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Financial Behaviour

Behavioural economics, impulse spending, savings automation, and financial decision-making.

Research synthesis8 min read

What the Financial Behavior & Decision-Making Research Actually Shows

Behavioral economics has documented dozens of ways humans make predictably bad financial decisions. Here's the evidence — and how to design systems that work with your psychology.

The Gap Between Knowing and Doing

Financial advice is abundant and largely ignored. Most adults know they should save more, diversify their investments, and avoid high-fee products. They often don't. This gap between knowledge and behavior is not explained by stupidity or irrationality in the derogatory sense — it is explained by well-documented cognitive mechanisms that apply universally, moderated by context.

Behavioral economics — the field that won Daniel Kahneman a Nobel Prize in 2002 and Richard Thaler one in 2017 — has produced the most rigorously replicated body of research on human financial behavior in existence. The practical implication is specific: you don't need to overcome your psychology, you need to design systems that exploit it.

Loss Aversion: The Most Consequential Bias in Finance

Kahneman and Tversky's prospect theory (1979) is among the most replicated findings in behavioral science. The core empirical result: losses loom roughly twice as large as equivalent gains in psychological impact. A $100 loss feels approximately as bad as a $200 gain feels good, across a wide range of experimental paradigms and populations.

Loss aversion produces several specific, measurable errors:

Disposition effect: investors sell winning positions too early and hold losing positions too long — exactly the opposite of rational portfolio management. Shefrin and Statman (1985) documented this in large brokerage account datasets. The effect is robust: individual investors realize gains 1.5–2x more often than losses of equivalent magnitude, and losses held to realized have significantly larger absolute values than gains realized.

Market timing errors: loss aversion drives selling during market downturns and underperformance versus buy-and-hold. Dalbar's annual Quantitative Analysis of Investor Behavior consistently shows that average investor returns are 1–3 percentage points per year lower than the market indices they invest in, primarily due to reactive selling.

Status quo bias: once money is invested, loss aversion creates strong inertia. The same mechanism that causes panic selling also prevents people from rebalancing portfolios or switching from high-fee to low-fee funds — because change feels like loss.

The Architecture of Good Decisions: Defaults and Commitment

Thaler and Sunstein's "nudge" framework — designing choice environments to make better behaviors the default — has produced some of the strongest experimental evidence on behavior change in economics.

Auto-enrollment in 401(k) plans: Madrian and Shea (2001) studied a company that switched from opt-in to opt-out enrollment. Participation rose from 37% to 86% among new employees. The savings rate was also higher under auto-enrollment. Default contribution rates and fund selections dramatically outperformed any financial education intervention in the same company.

Automatic escalation (Save More Tomorrow): Thaler and Benartzi's SMART program automatically increased employee contribution rates at each annual raise. Because the increase was tied to future income and automatic, it bypassed loss aversion (people never "felt" the deduction as a loss). Three-year follow-up showed average savings rates tripled from 3.5% to 11.6%.

The general principle: when you want to do something in theory but consistently fail in practice, the intervention is redesigning the default, not increasing willpower. Automating transfers to savings, investment accounts, or bill payments removes the decision from the friction-heavy present moment.

Present Bias: The Most Universal Financial Problem

Hyperbolic discounting — placing disproportionate weight on immediate versus future rewards — is documented across cultures, ages, and socioeconomic levels. The classic demonstration (Frederick et al., 2002): most people prefer $50 today to $100 in a year, but prefer $100 in 2 years to $50 in 1 year. The same gap, but time-shifted away from the present, produces different choices.

Present bias explains:

  • Retirement savings under-contribution despite tax advantages
  • Minimum credit card payments despite high interest rates (average APR ~22% in 2024)
  • Gym membership purchases without gym attendance (Della Vigna and Malmendier found average monthly cost of $17/visit for members who paid flat monthly fees, versus $10/visit pay-per-visit option — people systematically overestimated their future usage)
  • Procrastination on any financial task with costs now and benefits later

Practical implication with strong evidence: commitment devices — mechanisms that bind your future self — are more effective than better information for present-biased behavior. Giving up immediate access to money (CDs, 401(k) contributions, separate "don't touch" accounts) consistently outperforms willpower-based approaches in experimental studies.

