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On the old view of human economic decision-making—human beings are rational.
In the last few years, cognitive psychologists have revolutionized economics—by demonstrating that economic decisions are often irrational. One of the best-known examples of such irrationalities is the phenomenon of “loss aversion.” To a rational economist, $100 is worth exactly $100, whether it’s in your pocket now or on the gambling table. But dozens of studies have now demonstrated that the typical person places about twice much psychological value on keeping the $100 bill in their wallet as they place on winning another $100.
But new research suggests that our decision biases may not be so irrational at all. In a series of three studies scheduled to appear in the Journal of Personality and Social Psychology, and just released online by the American Psychological Association, research by several members of our team shows that loss aversion waxes and wanes in flexible ways, depending of whether or not the person is experiencing different fundamental motivational states (such as self-protection or mating motivation). Research participants were asked how happy or unhappy it would make them to gain or lose $100, for example, or to experience a 30-percentile boost in their financial assets. As in the previous research, losses typically loomed slightly larger than gains. But all that changed for participants who answered the questions in a mating frame of mind (after imagining themselves having a romantic encounter with someone they found highly attractive).
My son Dave, who is a film producer (and has a Psych Today blog on evolution and cinema), put together a video that includes some nice animations and interviews with the authors (not to mention a sound track in which I demonstrate the ability to play a blues run I learned from my friend Phil Tagliente back in high school!) (Check it out by clicking on the little window above it should open up in living color in a separate but more equal window.)
According to Jessica Li, who was the first author of the study: “For men in a mating frame of mind, loss aversion completely disappeared, so that they became more focused on wins than losses. For women, on the other hand, mating motivation led them to be even more loss averse.”
It’s not that men and women always respond differently to psychological motives. When we put participants in a self-protective frame of mind (by having them imagine being alone in the house on a dark night and hearing an intruder breaking in), both men and women became more loss averse in their judgments.
From an evolutionary perspective, loss aversion isn’t always a good thing. Worrying about losses could certainly have helped our ancestors deal with threats, but it would not have helped men win the mating game.” Other research by my colleague Norm Li (no relation to Jessica) has shown that women (but not men) prioritize a possible mate’s relative position in the dominance hierarchy, so men need to be willing to take some chances to win mates.
On this series of studies, Jessica Li and I were joined by Vlad Griskevicius, a marketing professor at the University of Minnesota, and Steven Neuberg, who is my partner in running Arizona State’s Evolution and Social Cognition lab. The new studies are part of a decade-long program of research testing ideas discussed in my new book: Sex, Murder, and the Meaning of Life: A psychologist investigates how evolution, cognition, and complexity are revolutionizing our view of human nature. One of the key themes of this new view of human nature is that human decision-making manifests “Deep Rationality.” On this view, which I described in my first post here, our economic decisions seem to be under the influence of deeply rational, and functionally flexible, biases that helped our ancestors survive and reproduce.
This research program was funded by the National Science Foundation.
References:
Li, Y.J., Kenrick, D.T., Griskevicius, V., & Neuberg, S.L. (2012). Economic biases in evolutionary perspective: How mating and self-protection motives alter loss aversion. Journal of Personality & Social Psychology. Early online release: http://psycnet.apa.org/psycinfo/2011-23438-001/
Li, N.P., Bailey, J.M., Kenrick, D.T., & Linsenmeier, J.A. (2002). The necessities and luxuries of mate preferences: Testing the trade-offs. Journal of Personality and Social Psychology, 82, 947-955.
Related blogs
Deep Rationality II: Conspicuous consumption as a mating display
Video press release: How Mating and Self-Protection Motives Alter Loss Aversion
