier era of much less communications technology one could only worry about one's status vis a vis one's local community. Now one can develop an appreciation of what one's status is vis a vis all the billionaires or all the national leaders or all the corporate CEOs or all the best athletes or prettiest models around the room. This inevitably gives most people a much larger group of people who seem like they have higher status. Therefore global feelings of lower relative status might well be growing.

By Randall Parker    2007 April 11 11:56 PM   Entry Permalink | Comments (18)
2006 May 03 Wednesday
Prospect Of Rewards Triggers Memory Formation

Reward-related areas of the brain tell other areas of the brain when events should have memories created for them.

The prospect of a paycheck, good grade, or promotion wonderfully concentrates the mind, and researchers have now identified the brain circuitry responsible for such reward-motivated learning.

In an article in the May 4, 2006, Neuron, Alison Adcock and colleagues report brain-scanning studies in humans that reveal how specific reward-related brain regions "alert" the brain's learning and memory regions to promote memory formation.

In their studies, the researchers asked volunteers to participate in two types of reward-related tasks as they scanned the subjects' brains using functional magnetic resonance imaging. In this technique, harmless magnetic fields and radio waves are used to detect regions of higher blood flow in the brain, which reflects higher activity.

In the first task, the researchers aimed at identifying the region involved in anticipating rewards. This task involved presenting the subjects with such symbols as circles or squares that indicated an amount of money the subjects could gain or lose--from no money to $5--by rapidly responding to a subsequently presented target by pressing a button. The subjects were notified immediately whether they had received the reward. The researchers found that reward anticipation activated specific brain structures in the "mesolimbic" region involved in the processing of emotions.

In the second task, the researchers sought to measure how this reward center promoted memory formation. They first showed subjects a "value" symbol that signified whether the image of a scene that followed would yield $5 or ten cents if they remembered it the next day. Then they showed the subjects the scene, and the next day tested their ability to pick the scene out of a group.

The researchers found that the subjects were far more likely to remember high-value scenes than low-value scenes. Importantly, they found that the cues to the high-reward scenes that were later remembered--but not those scenes later forgotten--activated the reward areas of the mesolimbic region as well as the learning-related hippocampus in the medial temporal lobe (MTL) of the brain. Activation prior to scene visualization suggests that the brain actually prepares in advance to filter incoming information rather than simply reacting to the world. Activation of the MTL is associated with higher brain functions, including learning and memory, and subjects who showed greater activation in these regions also showed better memory performance, found Adcock and colleagues.

The researchers concluded that the learning mechanism they identified "may let an organism's expectations and motivation interact with events in the physical world to influence learning. Thus, anticipatory activation of this mesolimbic circuit may help translate motivation into memory."

One of the problems with childhood education is that it seems so distant to eventual rewards in the job marketplace. If schools and parents could find better ways to reward better school performance the average kid in school might spend more time with their medial temporal lobe (MTL) activated and forming memories.

One problem with reward systems is that kids differ greatly in their ability to learn. How to gear a reward system to toward the abilities of each kid so that rewards are geared toward the upper range of how fast they can learn without having the rewards set too high so that the level of performance needed for rewards becomes unattainable for some kids or too easy for other kids?

Also, there's something to be said for a practice that I and many others to do themselves: Reward yourself for achieving some learning goal. When you set rewards for yourself to strive for you are setting up the conditions to active your brain's MTL.

By Randall Parker    2006 May 03 10:12 PM   Entry Permalink | Comments (6)
2006 April 23 Sunday
Neurons Identified That Assign Relative Ratings To Goods

All of economics is just the chattering of neurons. Scientists at Harvard Medical School have identified the neurons that advertisers want to control.

BOSTON--Researchers at Harvard Medical School (HMS) report in the April 23 issue of Nature that they have identified neurons that encode the values that subjects assign to different items. The activity of these neurons might facilitate the process of decision-making that occurs when someone chooses between different goods.

"We have long known that different neurons in various parts of the brain respond to separate attributes, such as quantity, color, and taste. But when we make a choice, for example: between different foods, we combine all these attributes--we assign a value to each available item," says Camillo Padoa-Schioppa, PhD, HMS research fellow in neurobiology and lead author of the paper. "The neurons we have identified encode the value individuals assign to the available items when they make choices based on subjective preferences, a behavior called 'economic choice.'"

Everyday examples of economic choice include choosing between working and earning more or enjoying more leisure time, or choosing to invest in bonds or in stocks. Such choices have long been studied by economists and psychologists. In particular, research in behavioral economics shows that in numerous circumstances, peoples' choices violate the criteria of economic rationality. This motivates a currently growing interest for the neural bases of economic choice--an emerging field called "neuroeconomics." In general, it is believed that economic choice involves assigning values to available options. However, the underlying brain mechanisms are not well understood.

In the study, Padoa-Schioppa and John Assad, PhD, HMS associate professor of neurobiology, found a population of neurons located in the orbitofrontal cortex (OFC) that assigns values to different goods on a common value scale. Assigning values on a common scale allows comparing goods, like apples and oranges, that otherwise lack a natural basis for comparison.

Previous work in other laboratories showed that lesions to the OFC can result in choice deficits such as eating disorders, compulsive gambling, and abnormal social behavior. Moreover, the OFC is part of brain circuitry implicated in drug abuse, which can also be thought of as a choice deficit. Padoa-Schioppa and Assad's results establish a more direct link between the activity of OFC and the mental valuation process underlying choice behavior.

"The activity of these neurons reflects the value subjects assign to the available goods when they make choices," says Padoa-Schioppa.

"A concrete possibility is that various choice deficits may result from an impaired or dysfunctional activity of this population, though this hypothesis remains to be tested."

In his experiment, Padoa-Schioppa had macaque monkeys choose between two types of juice offered in different amounts. In some trials, the monkey chose between one drop of grape juice (which monkeys prefer) and one drop of apple juice. In other trials, the monkey chose between one drop of grape juice and two drops of apple juice, etc. Behaviorally, Padoa-Schioppa observed a trade-off between juice type and juice quantity. The monkey might choose grape juice when one or two drops of apple juice were available. However, the monkey might be indifferent between the two juices when offered one drop of grape juice versus three drops of apple juice, and might always choose the apple juice if four or more drops were available. This indicates that the value the monkey assigns to one drop of grape juice is roughly equal to the value the monkey assigns to three drops of apple juice.

On the basis of such choice pattern, Padoa-Schioppa could correlate the activity of neurons in the OFC directly with the value assigned to the two juices. For example, the activity of one particular neuron could be low when the monkey chose one drop of grape juice or when it chose three drops of apple juice (low value). The activity of the same neuron might be medium-high when the monkey chose two drops of grape juice or when it chose six drops of apple juice (medium-high value). And the activity of the same neuron might be high when the monkey chose three drops of grape juice or when it chose 10 drops of apple juice (high value). This means that the activity of such OFC neurons encodes the value chosen by the monkey independently of the physical characteristics of the juice--its taste, quantity, etc.

Padoa-Schioppa also found that other neurons in the OFC encode the value of only one of the two juices offered to the monkey. Some neurons encoded the value of the grape juice, while other neurons encoded the value of the apple juice. "The monkey's choice may be based on the activity of these neurons," says Padoa-Schioppa.