Mental Accounting and the Fungibility Fallacy

Thaler's mental accounting research documents that people treat money differently depending on its source, location, and intended purpose — despite money being economically fungible (a dollar is a dollar regardless of where it came from).

Key effects:

The windfall effect: money received as a bonus, tax refund, or inheritance is spent at higher rates than money received as regular income, even controlling for total amount. People treat "found money" as more available for discretionary spending.

Pain of payment: cash payments produce higher psychological pain than credit card payments for the same item (Prelec and Simester, 2001). Tap-to-pay reduces it further. This is measurable: people spend systematically more when payment is friction-free, which is why casinos use chips.

Earmarking works: despite economic irrationality, creating separate mental or physical accounts for specific goals (emergency fund, vacation, home purchase) reliably increases saving rates. The structure overrides fungibility in practice.

Market Efficiency and What Individual Investors Can Control

The efficient market hypothesis — in its semi-strong form — posits that publicly available information is already reflected in asset prices, making consistent above-market returns from stock picking impossible on average. The empirical evidence is strong but not absolute:

A 2020 meta-analysis by Hou, Xue, and Zhang reviewed 452 published return anomalies and found that 65% failed to replicate out-of-sample. The implication: most claimed edges for individual stock selection do not survive. This is not pessimism — it is the basis for the rational conclusion that low-cost index fund investing outperforms the median active strategy, including actively managed funds.

S&P Dow Jones SPIVA report (2024): 92% of actively managed US large-cap funds underperformed the S&P 500 over the prior 20 years. What individual investors can control: costs (expense ratios, transaction costs, tax efficiency), asset allocation, and behavioral execution (not selling at the bottom).

What to Measure

  • Savings rate (% of gross income saved/invested per month): the single most predictive variable for wealth accumulation outcomes; track monthly
  • Spending by category (not just total): pattern recognition in discretionary vs. fixed spending; apps (Monarch, YNAB) automate categorization
  • Net worth trajectory (monthly or quarterly snapshot): direction of change matters more than absolute level; tracks whether system changes are working
  • Investment fees (weighted average expense ratio across all accounts): a 1% difference in annual fees compounds dramatically over decades; audit annually
  • Emotional trading log: note when you feel compelled to check or change investments; correlation with market news reveals your personal susceptibility to reactive decision-making

What to Experiment With

→ Automate savings transfer on payday day → savings rate and end-of-month discretionary balance over 3 months Tests the friction-removal hypothesis directly. Moving savings before the money is "available" exploits loss aversion in the right direction. Compare 3 months before and after automation.

→ 24-hour rule for non-essential purchases over $X → monthly discretionary spending and purchase regret score Present bias intervention: inserting a time delay converts an impulsive now-vs-never choice into a now-vs-later choice. Set your threshold (e.g., $50, $100), track override frequency and regret ratings.

→ Investment account blackout (check only once per month) for 6 months → reactive trade frequency and anxiety rating on portfolio check days Tests whether information access drives emotional decision-making for you. Most evidence says more frequent checking correlates with worse decisions and lower satisfaction. Your data tells you if you're in that pattern.

→ Zero-based budget month (every dollar assigned a purpose before spending) → savings rate and end-of-month category accuracy vs. plan Tests the mental accounting effect: explicit allocation changes spending patterns even when total income is constant. One month provides enough data to reveal where your mental accounts are misaligned.

Designing Around Your Own Psychology

The most useful implication of the behavioral economics literature is that self-knowledge about your specific biases is more valuable than generic financial advice. Most people know what they should do; far fewer know which specific cognitive biases most reliably derail them under which conditions. A month of systematically tracking financial decisions — not outcomes, but the decisions and the states that drove them — will reveal more about your financial behavior than any book. That data is the starting point for designing interventions that actually work for you.

