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The Mismeasure of Intelligence: Measurement Errors in the Relationship between Risk Preferences and Intelligence
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Recent experimental evidence suggests that noisy behavior correlates strongly with personal characteristics. Since decision noise leads to bias in most elicitation tasks, there is a risk of falsely interpreting noise-driven relationships as preference driven. This puts previous studies that found a negative relation between personality measures and risk aversion into perspective and in particular raises the question of how to achieve robust inference in this domain. This paper shows, by way of an economic experiment with subjects from all walks of life, that using structural estimation to model heterogeneity of noise in combination with a balanced design allows us to mitigate the bias problem. Our estimations show that cognitive ability is related to noisy behavior rather than risk preferences. We also find age and education to be strongly related to noise, but the personality characteristics obtained using the Big Five inventory are less related to noise and more robustly correlated to risk preferences.
We study the relationship between cognitive ability and risk aversion under real and hypothetical choice conditions. Our experimental results suggest that the statistical relationship between cognitive ability and risk aversion is sensitive to incentive conditions of the choice problems used to elicit risk preferences. Individuals in the upper tail of the cognitive ability distribution are willing to take more risks. However, this holds only when choices involve hypothetical payoffs. When choices envolve monetary incentives, this correlation is not significant. Results are robust to using alternative measures of cognitive ability.
Are highly intelligent people less risk averse? Over the last two decades scholars have argued the existence of a negative relationship between cognitive ability and risk aversion. Although numerous studies support this, the link between cognitive ability and risk aversion has not been found consistently. To shed new light on this topic, a systematic review and meta-analysis was conducted. A total of 97 studies were identified and included for meta-analysis in the domain of gains (N=90,723), 41 in the mixed domain (N=50,936), and 12 in the domain of losses (N=4,544). Results indicate that there exists a weak, but significant negative relationship between cognitive ability and risk aversion in the domain of gains. However, no relationship was observed in the mixed domain or in the domain of losses. Several meta-regressions were performed to investigate the influence of moderator variables. None of the moderator variables were found to consistently influence the relationship between cognitive ability and risk aversion across the domain of gains, mixed and losses. Moreover, no significant difference was observed between males and females across all three domains. In conclusion, this systematic review and meta-analysis provides new evidence that the relationship between cognitive ability and risk aversion is domain specific and not as strong as suggested by some previous studies.
We obtain rich measurements of risk preferences for 2939 subjects across 30 countries, and use the data to paint a picture of the distribution of risk preferences across the globe using structural equation models. Reference‐dependence and likelihood‐dependence are found to be important everywhere. Model parameters in non‐Western countries differ systematically from those in Western countries, with poorer countries substantially more risk tolerant than rich countries on average. We qualify previous findings on gender effects and cognitive ability by showing how they mainly impact likelihood‐dependence. We further add novel evidence on the correlation between risk preferences and study major. Whereas we confirm previous results on observable characteristics of subjects explaining little of overall preference heterogeneity, a few macroeconomic indicators can explain a considerable part of the between‐country heterogeneity.
This paper contributes to the debate about the relationship between cognitive ability and economic preferences. We employ both national representative survey data and experimental data, and apply different elicitation procedures for risk and time preferences in a developing country, Mexico. Our findings are based on three different samples-adult and adolescent survey data, and experimental data for young adults-and a total of 13 tests, two with monetary incentives and the rest without these incentives. Our results show no statistically significant relationship between cognitive ability and economic preferences using different elicitation procedures with three different samples.
Time pressure is a central aspect of economic decision making nowadays. It is therefore natural to ask how time pressure affects decisions, and how to detect individual heterogeneity in the ability to successfully cope with time pressure. In the context of risky decisions, we ask whether a person’s performance under time pressure can be predicted by measurable behavior and traits, and whether such measurement itself may be affected by selection issues. We find that the ability to cope with time pressure varies significantly across decision makers, leading to selected subgroups that differ in terms of their observed behaviors and personal traits. Moreover, measures of cognitive ability and intellectual efficiency jointly predict individuals’ decision quality and ability to keep their decision strategy under time pressure.