An important aspect of the results is that neurons in the OFC encode the economic value of offered and chosen goods independently of the particular way the goods are offered to the monkey, and independently of the specific action the animal uses to signal its choice. For example, OFC neurons encoding the value of apples and oranges would do so regardless of whether the apple is offered on the right and the orange on the left, or vice versa.

"This result has broad implications for possible psychological models of economic choice," says Padoa-Schioppa. "It suggests that economic choice is, at its essence, a choice between goods as opposed to a choice between actions--such as reaching to the right to take the apple or to the left to take the orange."

This work follows a paper published in February in the journal Cognition by Padoa-Schioppa with collaborators Lucia Jandolo and Elisabetta Visalberghi of the Italian National Research Council in Rome. That behavioral study found that monkeys indeed make choices by assigning values to available foods. In the present study, Padoa-Schioppa and Assad identify the neurons in the OFC that correlate such values.

If you could change the value your brain assigns to various goods would you do it? Would you want the ability to consciously change what your desires are to make your desires more adaptive for your health or more easy to fulfill or less likely to get you into trouble?

One of the scariest things I see about advances in neuroscience is that ultimately these advances are going to point toward directions for the development of neurotechnologies that will make personality and desires malleable. Inevitably governments, terrorist groups, and other entities will use neurotechnologies to mold minds to give them different values, desires, drives.

By Randall Parker    2006 April 23 09:41 PM   Entry Permalink | Comments (3)
2005 October 07 Friday
Feelings Of Mortality Change Charitable Gift Sizes And Food Choices

Feelings of mortality change charitable giving and food choices.

After the Sept. 11, 2001, terrorist attacks many Americans reported dramatic changes in their behavior, from increased church attendance and charitable giving to -- at the other end of the scale -- overeating and overspending.

Intrigued by these anecdotal reports, Baba Shiv, associate professor of marketing at Stanford Graduate School of Business, and colleagues Rosellina Ferraro and James R. Bettman from Duke University's Fuqua School of Business set out to discover what might be driving these changed behaviors. Their paper, "Let Us Eat and Drink, for Tomorrow We Shall Die," is published in the June 2005 Journal of Consumer Research.

They discovered that when confronted with thoughts of death, people tend to act in ways that will boost their self-esteem. They also have fewer cognitive resources to resist behaviors that are not central to their self-image. People for whom being slim or fit is important to their self-image, for instance, will not be as likely to overeat, but if physical appearance isn't as important, the willpower to resist that fudge sundae will plummet.

I've long suspected that terrorists are motivated in large part by a desire to manage their own feelings of self esteem. They carry out terrorist acts as a way to feel more efficacious and in control.

As a basis for the study, the researchers built upon an existing body of work on "Terror Management Theory," which attempts to explain how people cope when faced with a threat to their mortality. The theory holds that when reminded of their own mortality people first tend to cope in two ways: forcefully defending their cultural worldview (which could manifest itself in forms such as acting more aggressively toward someone with different political beliefs); or behaving in ways most likely to bolster their self-esteem.

The researchers decided to test the second part of this theory by examining two possible sources of self-esteem: physical appearance and being virtuous.

People who consider being virtuous as more important donate more when reminded of their mortality.

Researchers told 115 student subjects that they would be entered into a $200 lottery as part of their compensation for participating in a study. All participants first answered a questionnaire that measured the importance of virtue to their self-esteem. Half were then asked questions about the prospects of their own deaths while the other half were asked about dental pain. At the end, subjects in each group were asked how much of the $200 they would be willing to donate to charity if they won the lottery.

Participants for whom virtue was an important source of self-esteem offered significantly higher donations (an average of $65) when reminded of their mortality than when they were not (an average of just $34.50). Participants for whom virtue was not an important source of self-esteem actually donated less when reminded of their own deaths (an average of $20.36 compared with $28.60).

I wonder about the motivations here. Is the reminder of mortality more likely to result in virtuous behavior among those religious believers who expect they'll some day be judged by God in the afterlife? How would the results of this experiment differ with believers in different religions?

Do those who respond to reminders of mortality by donating money otherwise act more virtuous on average as compared to those who do not respond by upping their donations? What other differences are there between people who attach high importance to virtuous behavior and those who do not?

Will charities start running ads reminding people of their mortality as a way to boost donations? Or how about charities that help the homeless? Would they get more donations if they reminded people that health and financial reversals might some day make them homeless too?

Next we come to the very important choice between chocolate cake and fruit salad when placed in the context of future death.

A second part of the study investigated body image as a source of self-esteem. Participants were first asked questions to determine how their attitude toward their bodies contributed to their sense of self. Half were then asked about their reactions to September 11 while the others were asked about a recent local fire in which a building was destroyed but no one was hurt.

Afterward, all participants were given the choice between two snacks -- chocolate cake or fruit salad -- ostensibly as part of their reward for participating in the study.

Among women whose bodies contributed greatly to their self-esteem, only 23 percent chose cake when their sense of mortality was high; a dramatic drop from the 38 percent that chose cake when their sense of mortality was low.

These numbers make perfect sense, according to Shiv. "When people are reminded of their deaths, they are desperately seeking to cope, and if a decision can help them boost their self-esteem, they will make that decision. Thus women whose bodies were important to their self-esteem were much more likely to reject the offer of chocolate cake when their sense of mortality was heightened."

However, among women whose bodies did not contribute significantly to their sense of self-esteem, 94 percent chose chocolate cake when reminded of 9/11 -- more than twice as many as those who chose cake when their sense of mortality was low (44 percent).

"If you are using all your resources to focus on some important aspect of self-esteem in order to cope with thoughts of death, and body esteem is not central to you, then you simply have fewer resources to help you resist that tempting piece of chocolate cake," said Shiv.

I see the use of chocolate cake in this experiment as unfortunate. A lot of people think that chocolate makes them feel better when unhappy. This is especially so when heart broken over the end of a romance. So maybe the people who ate more chocolate cake when reminded of 9/11 were self-medicating.

A heightened sense of mortality did not cause men to resist chocolate cake.

Interestingly, there was no difference between the men's choice of cake or fruit salad based on their sense of mortality. The researchers attributed this to the fact that physical appearance is more of a "hot button" for women than for men.

I wonder if men would more likely choose high protein foods in response to a heightened sense of mortality on the theory that protein is needed to build muscles and muscles help in self defense.

I wonder how much of the response reported above is due to generalized feelings of stress versus feelings of lowered self esteem. Would other forms of stressors cause the same response? Or in response to stressors that do not remind us of our mortality would more people eat chocolate as a way to reduce the feelings of stress?

In the future the ability to manage one's emotional state might reduce charitable behavior. If people feel up and unstressed all the time I bet they are a lot less likely to donate to charities. Add in some future nanotech implants that automatically release compounds that block stress or negative emotions and the desire to engage in charitable behavior might decline markedly. I'd love to see a study of charitable giving of depressed people before and aftey they go on Prozac or Paxil. I bet anti-depressants reduce charitable giving by emotionally distancing people from those who suffer.

By Randall Parker    2005 October 07 03:53 PM   Entry Permalink | Comments (6)
2005 August 26 Friday
Monkeys Prefer Gambling Risk To Sure Reward

Human gambling problems probably have very ancient roots.