Full article →Test this on yourself →

Evidence base

Min quality:

50 papers

Meta-analysisWikiHigh evidence score

Wheat From Chaff: Meta-Analysis As Quantitative Literature Review

T. D. Stanley · The Journal of Economic Perspectives · 2001 · 958 citations

Meta-analysis is a powerful statistical method that combines and analyzes results from many independent scientific studies, providing clearer, more reliable insights and greater statistical power than individual studies, which is crucial for identifying robust findings to guide your personal experiments.

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Meta-analysisWikiHigh evidence score

Mindfulness-Based Programs in the Workplace: a Meta-Analysis of Randomized Controlled Trials

Ruben Vonderlin, Miriam Biermann, Martin Bohus +1 more · Mindfulness · 2020 · 246 citations

Across 56 RCTs, workplace mindfulness programs produced small-to-medium reductions in stress and burnout and improvements in well-being and job satisfaction — effects that held up at follow-up assessments up to 12 weeks later, making this the strongest available evidence base for designing your own workplace mindfulness experiment. ---

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RCTTop journalWikiHigh evidence score

The effect of a conditional cash transfer on HIV incidence in young women in rural South Africa (HPTN 068): a phase 3, randomised controlled trial

Audrey Pettifor, Catherine MacPhail, James P. Hughes +16 more · The Lancet Global Health · 2016 · 264 citations

A three-year study found that giving young women a monthly cash payment conditional on school attendance did not reduce their risk of acquiring HIV, suggesting that this specific financial incentive may not be an effective strategy for this outcome, though school attendance itself was linked to lower risk.

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StudyWikiModerate

Opinion Paper: “So what if ChatGPT wrote it?” Multidisciplinary perspectives on opportunities, challenges and implications of generative conversational AI for research, practice and policy

Yogesh K. Dwivedi, Nir Kshetri, Laurie Hughes +70 more · International Journal of Information Management · 2023 · 3,487 citations

This opinion paper synthesises perspectives from 43 experts across 13 fields to map the opportunities, risks, and research gaps of generative AI like ChatGPT — concluding that while the technology can boost productivity in banking, hospitality, and marketing, it also introduces unresolved threats around bias, misinformation, privacy, and the erosion of human judgment, with no consensus on whether regulation is needed.

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StudyTop journalWikiModerate

Global, regional, and national burden of disorders affecting the nervous system, 1990–2021: a systematic analysis for the Global Burden of Disease Study 2021

Jaimie D Steinmetz, Katrin Seeher, Nicoline Schiess +97 more · The Lancet Neurology · 2024 · 1,574 citations

Nervous system disorders are now the leading cause of disease burden worldwide, affecting 43% of the global population (3.4 billion people) in 2021, with total disability-adjusted life-years (DALYs) reaching 443 million — a number that increased by 18.2% since 1990, even though age-standardised death rates dropped by 33.6% over the same period.

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StudyWikiModerate

Artificial Intelligence (AI): Multidisciplinary perspectives on emerging challenges, opportunities, and agenda for research, practice and policy

Yogesh K. Dwivedi, Laurie Hughes, Elvira Ismagilova +32 more · International Journal of Information Management · 2019 · 3,908 citations

This is a multidisciplinary expert commentary, not an empirical study—it synthesises opinions from 22 contributors across academia, industry, and government to map the opportunities, challenges, and research agenda for AI across business, government, and science, concluding that AI will transform industries but faces critical barriers in trust, regulation, data quality, and workforce displacement.

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StudyWikiModerate

Connecting the dots in trustworthy Artificial Intelligence: From AI principles, ethics, and key requirements to responsible AI systems and regulation

Natalia Díaz-Rodríguez, Javier Del Ser, Mark Coeckelbergh +3 more · Information Fusion · 2023 · 632 citations

This paper provides a comprehensive framework for understanding what makes an AI system "trustworthy" by synthesising global AI principles, ethical philosophies, regulatory approaches, and seven technical requirements—but it does not test any intervention, so for someone running a self-experiment, the value lies in using its framework to audit your own AI tools or experiments for bias, transparency, and accountability.