This paper will focus on the relationship between cognitive ability and decision-making under risk and uncertainty. Taken as a whole, this research indicates that cognitive ability is associated with risk-taking behavior in various contexts and life domains, including incentivized choices between lotteries in controlled environments, behavior in nonexperimental settings, and self-reported tendency to take risks. One pattern that emerges frequently in these studies is that cognitive ability tends to be positively correlated with avoidance of harmful risky situations, but it tends to be negatively correlated with risk aversion in advantageous situations. We conclude by discussing perspectives for future research, in particular the scope for the development of richer sets of elicitation instruments and measurement across a wider range of concepts.
Success in life is determined to a large extent by school performance so it is important to understand the effect of the factors that influence it. In this exploratory study, in addition to cognitive abilities, we attempt to link measures of preferences with outcomes of school performance. We measured in an incentivized way risk, time, social and competitive preferences and cognitive abilities of university students to look for associations between these measures and two important academic outcome measures: exam results and GPA. We find consistently that cognitive abilities (proxied by the Cognitive Reflection Test) are very well correlated with school performance. Regarding non-cognitive skills, we report suggestive evidence for many of our measured preferences. We used two alternative measures of time preference: patience and present bias. Present bias explains exam grades better, while patience explains GPA relatively better. Both measures of time preferences have a non-linear relation to school performance. Competitiveness matters, as students, who opt for a more competitive payment scheme in our experimental task have a higher average GPA. We observe also that risk-averse students perform a little better than more risk-tolerant students. That makes sense in case of multiple choice exams, because more risk-tolerant students may want to try to pass the exam less prepared, as the possibility of passing an exam just by chance is not zero. Finally, we have also detected that cooperative preferences—the amount of money offered in a public good game—associates strongly with GPA in a non-linear way. Students who offered around half of their possible amounts had significantly higher GPAs than those, who offered none or all their money.
We study how the ratio between the length of the second and fourth digit (2D:4D) correlates with choices in social and risk preferences elicitation tasks by building a large dataset from five experimental projects with more than 800 subjects. Our results confirm the recent literature that downplays the link between 2D:4D and many domains of economic interest, such as social and risk preferences. As for the former, we find that social preferences are significantly lower when 2D:4D is above the median value only for subjects with low cognitive ability. As for the latter, we find that a high 2D:4D is not correlated with the frequency of subjects' risky choices.
Measuring temporal discounting through the use of intertemporal choice tasks is now the gold standard method for quantifying human choice impulsivity (impatience) in neuroscience, psychology, behavioral economics, public health and computational psychiatry. A recent area of growing interest is individual differences in discounting levels, as these may predispose to (or protect from) mental health disorders, addictive behaviors, and other diseases. At the same time, more and more studies have been dedicated to the quantification of individual attitudes towards risk, which have been measured in many clinical and non-clinical populations using closely related techniques. Economists have pointed to interactions between measurements of time preferences and risk preferences that may distort estimations of the discount rate. However, although becoming standard practice in economics, discount rates and risk preferences are rarely measured simultaneously in the same subjects in other fields, and the magnitude of the imposed distortion is unknown in the assessment of individual differences. Here, we show that standard models of temporal discounting —such as a hyperbolic discounting model widely present in the literature which fails to account for risk attitudes in the estimation of discount rates— result in a large and systematic pattern of bias in estimated discounting parameters. This can lead to the spurious attribution of differences in impulsivity between individuals when in fact differences in risk attitudes account for observed behavioral differences. We advance a model which, when applied to standard choice tasks typically used in psychology and neuroscience, provides both a better fit to the data and successfully de-correlates risk and impulsivity parameters. This results in measures that are more accurate and thus of greater utility to the many fields interested in individual differences in impulsivity.
We take school admission mechanisms to the lab to test whether the widely-used manipulable Immediate Acceptance mechanism disadvantages students of lower cognitive ability and whether this leads to ability segregation across schools. Results show this to be the case: lower ability participants receive lower payoffs and are over-represented at the worst school. Under the strategy-proof Deferred Acceptance mechanism, payoff differences are reduced, and ability distributions across schools harmonised. Hence, we find support for the argument that a strategy-proof mechanism “levels the playing field”. Finally, we document a trade-off between equity and efficiency in that average payoffs are larger under Immediate than under Deferred Acceptance.