DURHAM, N.C. -- Duke University Medical Center neurobiologists have pinpointed circuitry in the brains of monkeys that assesses the level of risk in a given action. Their findings -- gained from experiments in which they gave the monkeys a chance to gamble to receive juice rewards -- could give insights into why humans compulsively engage in risky behaviors, including gambling, unsafe sex, drug use and overeating.

The researchers, Michael Platt, Ph.D., and Allison McCoy, published their findings in the advanced online version of Nature Neuroscience, posted August 14, 2005. The research was sponsored by the National Institutes of Health, the EJLB Foundation, and the Klingenstein Foundation.

In their experiments, the researchers gave two male rhesus macaque monkeys chances to choose to look at either of two target lights on a screen. Looking at the "safe" target light yielded the same fruit juice reward each time. However, looking at the "risky" target light might yield a larger or smaller juice reward. The average juice reward delivered by looking at either target was the same.

To their surprise, the monkeys overwhelmingly preferred to gamble by looking at the risky target. This preference held, regardless of whether the scientists made the risky target reward more

variable, or whether the monkeys had received more or less fruit juice during the course of the day.

This result is another knock at the foundations of economic theories that assume perfect rational utility maximization by market actors.

"There was no rational reason why monkeys might prefer one of these options over the other because, according to the theory of expected value, they're identical," said Platt. The researchers also tested whether the monkeys were simply responding to the novelty of the risky target.

Well, the theory of expected value is wrong. Monkeys, like homo sapiens, are not homo economicus.

I wonder if manufacturers who sell products that are sometimes great and sometimes terrible attract repeat buyers who keep hoping for a repeat of that successful thrill.

"We wondered whether the monkeys preferred the risky target because the experiment was dull and boring, and they wanted the variability," said Platt. "But when we made the task more interesting by changing the color of the lights on each trial, the monkeys didn't care anything about it."

Monkeys, like many humans, like to gamble in games where the odds are stacked against them.

In fact, when the researchers made the average payoff for the risky target less than for the safe target, "we found that they still preferred the risky target," said Platt. "Basically these monkeys really liked to gamble. There was something intrinsically rewarding about choosing a target that offered a variable juice reward, as if the variability in rewards that they experienced was in itself rewarding."

Even when the researchers subjected the monkeys to a string of "losses," the high of a "win" appeared to keep them going, said Platt.

"If they got a big reward one time on the risky choice, but then continued to get small rewards, they would keep going back as if they were searching or waiting or hoping to get that big payoff. It seemed very, very similar to the experience of people who are compulsive gamblers. While it's always dangerous to anthropomorphize, it seemed as if these monkeys got a high out of getting a big reward that obliterated any memory of all the losses that they would experience following that big reward," said Platt.

The researchers inserted microelectrodes into the posterior cingulate cortex of the brain to further studied monkey gambling.

Confident that they had developed a valid animal model that would reveal insights into the brain mechanism for assessing risk, the researchers next explored the neural circuitry that governed that assessment. They threaded hair-thin microelectrodes into a brain region called the posterior cingulate cortex, which studies in humans and animals had implicated in the processing of information on rewards. They then measured the electrical activity of neurons in the region as they administered the same behavioral task to the monkeys.

"We found that the neurons behaved very similarly to the monkeys," said Platt. "That is, as we increased the riskiness of a target, the neurons' activity would go up in the same way the monkey's frequency of choosing that target would go up. It was amazing the degree to which the activity of these neurons paralleled the behavior of the monkeys. They looked like they were signaling, in fact, the monkeys' subjective valuation of that target," he said. Further analysis of the neuronal activity indicated that, indeed, the neurons were reflecting the risk value the monkeys placed on the target, rather than an after-the-fact response to the payoff.

Where does this sort of insight lead to? Picture in the future microelectrodes inserted into the brain to deliver jolts to cancel out the feeling that some gamble is worth taking.

While Platt and McCoy believed they have isolated one component of the neural machinery of risk, they do not believe they have mapped the entire circuitry.

"We don't think the posterior cingulate cortex is by any means the only area that's important for assessing risk, for deciding what's valuable and for actually making a choice based on that valuation," said Platt. "We think that this is just part of a whole circuit that's involved in that process." However, he said, pinpointing a key region involved in risk assessment will enable further studies to map that circuitry.

"It's going to be interesting to trace this circuitry to see which parts of the brain are signaling something about subjective utility and which parts of the brain are signaling information about true reward and punishment experiences," said Platt.

The animal study results can help map where to place electrodes to cancel out the desire to gamble (not that the researchers made such a claim).

He emphasized that such animal studies are a highly useful complement to human studies and genetic studies using mice. Neuroimaging studies in humans performing such tasks can identify brain regions involved in making decisions based on risk, he said.

"And then, using these animals, we can do electrophysiological studies that allow us to understand how the fundamental processing units of the brain -- single nerve cells -- actually process information about reward and risk and uncertainty; and how that information might contribute to the actual decision process that results in the monkey's choice," said Platt. What's more, he said, the monkey studies allow manipulation of the circuitry using drugs to determine how the circuitry might malfunction in human disorders.

The monkey model of desire to gamble also makes for a convenient lab model for the development of pharmaceutical agents to dampen down the gambling impulse.

"For example, it is believed that people who have low levels of the neurotransmitter serotonin might be more risk prone and impulsive," said Platt. "Disturbances in such neurotransmitter systems might be the basis of pathological conditions like pathological gambling, obsessive-compulsive disorder and depression. We can do pharmacological manipulation of the serotonin system in monkeys to see how it influences risk perception and risk preferences, and whether we see changes at the level of the single neurons that we're studying."

Plus, if monkeys can be genetically engineered to be less prone to gambling then some day the same will be doable with offspring genetic engineering.

What's more, said Platt, the studies with monkeys can guide studies in mice, in which scientists can make genetic alterations in the mice and study the behavioral effects of those alterations. Such studies could contribute to understanding of the genetic basis of compulsive behaviors and other such behavioral disorders.

With greater understanding comes greater powers to manipulate. How about a virus genetically engineered for surreptitious injection into a political opponent to make him a reckless gambler? Risks with illicit affairs or foreign policy adventures might help bring down the politician. Then again, if recent experience serves as a guide, perhaps not. Hmmm....

By Randall Parker    2005 August 26 04:45 PM   Entry Permalink | Comments (3)
2005 August 17 Wednesday
Happiness Comes From Relative Comparisons Of Wealth

While level of physical healthiness is the biggest determinant of happiness, comparison of financial success with others of the same age group is the second largest source of happiness and unhappiness.

PHILADELPHIA, PA--Financially richer people tend to be happier than poorer people, according to sociological researcher Glenn Firebaugh, Pennsylvania State University, and graduate student Laura Tach, Harvard University. Their research is focused on whether the income effect on happiness results largely from the things money can buy (absolute income effect) or from comparing one's income to the income of others (relative income effect). They present their research in a session paper, titled "Relative Income and Happiness: Are Americans on a Hedonic Treadmill?," at the American Sociological Association Centennial Annual Meeting on August 14.