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StudyTop journalModerate

The State of US Health, 1990-2016

The US Burden of Disease Collaborators, Ali H. Mokdad, Katherine Ballestros +97 more · JAMA · 2018 · 1,428 citations

Introduction: Several studies have measured health outcomes in the United States, but none have provided a comprehensive assessment of patterns of health by state. Objective: To use the results of the Global Burden of Disease Study (GBD) to report trends in the burden of diseases, injuries, and risk factors at the state level from 1990 to 2016. Design and Setting: A systematic analysis of published studies and available data sources estimates the burden of disease by age, sex, geography, and year. Main Outcomes and Measures: Prevalence, incidence, mortality, life expectancy, healthy life expectancy (HALE), years of life lost (YLLs) due to premature mortality, years lived with disability (YLDs), and disability-adjusted life-years (DALYs) for 333 causes and 84 risk factors with 95% uncertainty intervals (UIs) were computed. Results: Between 1990 and 2016, overall death rates in the United States declined from 745.2 (95% UI, 740.6 to 749.8) per 100 000 persons to 578.0 (95% UI, 569.4 to 587.1) per 100 000 persons. The probability of death among adults aged 20 to 55 years declined in 31 states and Washington, DC from 1990 to 2016. In 2016, Hawaii had the highest life expectancy at birth (81.3 years) and Mississippi had the lowest (74.7 years), a 6.6-year difference. Minnesota had the highest HALE at birth (70.3 years), and West Virginia had the lowest (63.8 years), a 6.5-year difference. The leading causes of DALYs in the United States for 1990 and 2016 were ischemic heart disease and lung cancer, while the third leading cause in 1990 was low back pain, and the third leading cause in 2016 was chronic obstructive pulmonary disease. Opioid use disorders moved from the 11th leading cause of DALYs in 1990 to the 7th leading cause in 2016, representing a 74.5% (95% UI, 42.8% to 93.9%) change. In 2016, each of the following 6 risks individually accounted for more than 5% of risk-attributable DALYs: tobacco consumption, high body mass index (BMI), poor diet, alcohol and drug use, high fasting plasma glucose, and high blood pressure. Across all US states, the top risk factors in terms of attributable DALYs were due to 1 of the 3 following causes: tobacco consumption (32 states), high BMI (10 states), or alcohol and drug use (8 states). Conclusions and Relevance: There are wide differences in the burden of disease at the state level. Specific diseases and risk factors, such as drug use disorders, high BMI, poor diet, high fasting plasma glucose level, and alcohol use disorders are increasing and warrant increased attention. These data can be used to inform national health priorities for research, clinical care, and policy.

StudyWikiModerate

Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?

Cameron Hepburn, Brian O’Callaghan, Nicholas Stern +2 more · Oxford Review of Economic Policy · 2020 · 756 citations

A survey of 231 economic experts from G20 countries identified five fiscal recovery policies—clean physical infrastructure, building efficiency retrofits, education/training investment, natural capital investment, and clean R&D—that simultaneously deliver high economic multipliers and strong climate benefits, offering a roadmap for governments designing post-COVID stimulus packages.

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StudyModerate

Consumers and Artificial Intelligence: An Experiential Perspective

Stefano Puntoni, Rebecca Walker Reczek, Markus Giesler +1 more · Journal of Marketing · 2020 · 963 citations

Artificial intelligence (AI) helps companies offer important benefits to consumers, such as health monitoring with wearable devices, advice with recommender systems, peace of mind with smart household products, and convenience with voice-activated virtual assistants. However, although AI can be seen as a neutral tool to be evaluated on efficiency and accuracy, this approach does not consider the social and individual challenges that can occur when AI is deployed. This research aims to bridge these two perspectives: on one side, the authors acknowledge the value that embedding AI technology into products and services can provide to consumers. On the other side, the authors build on and integrate sociological and psychological scholarship to examine some of the costs consumers experience in their interactions with AI. In doing so, the authors identify four types of consumer experiences with AI: (1) data capture, (2) classification, (3) delegation, and (4) social. This approach allows the authors to discuss policy and managerial avenues to address the ways in which consumers may fail to experience value in organizations’ investments into AI and to lay out an agenda for future research.