To what extent is there a general factor of risk preference, R, akin to g, the general factor of intelligence? Can risk preference be regarded as a stable psychological trait? These conceptual issues persist because few attempts have been made to integrate multiple risk-taking measures, particularly measures from different and largely unrelated measurement traditions (self-reported propensity measures assessing stated preferences, incentivized behavioral measures eliciting revealed preferences, and frequency measures assessing actual risky activities). Adopting a comprehensive psychometric approach (1507 healthy adults completing 39 risk-taking measures, with a subsample of 109 participants completing a retest session after 6 months), we provide a substantive empirical foundation to address these issues, finding that correlations between propensity and behavioral measures were weak. Yet, a general factor of risk preference, R, emerged from stated preferences and generalized to specific and actual real-world risky activities (for example, smoking). Moreover, R proved to be highly reliable across time, indicative of a stable psychological trait. Our findings offer a first step toward a general mapping of the construct risk preference, which encompasses both general and domain-specific components, and have implications for the assessment of risk preference in the laboratory and in the wild.
We examine the psychometric and empirical properties of some commonly used survey-based measures of risk preferences in a population-based sample of 11,000 twins. Using a model that provides a general framework for making inferences about the component of measured risk attitudes that is not due to measurement error, we show that measurement-error adjustment leads to substantially larger estimates of the predictive power of risk attitudes, of the size of the gender gap, and of the magnitude of the sibling correlation. Risk attitudes are predictive of investment decisions, entrepreneurship, and drinking and smoking behaviors; are robustly associated with cognitive ability and personality; and our estimates are often larger than those in the literature. Our results highlight the importance of adjusting for measurement error across a wide range of empirical settings.
We experimentally compare fast and slow decisions in a series of experiments on financial risk taking in three countries involving over 1700 subjects. To manipulate fast and slow decisions, subjects were randomly allocated to responding within 7 seconds (time pressure) or waiting for at least 7 or 20 seconds (time delay) before responding. To control for different effects of time pressure and time delay on measurement noise, we estimate separate parameters for noise and risk preferences within a random utility framework. We find that time pressure increases risk aversion for gains and risk taking for losses compared to time delay, implying that time pressure increases the reflection effect of Prospect Theory. The results for gains are weaker and less robust than the results for losses. We find no significant difference between time pressure and time delay for loss aversion (tested in only one of the experiments). Time delay also leads to less measurement noise than time pressure and unconstrained decisions, and appears to be an effective way of decreasing noise in experiments.
Electronic supplementary material
The online version of this article (doi:10.1007/s11166-017-9252-4) contains supplementary material, which is available to authorized users.
We focus on the comparison of risk attitudes elicited through three different procedures with the goal to analyse the consistency of risk attitudes. Rank correlations are utilized to measure the degree of association of the subjects’ choices and principal component analysis is employed to find the main factors describing the specific characteristics of risk attributes. We observe patterns of consistency in risk attitudes between two methods and within the selected multidimensional method, too. We find an evidence that gender and subjects’ cognitive abilities play a certain role in the consistency of risk attitudes. Participants’ choices in popular Holt and Laury method and the other two methods show nearly no relation. The principal component analysis supports the validity of the distinctive nature of the three risk elicitation methods. We also identify another aspect which is common in the different risk context; we call it the payoff risk sensitivity.
The question of how to measure and classify people’s risk preferences is of substantial importance in the field of economics. Inspired by the multitude of ways used to elicit risk preferences, we conduct a holistic investigation of the most prevalent method, the multiple price list (MPL) and its derivations. In our experiment, we find that revealed preferences differ under various versions of MPLs as well as yield unstable results within a 30-minute time frame. We determine the most stable elicitation method with the highest forecast accuracy by using multiple measures of within-method consistency and by using behavior in two economically relevant games as benchmarks. A derivation of the well-known method by Holt and Laury (American Economic Review 92(5):1644–1655, 2002), where the highest payoff is varied instead of probabilities, emerges as the best MPL method in both dimensions. As we pinpoint each MPL characteristic’s effect on the revealed preference and its consistency, our results have implications for preference elicitation procedures in general.
Electronic supplementary material
The online version of this article (doi:10.1007/s11166-016-9247-6) contains supplementary material, which is available to authorized users.
We study the transmission of risk attitudes in a unique survey of mothers and children in which both participated in an incentivized risk preference elicitation task. We document that risk preferences are correlated between mothers and children when the children are just 7 to 8 years old. This correlation is only present for daughters. We further show that a measure of maternal involvement is a strong moderator of the association between mothers’ and daughters’ risk tolerance. This is consistent with a role for socialization and parental investment in the intergenerational transmission of risk preferences.