Firebaugh argues that, in evaluating their own incomes, individuals compare themselves to their peers of the same age. Therefore a person's reported level of happiness depends on how his or her income compares to others in the same age group. Using comparison groups on the basis of age, the researchers find evidence of both relative and absolute effects, but relative income is more important than absolute income in determining the happiness of individuals in the United States. This may result in a self-indulgent treadmill, because incomes in the United States rise over most of the adult lifespan.

"If income effects are entirely relative, then continued income growth in rich countries today is irrelevant to how happy people are on the whole," says Firebaugh. "Rather than promoting overall happiness, continued income growth could promote an ongoing consumption race where individuals consume more and more just to maintain a constant level of happiness."

Firebaugh tested what he refers to as the hedonic treadmill hypothesis, which uses a comparison of age-based cohorts. The hedonic treadmill requires a specific type of relative income effect--one where "keeping up with the Joneses" means continually increasing one's own income, because we can be sure that the Joneses are increasing theirs.

This suggests a reason why some find socialism attractive: People want to be freed from the competitive need to keep up with others. Socialists want to eliminate the ability to get ahead so that they no longer have to worry about the need to keep up others in order to preserve their happiness. Therefore the lure of socialist policies stems from innate genetically determined features of how the mind works.

The researchers' measured the age, total family income, and general happiness of 20- to 64-year-olds using analysis from the 1972-2002 General Social Survey. They controlled for health, education, effects of getting older, race, and marital status. Happiness was measured using a self-report response of "very happy," "pretty happy," or "not too happy."

While income is important in determining happiness, Firebaugh's data found that physical health was the best single predictor of happiness, followed by income, education, and marital status. The researchers found a relative income effect--the richer you are relative to your age peers, the happier you will tend to be.

Aside: This is yet another argument for the development of Strategies for Engineered Negligible Senescence or SENS. SENS therapies will rejuvenate the body and make everyone healthier. Since healthiness is the most powerful determinant of happiness rejuvenation therapy will greatly increase happiness for entire populations.

"We find with and without controls for age, physical health, education, and other correlates of happiness," said Firebaugh, "that the higher the income of others in one's age group, the lower one's happiness. Families whose income earners are in jobs with flat income trajectories are likely to become less happy over time. Thus the relative income effect observed here implies adverse effects for some individuals over the working years of their life cycles."

On the other hand, the longer people live the more they will feel unhappy due to losing out to more successful people their same age. The range of incomes and accumulated assets will get wider with passing years due to differing levels of ability, motivation, and luck. However, if everyone walks around in youthful bodies comparison between oneself and people of one's own age group will become more difficult. How to tell who is your age or 50 years older or younger than you?

But comparison of relative wealth as a source of unhappiness will be solved by advances in neuroscience. People will use drugs, gene therapies, and cell therapies to reprogram their circuits for determining their level of happiness. For example, I predict that people setting out to achieve some goal (e.g. getting an advanced degree or starting a business or leaning to play a musical instrument) will get their own brains reprogrammed to cause them to get more of their sense of happiness from how well they are progressing toward that goal and less from comparison with other people.

One of the problems posed by cheap worldwide communications technologies is that they increase the pool of people to which people compare each other. Someone in Pakistan or Yemen or South Africa can compare their material possessions to those in Britain or America or Taiwan and find more people who are far better off than them. Therefore satellite TV and the internet are probably sources of increased unhappiness (and likely resentment) among the poorer folks who have access to such technologies. Super poor people in places like Bangladesh or Niger probably feel less unhappiness about relative levels of wealth than moderately poor people in places like Egypt or Indonesia.

Update: Another point: If rich peope were to hide their wealth by living in places that are either obscure (plant trees and bushes and live in small remote valleys in rural locales or perhaps on private islands) or in homes that are outwardly modest looking then the happiness of an overall population would be raised. Also, if wealth gets concentrated into a small number of countries and the poorer folks are kept from emigrating to those countries then again relative differences in levels of wealth would be less obvious and poorer folks would probably feel happier.

By Randall Parker    2005 August 17 03:22 PM   Entry Permalink | Comments (16)
2005 June 22 Wednesday
Capuchin Monkeys Show Same Loss Aversion Economic Behavior As Humans

Monkeys respond to the same odds differently depending on how the choices are presented.

New Haven, Conn., June 20, 2005—The basic economic theory that people work harder to avoid losing money than they do to make money is shared by monkeys, suggesting this trait has a long evolutionary history, according to a Yale University study under review by the Journal of Political Economy.

This phenomenon, known as “loss aversion,” refers to the tendency for people to strongly prefer avoiding losses to acquiring gains. “A large body of studies suggest that losses are more than twice as psychologically powerful as gains,” said author M. Keith Chen, assistant professor at Yale School of Management.

In this study conducted with Venkat Lakshminaryanan, a research assistant in the Department of Psychology, and Laurie Santos, assistant psychology professor and director of the Capuchin Cognition Laboratory at Yale, tufted capuchin monkeys were given small disks to trade for rewards—apples, grapes or gelatin cubes. The researchers said capuchins are well-suited subjects for study since they are relatively large-brained primates, skilled problem solvers, and a close evolutionary neighbor to humans.

In their studies monkeys were given a budget of disks and asked to decide how much to spend on apples, and how much to spend on the gelatin cubes, even as the prices of these goods and the size of their budgets fluctuated. Capuchins performed much like humans do. Capuchins, like humans, react rationally to these fluctuations.

In a second experiment, capuchins were asked to choose between spending a token on one visible piece of food that half the time gave a return of two pieces, or two pieces of visible food, that half the time gave a return of only one piece. Economic theory predicts that consumers should not care which of these outcomes they receive since they are essentially both 50-50 shots at one or two pieces of food. The capuchins, however, vastly preferred the first gamble, which is essentially a half chance at a bonus, than the second gamble, which is essentially a half chance at a loss.

“The goal of this work,” said Santos, “is to learn whether other animals share some of our basic economic decision processes or whether human economic behavior is unique to our own species.”

“The economic view,” Chen added, “says people are aware, rational and in control of their major decisions. Social psychology cuts in the opposite direction, maintaining that people are often unaware of the forces that dictate their behavior. We wanted to understand the interactions of these two things. What we’ve shown is that capuchin monkeys look remarkably like us; making rational decisions in many of the same settings that humans get right, but also make many of the same mistakes we make.”

Their work provides an evolutionary spin on the current debate about why Americans do not save enough for retirement or put enough of their savings into the stock market. “Although the stock market offers a better rate of return than investing in safer financial products, such as bonds, people tend to experience stock market fluctuations through the biased lens of loss aversion, a lens that appears to be shared with other primates,” Santos said. Chen added, “We are fighting tendencies that may be biologically hard-wired.”

We are more like monkeys that most of are willing to admit. Resistance to the theory of evolution is just one manifestation of that reluctance.

To learn about work done on humans with loss aversion read about the classic experiment on risk aversion done by Kahneman, Knetsch, and Thaler with coffee mugs. Basically, people value objects that they own more than objects that they could buy. Also, see the Wikipedia Loss Aversion entry. Or see an example that perhaps more closely mirrors the example with the monkeys where different styles of framing choices causes different preferred outcomes.

