Decision Making and Emotion

Economists and policy makers are coming to the realization that rationality, in its multiple forms, doesn’t always explain why people make the decisions that they do.  By rationality, I mean both the assumption of “economic man” (a utilitarian cost/benefit analyzer) and the emphasis on education and knowledge as the privileged means of shaping behavior.   

Let’s take three recent headlines: “Why Sadness Increases Spending,” “Craving the High That Risky Trading Can Bring” and “Teenage Risks, and How to Avoid Them.”  All point to the role of emotion in decision making (any surprise here?). 

The first article states, “A research team [of Cynthia Cryder, Jennifer Lerner, and colleagues] finds that people feeling sad and self-focused spend more money to acquire the same commodities than those in a neutral emotional state.” 

The second provides an Aristotelian summary: “The findings, while preliminary, suggest — perhaps unsurprisingly — that traders who let their emotions get the best of them tend to fare poorly in the markets. But traders who rely on logic alone don’t do that well either. The most successful ones use their emotions to their advantage without letting the feelings overwhelm them.” 

The third tells us, “Scientific studies have shown that adolescents are very well aware of their vulnerability and that they actually overestimate their risk of suffering negative effects from activities like drinking and unprotected sex…  ‘It now becomes clearer why traditional intervention programs fail to help many teenagers,’ Dr. Valerie Reyna and Dr. Frank Farley wrote. ‘Although the programs stress the importance of accurate risk perception, young people already feel vulnerable and overestimate their risks.’  In Dr. Reyna’s view, inundating teenagers with factual risk information could backfire, leading them to realize that behaviors like unprotected sex are less risky than they thought. Using an analytical approach of weighing risks versus benefits is ‘a slippery slope that all too often results in teens’ thinking that the benefits outweigh the risks,’ she said.” 

This type of research provides small steps forward vis-à-vis traditional Western assumptions about decision making and rationality.  But my question is, Why don’t they go further?  Why do they simply seem to affirm our common sense view of the world? 

In the first example of sadness and spending, the research design and psychological assumptions leave the research at some distance from everyday life:

“In the experiment, participants viewed either a sad video clip or one devoid of human emotion. Afterward, participants could purchase an ordinary commodity, such as a water bottle, at various prices. Participants randomly assigned to the sad condition offered almost 300% more money to buy the product than “neutral” participants. Notably, participants in the sadness condition typically insist, incorrectly, that the emotional content of the film clip did not carry over to affect their spending.  Self-focus helps to explain the spending differences between the two groups. Among participants ‘primed’ to feel sad, those who were highly self-focused paid more than those low in self-focus. Notably, sadness tends to increase self-focus, making the increased spending prompted by sadness difficult to avoid. Why might a combination of sadness and self-focus lead people to spend more money? First, sadness and self-focus cause one to devalue both one’s sense of self and one’s current possessions. Second, this devaluation increases a person’s willingness to pay more for new material goods, presumably to enhance sense of self.”

When you hear or read words like “why might”, “tends to” and “cause one,” then you know the researcher has not done any ethnographic work to see how what appears “real” in the laboratory actually plays out in the real world.  You also know that they operate with a causal view of the mind, not taking into account the role of context and language (among other things) into account.  Could the sadness possibly promote greater generosity and gift giving among individuals?  We don’t know—we are presented with a utilitarian link between sadness and spending that revolves around the “individual.”

In the second example of craving the high of trading and risk taking, the two main problems are a “hard wired” assumption and an individual-vs-society (the “market” in this case) assumption.  Jenny Anderson relates in her article, “A small group of scientists, including some psychologists, say they are starting to discover what many Wall Street professionals have long suspected — that people are hard-wired for money. The human brain, these researchers say, responds to high-stakes trading just as it does to the lure of sex. And the riskier the trades get, the more the brain craves them.”  How can we be hard-wired for money when money is a relatively recent cultural construct?  It just does not make much sense.

As for the market, here’s the piece that comes directly after the hard-wired piece: “Neuroeconomics has not won many converts on Wall Street. Researchers like Mr. [Brain] Knutson have yet to show how their work can be applied effectively in the markets. And some academics question whether the field is of any use in economics.  ‘Economics is about equilibrium, and supply and demand, and forces that come to some stabilized system,’ says Stephen A. Ross, the Franco Modigliani Professor of Finance and Economics at the Massachusetts Institute of Technology. ‘It’s not about atoms or how little people behave’.”  (While I completely disagree with Mr. Ross, you have to admit, he knows how to deliver a quote—ouch, those little people…)

The little people vs. market forces dynamic forces us into an either-or dichotomy that does not permit us to apprehend why traders might take the risks they do (notice the “might,” no ethnography for this one…).  This particular newspaper piece grew out of the scandal by the French trader who incurred massive losses at Societe Generale.  I can certainly imagine that among traders, there is a culture that encourages risk-taking, accompanied by plenty of social praise when a risky gamble pays off.  And it sounds as if there were few social consequences, nothing to pull Jerome Kerviel back from a very abstract mix of chasing sunk costs in the market while getting more and more desperate.  In other words, we can get out of the individual-vs-abstract social force dichotomy by thinking about the importance of local context and how an individual is enmeshed in social relationships and the fulfillment of a role, and the sorts of interpretations and reactions that people will have in such a context.  That’s just not as journalistically “fun” as brain scans and market forces, things supposedly outside the human realm.

