14 DAY TRIAL // Researchers funded by the US National Science Foundation (NSF) recently established that impulses which have been with our species since its earliest days still affect our financial and economic decisions to this day, with far-reaching effects.
The investigation was conducted by researchers at the Arizona State University (ASU).The researchers learned that people's financial portfolios, for example, can be influenced by decisions they made under the influence of a passing mood years ago.
What this implies is that mood and impulses that have been with our species for millions of years can still have a tremendously important say in the way we conduct our daily lives. The study was just released by the American Psychological Association on its PsycNet website.
Two of the most important factors that affect our financial and economic decisions are survival and reproduction, the same two drives that have been with our species for so long. Increasingly often, studies are showing that people are not acting rationally when making important decisions.
Until now, economists operated under the assumption that that was the case, but now it would appear that centuries of economic development have been guided by a false assumption. This study is interesting because it looks at economic decisions through an evolutionary perspective.
Details of the work are scheduled to appear in a series of three scientific paper, all of which have been accepted for publication in the March 2012 issue of the Journal of Personality and Social Psychology.
The key to understanding this research is understanding the concept of loss aversion, which is when people place more value on money if they keep it, rather than if they gamble it to win an equal amount of money. Risk aversion is not rationally-sound, yet it was found to dictate numerous financial choices.
However, loss aversion is not a fixed phenomenon. Its intensity is increased or decreased based on what we are doing at a certain point. If our need for protection, or for a relationship, is dire enough, then our loss aversion decreases, meaning that we are bound to make more irrational decisions.
“For men in a mating frame of mind, loss aversion completely disappeared and they became more focused on wins than losses. For women, on the other hand, mating motivation led them to be even more loss averse, to focus less on possible gains and even more on the pain of loss,” says Jessica Li.
The expert, who was the first author of the investigation, is a PhD student at ASU. The team was led by professor Douglas Kenrick, and also included University of Minnesota marketing professor Vlad Griskevicius and ASU Evolution and Social Cognition lab co-leader Steven Neuberg.