This whole area of economics calls for attempts to develop methods to compensate for systematic biases in human cognitive processes. For example, to overcome resistance to regulatory changes due to status quo bias loss aversion Lynne Kiesling of Knowledge Problem argues that experiments to demonstrate the effects of policy changes might help reduce the resistance to changes in the regulatory status quo.

By Randall Parker    2005 June 22 01:35 PM   Entry Permalink | Comments (2)
2005 February 16 Wednesday
Human Brain Overestimates Available Time Weeks In Advance

People overestimate the amount of extra time they will have in the future to do additional tasks. (same article here)

If your appointment book runneth over, it could mean one of two things: Either you are enviably popular or you make the same faulty assumptions about the future as everyone else. Psychological research points to the latter explanation. Research by two business-school professors reveals that people over-commit because we expect to have more time in the future than we have in the present. Of course, when tomorrow turns into today, we discover that we are too busy to do everything we promised.

The study appears in the February issue of the Journal of Experimental Psychology (JEP): General, which is published by the American Psychological Association (APA).

Gal Zauberman, PhD, of the University of North Carolina at Chapel Hill, and John Lynch Jr., PhD, of Duke University, also learned from paper-and-pencil questionnaires (respondents to seven different surveys numbered 95, 68, 241, 61, 264, 48 and 130) that this expectation of more time “slack,” a surplus of a given resource available to complete a task, is more pronounced for time than money.

The authors suspect that’s because every day’s a little different: The nature of time fools us and we “forget” about how things fill our days. Money is more “fungible,” freely exchanged for something of like kind -- such as four quarters for a dollar bill. Write Zauberman and Lynch, “Barring some change in employment or family status, supply and demand of money are relatively constant over time, and people are aware of that. Compared with demands on one’s time, money needs in the future are relatively predictable from money needs today.”

Participants believed that both time and money would be more available in “a month” than “today,” and believed it more strongly for time than for money. A deeper investigation of a psychological phenomenon called “delay discounting,” in which people tend to lessen the importance of future rewards, showed that people also discounted future time more than both gains and losses in future money.

Take home lesson: If you are going to ask someone for a time-consuming favor ask them several weeks before you need the favor done.

The best time to ask someone for a favour is at least several weeks in advance, a new study suggests. The research finds that people consistently over-commit because they expect to have more time in the future than they do right now.

Yes, I believe I do this. Most of the time the future of one's life a couple of months from now looks simpler than the future of one's life tomorrow. More of the detailed clutter of tasks for tomorrow are clear in one's mind than is the case for days further out in the future.

Is this tendency to underestimate the number of more distant future tasks simply a result of having longer lists of tasks to do tomorrow versus a month from now? Or is something deeper at work? The ability to think of all the tasks one has to do a month from now may have been maladaptive. The ability to think in detail about the many detailed tasks one might do weeks into the future was probably a counter-productive distraction from concentration on more immediate needs.

By Randall Parker    2005 February 16 12:20 AM   Entry Permalink | Comments (2)
2005 February 03 Thursday
People Want Utilitarian Rationalizations For Hedonic Purchases

Fun goods are much preferred as long as they are not compared to more practical goods.

In a study that sheds new light on how consumers choose between pleasurable or practical products, a University of Washington researcher has found that people are more likely to buy fun products, but only if the situation allows them the flexibility to rationalize their purchases.

According to Erica Okada, an assistant professor of marketing at the UW Business School, goods can be broadly categorized into hedonic goods that offer enjoyment and utilitarian goods that offer practical functionality.

For example, she said, in the wide product category of automobiles, sports cars are more hedonic and sport utility vehicles are generally more utilitarian. Between a sports car and an SUV, consumers may find the prospect of buying a sports car more appealing, but in a side by side comparison, consumers are much more likely to buy the SUV to avoid feeling guilty for buying something that is perceived more as a want than a need.

She found that when a hedonic product and a utilitarian one of comparable value are each presented singly for evaluation, the hedonic alternative tends to elicit a higher rating. However, when the two are presented side by side, the utilitarian alternative is more likely to be chosen.

So then is the secret of the growth in popularity of Sports Utility Vehicles the presence of the word Utility in the middle? Makes sense. People can spend a lot of money on a fancy vehicle and defend their choice by saying it is practical. This suggests that marketers need to relabel various products to make them seem more utilitarian. How about Emergency Work Energy Boost Ice Cream marketed to people who need to work long hours to complete projects?

Or how about selling sports cars based on the idea that their low profiles make them more able to handle heavy crosswinds when trying to evacuate an area ahead of a hurricane? Show an animation of SUVs getting blown into a Lousiana Bayou while practical people escape New Orleans in advance of hurricane winds and massive flooding. Maybe sports cars need to be sold with 4 wheel drive and wide tires designed to keep going on icy roads. Or how about a battery hybrid sports car? People could buy it to protect the environment.

People view hedonic (pleasurable) versus practical goods differently in terms of time and money spent to acquire them.

In addition, Okada found that the difference in the need for justification also affects the combination of time, or effort, and money that people choose to expend in order to acquire hedonic versus utilitarian items. Specifically, she said people have a relative preference to pay in time for hedonic goods, and in money for utilitarian goods.

"Consumers are generally willing to pay a premium for convenience, and go the distance for a bargain," she said. "Given a choice between paying in time versus money, individuals are more likely to go the extra mile and find a good deal on the DVD player – that is, pay in time – and more likely to pay a higher price monetarily at a convenient location for the food processor."

Maybe selling hedonic goods with a promise on the part of the seller to donate some percentage of the sale to some charity (say helping kids who have cancer) would give people the opening they need to rationalize the purpose: "I'm doing it for the kids" or "I'm doing it to save the Siberian tigers from extinction". Each type of hedonic good may need a different ideal charity that its sales could be paired up with. Who or what do you need to help to allow you to feel good about buying a sports car? Abandoned children perhaps? Is it best to medical research in order to justify the eating of ice cream? Surely research could provide the answers to these questions all broken out by demographic profiles and hot guilt buttons to cool down. Of course, this all has to be done in ways that do not dampen the pleasure of the purchase.

Something like a sports car could be sold with real life inspiring stories of practical uses of the product: "I was called in to do emergency heart surgery at this rural hospital in the middle of the night and I was the only one in 250 miles who could do it. If I hadn't sacrificed my plans for a fourth vacation home to buy the Lamborghini there is just no way I could have driven 150 miles an hour to make it to the hospital in time so save the heart and life of that mother of 4 children who had been severely injured in a car accident. Those kids have their mom to take care of them thanks to my Lamborghini. I can't possibly give it up."

By Randall Parker    2005 February 03 03:02 AM   Entry Permalink | Comments (2)
2004 December 05 Sunday
What Women Most And Least Enjoy

Commuting is the least enjoyable activity for women? I bet women would enjoy commuting a lot more if they regularly car-pooled with close friends.

The technique, described in the Dec. 3 issue of Science, provides insight into what people actually enjoy and what kinds of factors affect how happy we are with our lives.

Some of the findings confirm what we already know while others are counter-intuitive. The researchers assessed how people felt during 28 types of activities and found that intimate relations were the most enjoyable, while commuting was the least enjoyable.