Researchers have proposed various theories to explain overbidding in rent-seeking contents, including mistakes, systematic biases, the utility of winning, and relative payoff maximization. Through an eight-part experiment, we test and find significant support for the existing theories. Also, we discover some new explanations based on cognitive ability and impulsive behavior. Out of all explanations examined, we find that impulsivity is the most important factor explaining overbidding in contests.
Background
Impulsivity as a tendency to act quickly without considering future consequences has been proposed as a dimensional factor in bipolar disorder. It can be measured using behavioral tasks and self-report questionnaires. Previous findings revealed patients to show worse performance on at least one behavioral measure of impulsivity. Additionally, self-reported impulsivity seems to be higher among bipolar patients, both parameters being possibly associated with a more severe course of illness. In this study, our primary aim was to investigate the relationship between these two constructs of impulsivity among bipolar patients. MethodsA total of 40 euthymic patients with bipolar disorder (21 female, 22 Bipolar I) and 30 healthy controls were recruited for comprehensive neuropsychological assessment. To assess inhibition control as a behavioral measure of impulsivity, the Stroop Color and Word Test (Stroop) was used. Additionally, both groups completed the Barratt Impulsiveness Scale (BIS) as a self-report of impulsivity. To compare the groups’ performance on the Stroop and ratings on the BIS, the non-parametric Mann–Whitney U test was used. Within the bipolar group, we additionally examined the possibility of an association between Stroop performance and BIS total scores using Pearson’s Correlation r. ResultsPatients and controls differed significantly on the Stroop and BIS, with patients performing worse on the Stroop and scoring higher on the BIS. However, there was no association between the Stroop and BIS within the bipolar group. As an exploratory analysis, a positive correlation between Stroop performance and number of episodes was found. Further, we detected a statistical trend in the direction of poorer Stroop performance among patients treated with polypharmacy. Conclusions
Both difficulties with behavioral inhibition and self-reported impulsivity were observed to be higher in bipolar patients than controls in the current study. However, within the patient group we did not observe an association between patients’ behavioral performance and self-report. This indicates that the parameters likely constitute distinct, dimensional factors of bipolar disorder. In future research, studies with larger samples should investigate which of the two markers constitutes the better marker for the illness and is more suitable to differentiate the most severe patients.
oTree is an open-source and online software for implementing interactive experiments in the laboratory, online, the field or combinations thereof. oTree does not require installation of software on subjects’ devices; it can run on any device that has a web browser, be that a desktop computer, a tablet or a smartphone. Deployment can be internet-based without a shared local network, or local-network-based even without internet access. For coding, Python is used, a popular, open-source programming language. http://www.oTree.org[www.oTree.org] provides the source code, a library of standard game templates and demo games which can be played by anyone.
We present results from two studies that show a positive relation between cognitive reflection and trusting behavior, but no significant relation with trustworthy behavior. Our finding holds regardless of individual distributional social preferences and risk aversion. Our results add to a growing body of literature that illustrates the role of cognitive ability in helping explain outcomes in economic experiments.
We investigated how adult aging specifically alters economic decision-making, focusing on examining alterations in uncertainty preferences (willingness to gamble) and choice strategies (what gamble information influences choices) within both the gains and losses domains. Within each domain, participants chose between certain monetary outcomes and gambles with uncertain outcomes. We examined preferences by quantifying how uncertainty modulates choice behavior as if altering the subjective valuation of gambles. We explored age-related preferences for two types of uncertainty, risk, and ambiguity. Additionally, we explored how aging may alter what information participants utilize to make their choices by comparing the relative utilization of maximizing and satisficing information types through a choice strategy metric. Maximizing information was the ratio of the expected value of the two options, while satisficing information was the probability of winning. We found age-related alterations of economic preferences within the losses domain, but no alterations within the gains domain. Older adults (OA; 61–80 years old) were significantly more uncertainty averse for both risky and ambiguous choices. OA also exhibited choice strategies with decreased use of maximizing information. Within OA, we found a significant correlation between risk preferences and choice strategy. This linkage between preferences and strategy appears to derive from a convergence to risk neutrality driven by greater use of the effortful maximizing strategy. As utility maximization and value maximization intersect at risk neutrality, this result suggests that OA are exhibiting a relationship between enhanced rationality and enhanced value maximization. While there was variability in economic decision-making measures within OA, these individual differences were unrelated to variability within examined measures of cognitive ability. Our results demonstrate that aging alters economic decision-making for losses through changes in both individual preferences and the strategies individuals employ.