StudyTop journalWikiModerate

Measuring universal health coverage based on an index of effective coverage of health services in 204 countries and territories, 1990–2019: a systematic analysis for the Global Burden of Disease Study 2019

Rafael Lozano, Nancy Fullman, John Everett Mumford +97 more · The Lancet · 2020 · 684 citations

Global effective coverage of health services improved from 45.8 to 60.3 out of 100 between 1990 and 2019, but progress is slowing, non-communicable disease care lags far behind infectious disease care, and the world is on track to miss the 2023 target of 1 billion more people benefiting from universal health coverage by roughly 611 million people.

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StudyModerate

Digital Economics

Avi Goldfarb, Catherine E. Tucker · Journal of Economic Literature · 2019 · 2,184 citations

Digital technology is the representation of information in bits. This technology has reduced the cost of storage, computation, and transmission of data. Research on digital economics examines whether and how digital technology changes economic activity. In this review, we emphasize the reduction in five distinct economic costs associated with digital economic activity: search costs, replication costs, transportation costs, tracking costs, and verification costs. (JEL D24, D83, L86, O33, R41)

StudyModerate

Automation and New Tasks: How Technology Displaces and Reinstates Labor

Daron Acemoğlu, Pascual Restrepo · The Journal of Economic Perspectives · 2019 · 2,077 citations

We present a framework for understanding the effects of automation and other types of technological changes on labor demand, and use it to interpret changes in US employment over the recent past. At the center of our framework is the allocation of tasks to capital and labor—the task content of production. Automation, which enables capital to replace labor in tasks it was previously engaged in, shifts the task content of production against labor because of a displacement effect. As a result, automation always reduces the labor share in value added and may reduce labor demand even as it raises productivity. The effects of automation are counterbalanced by the creation of new tasks in which labor has a comparative advantage. The introduction of new tasks changes the task content of production in favor of labor because of a reinstatement effect, and always raises the labor share and labor demand. We show how the role of changes in the task content of production—due to automation and new tasks—can be inferred from industry-level data. Our empirical decomposition suggests that the slower growth of employment over the last three decades is accounted for by an acceleration in the displacement effect, especially in manufacturing, a weaker reinstatement effect, and slower growth of productivity than in previous decades.

StudyModerate

Measuring the Impacts of Teachers II: Teacher Value-Added and Student Outcomes in Adulthood

Raj Chetty, John N. Friedman, Jonah E. Rockoff · American Economic Review · 2014 · 1,659 citations

Are teachers' impacts on students' test scores (value-added) a good measure of their quality? This question has sparked debate partly because of a lack of evidence on whether high value-added (VA) teachers improve students' long-term outcomes. Using school district and tax records for more than one million children, we find that students assigned to high-VA teachers are more likely to attend college, earn higher salaries, and are less likely to have children as teenagers. Replacing a teacher whose VA is in the bottom 5 percent with an average teacher would increase the present value of students' lifetime income by approximately $250,000 per classroom. (JEL H75, I21, J24, J45)

StudyTop journalWikiModerate

It starts at home? Climate policies targeting household consumption and behavioral decisions are key to low-carbon futures

Ghislain Dubois, Benjamin K. Sovacool, Carlo Aall +17 more · Energy Research & Social Science · 2019 · 594 citations

Households are responsible for 72% of global greenhouse gas emissions, and the most impactful personal changes are reducing car and plane travel, cutting meat and dairy consumption, and lowering home heating energy use — but voluntary efforts alone are insufficient without supportive government policies.

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StudyModerate

Fintech, financial inclusion and income inequality: a quantile regression approach

Ayse Demir, Vanesa Pesqué‐Cela, Yener Altunbaş +1 more · European Journal of Finance · 2020 · 724 citations