More surprisingly, taking care of their children was also among the less enjoyable activities, although people generally report that their children are the greatest source of joy in their lives.

"When people are asked how much they enjoy spending time with their kids they think of all the nice things---reading them a story, going to the zoo," said University of Michigan psychologist Norbert Schwarz, a co-author of the Science article. "But they don't take the other times into account, the times when they are trying to do something else and find the kids distracting. When we sample all the times that parents spend with their children, the picture is less positive than parents expect. On the other hand, we also find that people enjoy spending time with their relatives much more than they usually assume."

General reports of what people enjoy may also differ from descriptions of how people actually feel in a specific situation because many people hesitate to report socially inappropriate feelings. This is less of a problem when they report on specific episodes. "Saying that you generally don't enjoy spending time with your kids is terrible," Schwarz said, "but admitting that they were a pain last night is quite acceptable." The new Day Reconstruction Method provides a better picture of people's daily experiences by improving accurate recall of how they felt in specific situations.

By illuminating what kinds of activities, under what conditions and with what partners, are most likely to be linked with positive or negative feelings, the method has potential value for medical researchers examining the emotional burden of different illnesses and the health consequences of stress, according to Schwarz, who is a research scientist at the U-M Institute for Social Research (ISR).

For the study, researchers analyzed questionnaires completed by a convenience sample of 909 working women. Participants answered demographic and general satisfaction questions and were asked to construct a short diary of the previous day: "Think of your day as a continuous series of scenes or episodes in a film," the directions began. After participants developed their diary, they answered a series of structured questions about each episode, including when it started and ended, what they were doing, where they were, with whom they were interacting, and how they felt. The study builds on earlier work on Americans' use of time, initiated by ISR economist F. Thomas Juster.

The average number of daily activities participants reported was 14.1 and the average duration of each episode was 61 minutes.

In addition to intimate relations, socializing, relaxing, praying or meditating, eating, exercising, and watching TV were among the most enjoyable activities. Commuting was the least enjoyable activity, with working, doing housework, using the computer for e-mail or Internet, and taking care of children rounding out the bottom of the list.

Interactions with friends and relatives were rated as the most enjoyable, followed by activities with spouses or significant others, children, clients or customers, co-workers and bosses. At the bottom of the list: activities done alone.

Personal characteristics such as trouble maintaining enthusiasm (an indicator of depression) or a poor night's sleep exerted a pervasive influence on how people felt during daily activities. Features of the current situation such as the identity of partners in an interaction or the level of time pressure experienced at work exerted a powerful effect.

But general life circumstances---such as how secure people think their jobs are, or whether they are single or married---had a relatively small impact on their feelings throughout the day. These factors were closely linked with how satisfied people said they were with their lives in general, but had little influence on how positive they felt during specific activities.

"It's not that life circumstances are irrelevant to well-being," notes Schwarz. "On the contrary, we found that people experience large variations in feelings during the course of a normal day. This variation highlights the importance of optimizing the allocation of time across situations and activities. If you want to improve your well-being, make sure that you allocate your time wisely."

Unfortunately, that's not easy. When the researchers examined the amount of time spent on various activities, they found that people spent the bulk of their waking time---11.5 hours---engaged in the activities they enjoyed the least: work, housework and commuting.

Women do not like using the computer to surf the internet. No wonder most blog comment posters appear to be men. But web surfing is a solitary activity in most cases. No wonder women do not like it.

Women do not like their children as much as they pretend to.

On average, the 900 women gave "Intimate relations" a positive score of 5.10, compared to 4.59 for socializing. Housework scored 3.73, which was better at least than working at 3.62 and commuting with a lowly score of 3.45.

As for who the women preferred to be with, friends clearly won out with a positive score of 4.36. Children landed in the middle, after relatives and spouses.

The measurement method to produce these results is called the Day Reconstruction Method (DRM).

The tool, called the Day Reconstruction Method (DRM), assesses how people spend their time and how they feel about, or experience, activities throughout a given day. In a trial of the new technique, a group of women rated the psychological and social aspects of a number of daily activities. Among these women, relaxing with friends was one of the most enjoyable activities, and the least enjoyable was commuting.

DRM is described by Daniel Kahneman, Ph.D., a professor of Psychology and Public Affairs at Princeton University, and colleagues in the December 3, 2004, issue of Science. Dr. Kahneman was joined in this study by his Princeton University colleague, economist Alan B. Krueger, and psychologists David A. Schkade of the University of California, San Diego, Norbert Schwarz of the University of Michigan, and Arthur A. Stone of Stony Brook University.

"Current measures of well-being and quality of life need to be significantly improved," says Richard M. Suzman, Ph.D., Associate Director of the National Institute on Aging (NIA), which in part funded the research. "In the future I predict that this approach will become an essential part of national surveys seeking to assess the quality of life. The construction of a National Well-Being Account that supplements the measure of GNP with a measure of aggregate happiness is a revolutionary idea." The NIA is part of the National Institutes of Health (NIH) at the U.S. Department of Health and Human Services.

The DRM is going to be used for macroeconomic measurements of the feeling of well-being of large groups of people.

The new tool will be used in an effort to calculate a "national well-being account," a measure similar to economic gauges such as the gross national product. The research team is working with the Gallup Organization to pilot a national telephone survey using the new method.

"The potential value is tremendous," said Princeton economist Alan Krueger, who worked with psychologist Daniel Kahneman, a Nobel laureate, on the study. "Right now we use national income as our main indicator of well-being, but income is only a small contributor to life satisfaction. Ultimately, if our survey is successful and generates the type of data we hope, we would like to see the government implement our method to provide an ongoing measure of well-being in addition to national income."

The Princeton researchers collaborated with psychologists David Schkade of the University of California-San Diego, Norbert Schwarz of the University of Michigan and Arthur Stone of the State University of New York-Stony Brook.

"Current measures of well-being and quality of life need to be significantly improved," said Richard Suzman, associate director of the National Institute on Aging, which partially funded the research. "In the future I predict that this approach will become an essential part of national surveys seeking to assess the quality of life. The construction of a national well-being account that supplements the measure of GNP with a measure of aggregate happiness is a revolutionary idea."

I will bet that using this method men will eventually be shown to find solitary activities to be more pleasurable than women find them.

So how to make women more happy? More sex obviously. Drugs that increase erotic feelings and joy of sex would greatly help increase average level of happiness. But aside from that? Housework will become more automated in the future as new materials and robots reduce the need for cleaning. Also, computer networks might eventually reduce the need for commuting. But that would also reduce the amount of at-work socializing that women can engage in. So will home office work make women more or less happy?

How to make children easier to raise and less time-consuming? Genetic engineering to make them more well-behaved. Do women with poorly behaved children get less joy out of raising them? Probably.

By Randall Parker    2004 December 05 05:10 PM   Entry Permalink | Comments (5)
2004 October 16 Saturday
Brain Battles Between Short Term Emotions And Long Term Logic

When you give in to the impulse for an immediate reward over a longer term greater reward your emotional regions of your brain has beat out your logical regions.

You walk into a room and spy a plate of doughnuts dripping with chocolate frosting. But wait: You were saving your sweets allotment for a party later today. If it feels like one part of your brain is battling another, it probably is, according to a newly published study.