In this paper, we ask whether variation in preference anomalies is related to variation in cognitive ability. Evidence from a new laboratory study of Chilean high-school students with similar schooling backgrounds shows that small-stakes risk aversion and short-run discounting are less common among those with higher standardized test scores. The relationship with test scores survives controls for parental education and wealth. We find some evidence that elementary-school GPA is predictive of preferences measured at the end of high school. Two laboratory interventions provide suggestive evidence of a possible causal impact of cognitive resources on expressed preferences. (JEL: J24, D14, C91).
Probability weighting is a major concept for accommodating systematic departures from expected utility theory. We examine the relation between probability weighting and cognitive ability with two experiments: one recruiting subjects with a large variation in cognitive ability and the other using the within-subject manipulation of time constraints in lottery choices and cognitive tests. We find a significant association between likelihood insensitivity—the cognitive component of probability weighting—and cognitive limitation such that subjects with a lower cognitive score or more interrupted cognition due to time pressure respond less discriminately to intermediate probabilities and more over-sensitively to extreme probabilities. Our findings shed light on the sources of anomalous choices against expected utility theory.
This paper was accepted by Yan Chen, behavioral economics and decision analysis.
The purpose of the present study was to revise the Barratt Impulsiveness Scale Version 10 (BIS-10), identify the factor structure of the items among normals, and compare their scores on the revised form (BIS-11) with psychiatric inpatients and prison inmates. The scale was administered to 412 college undergraduates, 248 psychiatric inpatients, and 73 male prison inmates. Exploratory principal components analysis of the items identified six primary factors and three second-order factors. The three second-order factors were labeled Attentional Impulsiveness, Motor Impulsiveness, and Nonplanning Impulsiveness. Two of the three second-order factors identified in the BIS-11 were consistent with those proposed by Barratt (1985), but no cognitive impulsiveness component was identified per se. The results of the present study suggest that the total score of the BIS-11 is an internally consistent measure of impulsiveness and has potential clinical utility for measuring impulsiveness among selected patient and inmate populations.
The authors investigated whether cognitive intelligence (intelligence quotient [IQ]) and emotional intelligence (emotional quotient [EQ]) meaningfully correlate with time preference and risk preference, finding solid evidence in support. In the realm of time preference, high-EQ individuals are less subject to present (or future) bias and more patient. Further, high-IQ subjects tend to exhibit preferences that conform to expected utility maximization. While recent research on the relationship between cognitive ability and preferences has provided important insights, the results suggest that both cognitive intelligence and emotional intelligence matter.
Using the new macro data on risk aversion and patience by Falk et al. (2018), I show that risk aversion and patience are related to intelligence: high-IQ populations are more patient and more risk averse than low-IQ populations. The correlation between patience and intelligence corroborates previous results based on micro data. Intelligent people tend to be patient because they have long time horizons. The correlation between risk aversion and intelligence supports new micro data studies based on dynamically optimized sequential experimentation (Chapman et al. 2018).
Temporary changes in biological state, such as hunger, can impact decision making differently for men and women. Food scarcity is correlated with a host of negative economic outcomes. Two explanations for this correlation are that hunger affects economic preferences directly or that hunger creates a mindset that focuses on scarcity management to the detriment of other decisions. To test these predictions, we conduct a lab-in-the-field experiment in a health screening clinic in Shanghai, recruiting participants who finish their annual physical exam either before or after they have eaten breakfast. We compare the hungry and sated groups on their risk, time and generosity preferences as well as their cognitive performance. Our results show that men and women respond to hunger in opposite directions, thus hunger reduces the gender gap in decision quality, risk aversion and cognitive performance, but creates one in generosity. Finally, we examine several biomarkers and find that higher blood lipid levels are correlated with greater choice inconsistency, risk aversion and generosity. We contribute to emerging insights on the biological foundations for economic preferences and outcomes.