I found the final piece on teenagers the most interesting.  Jane Brody brought us a counter-intuitive result, that teenagers actually gauge risk rather well: “The risk of pregnancy from a single act of unprotected sex is quite small, perhaps one chance in 12, and the risk of contracting H.I.V., about one in 500, is very much smaller than that. We’re not thinking logically; [adolescents] are.”  The researchers in question, Valerie Reyna and Frank Farley, bring a comparative perspective, considering how adults are different than adolescents.  And it’s not about modules or being more rational!  “[A]s people grew older and more experienced, they became more intuitive, and more of their decisions were based on what she calls ‘gist,’ an overall sense of what is the best course of action.  This approach, in which ‘one sees the forest more than the trees,’ enables adults to reach the bottom line more quickly and, in the process, reduce their risky behaviors…  ‘Young people don’t get it,’ Dr. Reyna said. ‘They don’t get the gist of a situation. Gist is based on one’s culture, background and experiences, and experience is what teens lack’.”  But in many ways, teenagers do get the “gist” of the situation—trying out adult behaviors, paying attention to what others think, and considering what risks are involved.  Passing another car at 70 miles per hour counts as an accomplishment for many boys.  Trying drugs as well.  Is that hard-wired?  Is it something individual?  Something societal?  Are they sad, so speeding and drugs cheer them up?  These are all the wrong sorts of questions.  Either-or framing and singular causes provide an illusion of knowledge, but mostly it’s scientists chasing their own research high—a very contextual thing, I know, that most other people just don’t get. Still, us social scientist types are mostly about understanding what people are doing and why they do it.

So, what do we anthropologists, particularly the ones on this site, offer in exchange? The importance of ethnography.  The role of context and culture.  The consideration of variation.  A focus on the processes, at whatever analytic level, that contribute to shaping the overall pattern.  I actually think those things mesh better with common sense than most of what’s out there, and when it doesn’t mesh, then we have some concrete things to say about the people with whom we have worked.

6 thoughts on “Decision Making and Emotion

  1. Decision making and emotion

    This article has come to me this morning through Google Alerts. The basic idea is that scientists are surprised that people do not always act rationally and are severely influenced by their emotions.

    The subject of emotions is extremely complex to study. There is not a single answer, at least not yet. Therefore there cannot be a simple answer to the question why people buy things when emotionally sad.

    I would like to suggest one possible solution here. The core of my notion is that the solution lies in hierarchy of human society. There are symbols, signs of hierarchy; some of them are well-known as status symbols, cars, houses, expensive fur coats etc. The more you can buy the higher you are in the human society. There is a strong drive in many people to get as high as possible in this human hierarchy. But more general the findings show that it is normally not so important for people to get really extremely high in the hierarchy, but it is really important for them not to be the last on in the hierarchy.

    The position of the last one in the hierarchy cannot be exactly determined; therefore people try to get higher as they do not know if they are not still the last ones. If some one feels sad he/she feels down and in order to contradict this feeling they buy things as they believe these things as status symbols will bring them up again, and it is usually the case.

    Many observations have been mad as far as buying habits are concerned. In the times of personal success people usually buy dark furniture, if they are in the need of buying some furniture at that time. In the times of personal depression people usually buy white or light furniture if they are in the situation of buying some furniture at that time. Obviously, color of furniture is indirectly related to the personal economic and emotional situation.

  2. Daniel, I’m struck by this research, too, in part because of my own brushes with ‘neuro-economics.’ I’ve found the field to be a real mixed bag. On the one hand, some of the neuro-economics work seems to be an improvement on the usual approach economists take to things as it acknowledges the fact that subjects are actually limited by their brains’ organic nature, rather than being perfect calculating machines. In that sense, this would be an improvement on economics-as-usual. However, the field is still limited, as you point out, by a focus on an individual to an exclusion of context, social relations, and other considerations (like little people), by an amazing capacity to anthropomorphize ‘economic forces’ and yet be incapable of acknowledging any other sort of factors that might influence behavior, and a host of other issues. I really think of utilitarianism as more of an extended metaphor than a theoretical perspective, as it seems proponents are so liable to move the goal posts on any analysis, re-asserting in spite of evidence to the contrary, that all human behaviour is ‘rational’ and ‘utility-maximizing.’

    I think that, for me, Antonio Damasio’s book, Descartes’ Error, is interesting on this point, using cases of brain damage to show that, in fact, purely ‘rational’ individuals — those with certain emotion centres damaged — actually have a very hard time making decisions. That is, the evidence from neuropathology undermines the model of calculating subject that most microeconomics depends upon so heavily. This is not to say that economic models still don’t help to generate all sorts of really fascinating questions — and I’m going to keep on teaching economic anthropology — but it does suggest that all theoretical modeling needs, as you point out, empirical testing. A great example would be work by anthropology Jean Lave on how people actually use mathematics in markets and making purchases, or Caitlin Zaloom’s investigations of how commodities traders make decisions in trading pits or in front of computer screens (or work by Knorr-Cetina, which I really like). (We’ve got one of Zaloom’s chapters in the volume I did with Melissa Fisher, Frontiers of Capital.)

    All of these actual studies of market behavior show that, in spite of economic models, even behaviour at idealized settings such as virtual auctions, commodities trading pits, and international commerce, actually depend upon all sorts of social relations, information limitations, and emotional behaviour that undermine the models of perfectly rational markets. The fact that books like Freakonomics sell millions of copies, or economists like Gary Becker earn Nobel Prizes for arguing that non-economic behaviour is actually ‘rational’ or ‘calculating’ does not make it so. The explanations may be clever, but it’s easy to make up stories about how things are rational in retrospect — if you can’t make predictions based upon the model, then it’s obvious that there are other causal factors (even circular or unpredictable causation) in play.

    Thanks for posting all three of these articles though, Daniel. I’ve got to redo my economic anthro course for next semester and am looking for good examples to work with when I lecture.

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