Researchers at four universities found two areas of the brain that appear to compete for control over behavior when a person attempts to balance near-term rewards with long-term goals. The research involved imaging people's brains as they made choices between small but immediate rewards or larger awards that they would receive later. The study grew out of the emerging discipline of neuroeconomics, which investigates the mental and neural processes that drive economic decision-making.

The study was a collaboration between Jonathan Cohen and Samuel McClure at Princeton's Center for the Study of Brain Mind and Behavior; David Laibson, professor of economics at Harvard University; and George Loewenstein, professor of economics and psychology at Carnegie Mellon University. Their study appears in the Oct. 15 issue of Science.

"This is part of a series of studies we've done that illustrate that we are rarely of one mind," said Cohen, also a faculty member at the University of Pittsburgh. "We have different neural systems that evolved to solve different types of problems, and our behavior is dictated by the competition or cooperation between them."

The researchers examined a much-studied economic dilemma in which consumers behave impatiently today but prefer/plan to act patiently in the future. For example, people who are offered the choice of $10 today or $11 tomorrow are likely choose to receive the lesser amount immediately. But if given a choice between $10 in one year or $11 in a year and a day, people often choose the higher, delayed amount.

In classic economic theory, this choice is irrational because people are inconsistent in their treatment of the day-long time delay. Until now, the cause of this pattern was unclear, with some arguing that the brain has a single decision-making process with a built-in inconsistency, and others, including the authors of the Science paper, arguing that the pattern results from the competing influence of two brain systems.

The researchers studied 14 Princeton University students who were asked to consider delayed reward problems while undergoing functional magnetic resonance imaging (fMRI), a procedure that shows what parts of the brain are active at all times. The students were offered choices between Amazon.com gift certificates ranging from $5 to $40 in value and larger amounts that could be obtained only by waiting some period, from two weeks to six weeks.

The study showed that decisions involving the possibility of immediate reward activated parts of the brain influenced heavily by brain systems that are associated with emotion. In contrast, all the decisions the students made -- whether short- or long-term -- activated brain systems that are associated with abstract reasoning.

Most important, when students had the choice of an immediate reward but chose the delayed option, the calculating regions of their brains were more strongly activated than their emotion systems, whereas when they chose the immediate reward, the activity of the two areas was comparable, with a slight trend toward more activity in the emotion system.

The researchers concluded that impulsive choices or preferences for short-term rewards result from the emotion-related parts of the brain winning out over the abstract-reasoning parts. "There are two different brain systems and one of them kicks in as you get really proximate to the reward," McClure said.

What does it say about economists that today it is a growing view among economists that factors other than pure reasoning often drive people's decisions? They are just figuring this out? They didn't understand this, say, 20 years ago?

The finding supports the growing view among economists that psychological factors other than pure reasoning often drive people's decisions.

Do smarter people have a greater ability to control their emotions? Are brains that have more gray matter dedicated to abstract reasoning also brains whose abstract reasoning areas are better able to win out in a fight with the emotional areas? Or do the emotional areas typically scale up as much in size as the abstract reasoning areas in people who have larger abstract reasoning areas and bigger brains?

"Our emotional brain has a hard time imagining the future, even though our logical brain clearly sees the future consequences of our current actions," Laibson said. "Our emotional brain wants to max out the credit card, order dessert and smoke a cigarette. Our logical brain knows we should save for retirement, go for a jog and quit smoking. To understand why we feel internally conflicted, it will help to know how myopic and forward-looking brain systems value rewards and how these systems talk to one another."

The findings also may cast light on other forms of impulsive behavior and drug addiction.

This result explains what Spock had to do to become more Vulcan: He had to suppress the human dopaminergic circuits in his brain that caused him to feel emotions. But pure-blooded Vulcans have an easier job of mastering their emotions. The Vulcans must have either genetically engineered their species to down-regulate emotion producing areas of the brain or they engaged in generations of eugenic breeding practices ("Match maker, match maker, make me a logical match, catch me an unemotional catch") aimed at suppressing impulsiveness and emotional reactions to immediate stimuli. Certainly, as Sarek demonstrated, the Vulcans are not above the use of sophisticated reproductive technology to produce unusual offspring. Just because the Vulcans never have admitted to genetically engineering their species in any TV show episode that doesn't mean they didn't do so. After all, they hid Pon Farr as long as they could. They obviously have their secrets.

Dopaminergic circuits (neurons that release and accept dopamine neurotransmitter molecules) make us do what we ought not do.

"Our results help explain how and why a wide range of situations that produce emotional reactions, such as the sight, touch or smell of a desirable object, often cause people to take impulsive actions that they later regret," Loewenstein said. Such psychological cues are known to trigger dopamine-related circuits in the brain similar to the ones that responded to immediate rewards in the current study.

Concerning addiction, said Loewenstein, the findings help explain some aspects of the problem, such as why addicts become so focused on immediate gratification when they are craving a drug. The dopamine-related brain areas that dominated short-term choices among the study subjects also are known to be activated when addicts are craving drugs.

The researchers are now trying to pin down what kinds of rewards and how short a delay are needed to trigger the dopamine-related reaction. Their ultimate goal is to better understand how the emotion-related and calculating systems interact and to understand how the brain governs which system comes out victorious.

These results also suggest that Vulcans may be resistant to drug addiction. Vulcan neural physiology probably doesn't have dopaminergic neurons capable of responding much to opiates for example.

It would be interesting to take a large population of youths, test their tendency to choose smaller shorter term rewards over larger longer term rewards, and then follow them in a longitudinal study to see if the youths that have a stronger preference for shorter term rewards are more likely to become cigarette smokers, alcoholics, drug addicts, and convicted criminals.

It would also be interesting to test tendency toward choosing smaller shorter term versus larger longer term rewards as a function of IQ. Are people with 100 IQs more likely to go for the immediate reward than people with 130 IQs? Anyone know if that sort of experiment has been done? Or is IQ research too much of a taboo subject for that kind of work to be done by economists?

By Randall Parker    2004 October 16 12:49 PM   Entry Permalink | Comments (20)
2004 August 31 Tuesday
People More Unhappy From Wasted Money Than Wasted Time?

People do not know how to value their time and are less upset by wasted time than by wasted money.

"Our research shows that the concept of time is easier to write off than is money," said Erica Okada, a University of Washington assistant professor of marketing who co-authored the study with Stephen Hoch, professor of marketing at the University of Pennsylvania's Wharton School. "People are relatively certain about how much their money is worth, but when it comes to their time, people are less certain about its value."

Unlike previous research that focused almost exclusively on money-based transactions, this study used time as a form of currency. Researchers conducted five experiments to determine how the inherently ambiguous value of time influences consumer purchasing behavior.

Three hundred sixty undergraduate students completed a questionnaire that presented two scenarios in which they were told they had already consumed a product that they had acquired in exchange for either four hours of work or $50. In one scenario, the students were told their experience with the product was good, in the other negative.

Okada and Hoch noted a greater difference in reaction between a good experience and a bad experience among those who paid in money. The difference between the levels of satisfaction following a good experience and dissatisfaction following a bad experience was significantly less among those who paid in time.