Increased preference for immediate over delayed and for risky over certain rewards has been associated with unhealthy behavioral choices. Motivated by evidence that enhanced cognitive control can shift choice behavior away from immediate and risky rewards, we tested whether training executive cognitive function could influence choice behavior and brain responses. In this randomized controlled trial, 128 young adults (71 male, 57 female) participated in 10 weeks of training with either a commercial web-based cognitive training program or web-based video games that do not specifically target executive function or adapt the level of difficulty throughout training. Pre- and post-training, participants completed cognitive assessments and functional magnetic resonance imaging (fMRI) during performance of validated decision-making tasks: delay discounting (choices between smaller rewards now vs. larger rewards in the future) and risk sensitivity (choices between larger riskier rewards vs. smaller certain rewards). Contrary to our hypothesis, we found no evidence that cognitive training influences neural activity during decision-making, nor did we find effects of cognitive training on measures of delay discounting or risk sensitivity. Participants in the commercial training condition improved with practice on the specific tasks they performed during training, but participants in both conditions showed similar improvement on standardized cognitive measures over time. Moreover, the degree of improvement was comparable to that observed in individuals who were reassessed without any training whatsoever. Commercial adaptive cognitive training appears to have no benefits in healthy young adults above those of standard video games for measures of brain activity, choice behavior, or cognitive performance.Registry: NCT01252966, www.clinicaltrials.govSIGNIFICANCE STATEMENTEngagement of neural regions and circuits important in executive cognitive function can bias behavioral choices away from immediate rewards. Activity in these regions may be enhanced through adaptive cognitive training. Commercial brain training programs claim to improve a broad range of mental processes; however, evidence for transfer beyond trained tasks is mixed. We undertook the first randomized controlled trial of the effects of commercial adaptive cognitive training (Lumosity®) on neural activity and decision-making in young adults (N = 128), compared to an active control (playing online video games). We found no evidence for relative benefits of cognitive training with respect to changes in decision-making behavior or brain response, or for cognitive task performance beyond those specifically trained.
We separate for the first time the roles of cognitive and motivational factors in shaping age differences in decision making under risk. Younger and older adults completed gain, loss, and mixed-domain choice problems as well as measures of cognitive functioning and affect. The older adults’ decision quality was lower than the younger adults’ in the loss domain, and this age difference was attributable to the older adults’ lower cognitive abilities. In addition, the older adults chose the more risky option more often than the younger adults in the gain and mixed domains; this difference in risk aversion was attributable to less pronounced negative affect among the older adults. Computational modeling with a hierarchical Bayesian implementation of cumulative prospect theory revealed that the older adults had higher response noise and more optimistic decision weights for gains than did the younger adults. Moreover, the older adults showed no loss aversion, a finding that supports a positivity-focus (rather than a loss-prevention) view of motivational reorientation in older age.
An individual’s tolerance of risk can be quantified by using decision models with tuned parameters that maximally fit a set of risky choices the individual has made. A goal of this model fitting procedure is to identify parameters that correspond to stable underlying risk preferences. These preferences can be modeled as an individual difference, indicating a particular decision maker’s tastes and willingness to accept risk. Using hierarchical statistical methods, we show significant improvements in the reliability of individual risk preference parameter estimates over other common methods for cumulative prospect theory. This hierarchical procedure uses population-level information (in addition to an individual’s choices) to break “ties” (or near ties) in the fit quality for sets of possible risk preference parameters. By breaking these statistical ties in a sensible way, researchers can avoid overfitting choice data and thus more resiliently measure individual differences in people’s risk preferences.
This paper was accepted by Yuval Rottenstreich, judgment and decision making.
Decision-making processes can be modulated by stress, and the time elapsed from stress induction seems to be a crucial factor in determining the direction of the effects. Although current approaches consider the first post-stress hour a uniform period, the dynamic pattern of activation of the physiological stress systems (i.e., the sympathetic nervous system and hypothalamic-pituitary-adrenal axis) suggests that its neurobehavioral impact might be heterogeneous. Here we evaluate economic risk preferences on the gain domain (i.e., risk aversion) at three time points following exposure to psychosocial stress (immediately after, and 20 and 45 minutes from onset). Using lottery games, we examine decisions at both the individual and social levels. We find that risk aversion shows a time-dependent change across the first post-stress hour, evolving from less risk aversion shortly after stress to more risk averse behavior at the last testing time. When risk implied an antisocial outcome to a third party, stressed individuals showed less regard for this person in their decisions. Participants' cortisol levels explained their behavior in the risk, but not the antisocial, game. Our findings reveal differential stress effects in self- and other-regarding decision-making and highlight the multidimensional nature of the immediate aftermath of stress for cognition. This article is protected by copyright. All rights reserved.
A body of literature based primarily on experiments suggests that cognitive ability and risk aversion are inversely related. In contrast, studies using observational data often find that lower ability, or lower income, is positively related to risky behaviors. One potential explanation for the conflicting conclusions is that experimental studies tend to measure risk attitudes by presenting subjects with choices between an option with a certain outcome and an option characterized by risk, which requires computation and, hence, cognitive effort. Additionally, these studies have primarily relied on the use of hypothetical choices. I use an experiment to test whether this frequently-used method of measuring risk preferences is biased toward finding results that indicate that individuals with lower cognitive ability are more risk averse than individuals with higher cognitive ability. I find that the inverse relationship between risk aversion and cognitive ability is not robust and that high-ability subjects may misrepresent their preferences when they face hypothetical choices. Also, similar to earlier studies, I find that low-ability subjects are more likely to make errors and show that the availability of a certain option reduces errors for the lowest-ability subjects.
Economics and trait-based personality psychology have taken different approaches to understanding individual differences. The former emphasizes variables measured according to formal decision theory; the latter instead emphasizes variables derived from the factor analysis of trait assessments.
In a data set on trainee truckers in a large US company, we provide a systematic assessment of the empirical pattern of relationships and correlations between the measurements used in these two approaches by comparing the predictive power of variables derived from personality theory and decision theory for several individual characteristics and outcomes, and relating the two sets of measurements to each other.
We show that personality traits have a comparable or stronger statistical predictive power than do economic preferences for several dependent variables, including credit score, job persistence, and heavy truck accidents. They also have strong predictive power for Body Mass Index (BMI) and smoking status. Further, decision theory and personality variables are meaningfully related. For example, we confirm that cognitive ability explains a substantial part of time preferences, and find that Neuroticism and cognitive ability together explain attitudes toward risk. In an experimental game, cognitive skills and Agreeableness explain important aspects of strategic behavior.
Attitudes to risk (known probabilities) and attitudes to ambiguity (unknown probabilities) are separate constructs that influence decision making, but their development across adolescence remains elusive. We administered a choice task to a wide adolescent age-range (N = 157, 10-25 years) to disentangle risk- and ambiguity-attitudes using a model-based approach. Additionally, this task was played in a social context, presenting choices from a high risk-taking peer. We observed age-related changes in ambiguity-attitude, but not risk-attitude. Also, ambiguity-aversion was negatively related to real-life risk taking. Finally, the social context influenced only risk-attitudes. These results highlight the importance of disentangling risk- and ambiguity-attitudes in adolescent risk taking.
This statement outlines conclusions re-garded as mainstream among researchers on intelligence, in particular, on the nature, ori-gins, and practical consequences of individu-al and group differences in intelligence. Its aim is to promote more reasoned discussion of the vexing phenomenon that the research has revealed in recent decades. The follow-ing conclusions are fully described in the major textbooks, professional journals and encyclopedias in intelligence.
First expressed by Allais in the early fifties, dissatisfaction with the expected utility model of individual risk taking behavior has mushroomed in recent years, as the number of papers in this volume, its predecessor (Allais & Hagen(1979)), and elsewhere2 indicates. The nature of the current debate, i.e. whether to reject a theoretically elegant and heretofore tremendously useful descriptive model in light of accumulating evidence against its underlying assumptions, is a classic one in science, and the spur to new theoretical and empirical research which it is offering cannot help but leave economists, psychologists, and others who study this area with a better understanding of individual behavior toward risk.
Impulsive behavior is generally viewed as counterproductive by society, and individual differences in impulsivity have been found to be related to a number of socially relevant behaviors. Yet, there are times when acting quickly and without thinking may seem desirable, even adaptive. With the possible exception of intelligence, no other personality dimension or trait so broadly influences various areas of human endeavor: interpersonal relationships, education, fiscal responsibility, personal moral behavior, business ethics and entrepreneurship, aggression, and criminality. This chapter gives an overview of impulsivity from a personality theory perspective. Topics discussed include the historical development of the construct, the place of impulsivity in a broader personality theory, selfreport and behavioral assessment, and the role of impulsiveness in impulse control disorders.