As suspected, said Okada, the experiments revealed that consumers have an easier time rationalizing a bad outcome after paying with time than hard-earned cash. The ambiguity in the value of time allows people to do this, whereas it is more difficult to do so with money, she added.

I wonder whether older people and higher income people would react in the same way as these students. My guess is that students accustomed to treatment by educational institutions that place a low value on their time.

By Randall Parker    2004 August 31 01:55 AM   Entry Permalink | Comments (5)
2004 May 13 Thursday
Brain Scans Show Money Gained From Good Performance More Meaningful

Money that comes as a result of reasons unrelated to one's own performance causes less activity in the area of the brain associated with reward processing than when the money comes as a result of good performance. (same article here)

Human beings are more aroused by rewards they actively earn than by rewards they acquire passively, according to brain imaging research by scientists at Emory University School of Medicine. Results of the study, led by first author Caroline F. Zink and principal investigator Gregory S. Berns, MD, PhD, of Emory's Department of Psychiatry and Behavioral Sciences, are published in the May 13 issue of the journal Neuron.

The Emory scientists used functional magnetic resonance imaging (fMRI) to measure brain activity in the striatum, which is a part of the brain previously associated with reward processing and pleasure. Although other experiments have studied and noted brain activity associated with rewards, until now these studies have not distinguished between the pleasurable effects of receiving a reward and the "saliency" or importance of the reward.

Study volunteers in the Emory experiment were asked to play a simple target-detection computer game. During the game, a money bill appeared occasionally and automatically dropped into a bag of money on the screen. The participant was given the amount of money that dropped in the bag at the end of the game, but because receiving the money had nothing to do with their performance on the computer game, it was not particularly arousing or salient to them.

In another version of the game, a money bill occasionally appeared on the screen and the participant had to momentarily interrupt the target detection game and push a button to make the bill drop into the bag. In this case, whether or not the participant received the money did depend on their performance, which made the appearance of the money bill more salient to them.

In yet another version, participants played the same computer game except the bag on the screen did not appear to have money in it and a blank "blob" dropped into the bag instead of money.

The investigators performed fMRI on the subjects while they were playing the game, particularly focusing on the reward centers. They found that some reward centers of the brain were activated whenever the money was received, but that other parts, particularly the striatum, were activated only when the participants were actively involved in receiving the reward.

"Scientists have conducted tests with monetary rewards in the past and noted that the striatum was activated, but it has been unclear whether it was because of the pleasure surrounding the money or the fact that the money was presented to participants in a salient or behaviorally important manner," said Zink. "We differentiated the saliency aspect by having the participants receive money that had nothing to do with their actions and having them receive money through active participation."

The investigators confirmed that the appearance of money that required a response was more salient to participants than money received passively by measuring skin conductance responses during the game -- a measurement of general arousal used as part of lie detector tests. The active participation in receiving the reward was the only condition that elicited a higher skin conductance measure, indicating greater arousal.

"Being actively engaged in the pursuit of rewards is a highly important function for the brain, much more so than receiving the same rewards passively," Dr. Berns explains. "It is like the difference between winning the lottery and earning the same amount of money. From the brain's perspective, earning it is more meaningful, and probably more satisfying."

It makes sense from an evolutionary perspective that the brain is wired up to reward itself for successfully engaging in activities that bring gains to one's position. History has already provided copious quantities of evidence that the political philosophy of Karl Marx is incompatible with human nature. Even before communist revolutionaries swept into power there were older theories of human nature that predicted the failure of a creed based on "from each according to his ability and to each according to his need". But advances in brain imaging technology has produced tools that are allowing reductionist brain scientists to start unravelling the deep seated mechanisms of our brains that alwayts doomed Marxism to failure.

A more general observation here is that by discovering the mechanisms that govern our behavior science is discovering limits to the malleability of human nature. As brain science advances its results are increasingly going to be used to judge whether proposals for changes in social order are going to compatible with human nature as science comes to understand it. Radical advocates of new social orders are going to increasingly be challenged by results from scientific research labs.

However, science will not only play a conservative role in opposition to proposed changes. Some proposals will be found to be compatible with human nature. Also, and more worringly, eventually scientific advances in the understanding of the brain and in ways to manipulate neurons will serve as the foundation for the development of technologies for changing human nature. Any future radicals who manage to seize power will be able to use biotechnologies to rework the brains of their subjects to be compatible with their imagined utopias. We will no longer be able to count on human nature to serve as a source of resistance to radical utopians because human nature will become more malleable.

By Randall Parker    2004 May 13 11:38 PM   Entry Permalink | Comments (3)
2004 March 22 Monday
Sadness, Disgust Motivate People To Buy And Sell

Jennifer Lerner and colleagues at Carnegie Mellon University showed people movies that portrayed events that were either emotionally neutral, disgusting or saddening. While disgust caused people to be willing to sell at a lower price it also caused them to be less willing to buy unless the price was also low. By contrast, sadness caused both an increased desire to sell and an increased desire to buy.

Sadness, too, cut people's selling price, to $3.06, compared with what emotionally neutral volunteers demanded. Feeling blue made people so desperate for change that they held a fire sale. Sadness also raised, to $4.57, the price people would pay for the pens.

Sad people are therefore more likely to sell things for less than the best market price they could getand to buy things for more than the market price. Is this caused by a desire to change one's suirroundings in hopes of relieving the feeling of sadness? Or does a sad person just place a low value of their own money?

Physical disgust may have evolved to cause people to avoid things that are toxic or infectious to them.

"Disgust is a form of evasive action to protect us against signs of threat, such as disease," says Val Curtis, who led the research. "Women need to have a higher level of sensitivity to infection or disease, because they are the main carers of infants. And, as reproductive ability declines with age, so does disgust."

Avoid shopping or selling things when you are sad.

Update: Sadness makes people want to change their circumstances while disgust makes people want to get rid of what they have.

"We're showing for the first time that incidental emotions from one situation can exert a causal effect on economic behavior in other, ostensibly unrelated situations," said Jennifer Lerner, an assistant professor of social and decision sciences and psychology. Lerner co-authored the study with Economics Professor George Loewenstein and Deborah Small, a doctoral student in the Department of Social and Decision Sciences who soon will be joining the faculty at the Wharton School of Business at the University of Pennsylvania.

To study the effects of sadness on economic behavior, Lerner and her colleagues had one group of participants watch a scene from the film "The Champ" in which a young boy's mentor dies. The researchers elicited disgust in another group by showing a clip from the movie "Trainspotting" in which a man uses an unsanitary toilet. To augment their emotional states, the participants were asked to write about how they would feel in situations similar to those portrayed in the movies. Individuals were then given the opportunity to either sell a highlighter set they were given, or set a price that they would be willing to pay to buy a highlighter set. The study participants then actually bought and sold the highlighters.

The researchers concluded that sadness triggered an implicit need for individuals to change their circumstances, thus a greater willingness to buy new goods or to sell goods that they already had, while disgust made people want to get rid of what they had and made them reluctant to take on anything new, depressing all prices. When asked whether emotion played a role in their decisions, participants said no, indicating that they were unaware that their emotional state could be costing them money. The researchers already have replicated their results in another experiment.

By Randall Parker    2004 March 22 02:38 AM   Entry Permalink | Comments (1)
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