Bei jeder empirischen Untersuchung stellt sich die Frage nach der Qualität des Messvorgangs, die den Untersuchungserfolg und die Aussagefähigkeit der Ergebnisse entscheidend beeinflusst. Messfehler sind bei jedem Messvorgang, z.B. bei Persönlichkeitstests in der Psychologie oder Einstellungsfragebögen im Marketing, unvermeidbar. Daher muss es bei Messungen das Ziel sein, die Messqualität zu beurteilen und Messfehler zu minimieren. Traditionell werden in diesem Zusammenhang in der klassischen Testtheorie Haupt- und Nebengütekriterien betrachtet (Fisseni 2004, S. 46; Lienert und Raatz 1994, S. 7).
Exploring personality through test construction: Development of the multidimensional personality questionnaire Construction of a self-report personality inventory can be a straightforward undertaking. We may take a ‘rational’ or ‘deductive’ approach (Burisch, 1984) and begin by formulating a construct from which to ‘deduce’ basic descriptors — in our case a set of construct-based self-report items. We might even draw on already developed constructs and start writing items immediately; Murray's (1938) carefully elaborated motivational trait constructs have served that function several times. Once enough items have been generated, scale construction, if purely deductive, is complete. A deductive orientation does not rule out the use of data to improve one's initial scales. Data-based deletion or addition of items can increase the internal consistency of a deductive scale. If our objective is to create a multi-scale inventory, we can also empirically enhance scale distinctiveness and independence. But even if deductive scale construction includes extensive ...
Economic theory makes no predictions about social factors affecting decisions under risk. We examine situations in which a decision maker decides for herself and another person under conditions of payoff equality, and compare them to individual decisions. By estimating a structural model, we find that responsibility leaves utility curvature unaffected, but accentuates the subjective distortion of very small and very large probabilities for both gains and losses. We also find that responsibility reduces loss aversion, but that these results only obtain under some specific definitions of the latter. These results serve to generalize and reconcile some of the still largely contradictory findings in the literature. They also have implications for financial agency, which we discuss.
Heightened impulsivity and cognitive biases are risk factors for gambling problems. However, little is known about precisely how these factors increase the risks of gambling-related harm in vulnerable individuals. Here, we modelled the behaviour of 87 community-recruited regular, but not clinically problematic, gamblers during a binary-choice reinforcement-learning game, to characterize the relationships between impulsivity, cognitive biases and the capacity to make optimal action selections and learn about action-values. Impulsive gamblers showed diminished use of an optimal (Bayesian-derived) probability estimate when selecting between candidate actions, and showed slower learning rates and enhanced non-linear probability weighting while learning action values. Critically, gamblers who believed that it is possible to predict winning outcomes (as ‘predictive control’) failed to use the game's reinforcement history to guide their action selections. Extensive evidence attests to the ease with which gamblers can erroneously perceive structure in the reinforcement history of games when there is none. Our findings demonstrate that the generic and specific risk factors of impulsivity and cognitive biases can interfere with the capacity of some gamblers to utilize structure when it is available in the reinforcement history of games, potentially increasing their risks of sustaining gambling-related harms.
We study how cognitive abilities correlate with behavioral choices by collecting evidence from almost 1200 subjects across eight experimental projects concerning a wide variety of tasks, including some classic risk and social preference elicitation protocols. The Cognitive Reflection Test (CRT) has been administered to all our experimental subjects, which makes our dataset one of the largest in the literature. We partition our subject pool into three groups depending on their CRT performance. Reflective subjects are those answering at least two of the three CRT questions correctly. Impulsive subjects are those who are unable to suppress the instinctive impulse to follow the intuitive – although incorrect – answer in at least two 2 questions. The remaining subjects form a residual group. We find that females score significantly less than males in the CRT and that, in their wrong answers, impulsive ones are observed more frequently. The 2D:4D ratio, which is higher for females, is correlated negatively with subjects’ CRT score. We also find that differences in risk attitudes across CRT groups crucially depend on the elicitation task. Finally, impulsive subjects have higher social (inequity-averse) concerns, while reflective subjects are more likely to satisfy basic consistency requirements in lottery choices.
Prospect theory, first described in a 1979 paper by Daniel Kahneman and Amos Tversky, is widely viewed as the best available description of how people evaluate risk in experimental settings. While the theory contains many remarkable insights, economists have found it challenging to apply these insights, and it is only recently that there has been real progress in doing so. In this paper, after first reviewing prospect theory and the difficulties inherent in applying it, I discuss some of this recent work. While it is too early to declare this research effort an unqualified success, the rapid progress of the last decade makes me optimistic that at least some of the insights of prospect theory will eventually find a permanent and significant place in mainstream economic analysis.