Although theory suggests that financial market imperfections–mainly information asymmetries, market segmentation and transaction costs–prevent poor people from escaping poverty by limiting their access to formal financial services, new financial technologies (FinTech) are seen as key enablers of financial inclusion. Indeed, the UN 2030 Agenda for Sustainable Development (UN-2030-ASD) and the G20 High-Level Principles for Digital Financial Inclusion (G20-HLP-DFI) highlight the importance of harnessing the potential of FinTech to reduce financial exclusion and income inequality. This paper investigates the interrelationship between FinTech, financial inclusion and income inequality for a panel of 140 countries using the Global Findex waves of survey data for 2011, 2014 and 2017. We posit that FinTech affects inequality directly and indirectly through financial inclusion. We invoke quantile regression analysis to investigate whether such effects differ across countries with different levels of income inequality. We uncover new evidence that financial inclusion is a key channel through which FinTech reduces income inequality. We also find that while financial inclusion significantly reduces inequality at all quantiles of the inequality distribution, these effects are primarily associated with higher-income countries. Overall, our results support the aspirations of the UN-2030-ASD and G20-HLP-DFI. Highlights Harnessing the potential of FinTech to reduce financial exclusion and income inequality has been proposed by the UN and G20. We posit that FinTech affects income inequality directly and indirectly through financial inclusion. We invoke quantile regression analysis to investigate whether the effects of FinTech differ across countries with different levels of income inequality. We find that financial inclusion is a key channel through which FinTech reduces income inequality, at all quantile levels, primarily among higher-income countries.

StudyModerate

Handbook of Health Economics

Frans Rutten, Han Bleichrodt, Werner Brouwer +2 more · Journal of Health Economics · 2001 · 974 citations

StudyModerate

Going green to be seen: Status, reputation, and conspicuous conservation.

Vladas Griskevicius, Joshua M. Tybur, Bram Van den Bergh · Journal of Personality and Social Psychology · 2010 · 2,065 citations

Why do people purchase proenvironmental "green" products? We argue that buying such products can be construed as altruistic, since green products often cost more and are of lower quality than their conventional counterparts, but green goods benefit the environment for everyone. Because biologists have observed that altruism might function as a "costly signal" associated with status, we examined in 3 experiments how status motives influenced desire for green products. Activating status motives led people to choose green products over more luxurious nongreen products. Supporting the notion that altruism signals one's willingness and ability to incur costs for others' benefit, status motives increased desire for green products when shopping in public (but not private) and when green products cost more (but not less) than nongreen products. Findings suggest that status competition can be used to promote proenvironmental behavior.

StudyModerate

Generation Z consumers' expectations of interactions in smart retailing: A future agenda

Constantinos‐Vasilios Priporas, Nikolaos Stylos, Anestis Fotiadis · Computers in Human Behavior · 2017 · 758 citations

Retailing is witnessing a transformation due to rapid technological developments. Retailers are using smart technologies to improve consumer shopping experiences and to stay competitive. The biggest future challenge for marketing and consequently for retailing seems to be generation Z, since members of this generation seem to behave differently as consumers and are more focused on innovation. The aim of this paper is to explore Generation Z consumers' current perceptions, expectations and recommendations in terms of their future interactions in smart retailing contexts. To do so, we used a qualitative approach by conducting a series of semi-structured in depth interviews with 38 university students-consumers in the UK market. The findings showed that smart technologies have a significant influence on generation Z consumers' experiences. Moreover, this particular group of consumers expects various new devices and electronic processes to be widely available, thus offering consumers more autonomy and faster transactions. In addition, they expect the technology to enable them to make more informed shopping decisions. Interviewees also stressed the importance of training consumers how to use new smart retailing applications. In addition, some of the participants were sceptical about the effects of further advancing smart retailing on part of the job market. Relevant theoretical and practical implications are also provided.

StudyModerate

Natural Environments—Healthy Environments? An Exploratory Analysis of the Relationship between Greenspace and Health

S. de Vries, Robert Verheij, Peter Groenewegen +1 more · Environment and Planning A Economy and Space · 2003 · 1,247 citations

Are people living in greener areas healthier than people living in less green areas? This hypothesis was empirically tested by combining Dutch data on the self-reported health of over 10 000 people with land-use data on the amount of greenspace in their living environment. In the multilevel analysis we controlled for socioeconomic and demographic characteristics, as well as urbanity. Living in a green environment was positively related to all three available health indicators, even stronger than urbanity at the municipal level. Analyses on subgroups showed that the relationship between greenspace and one of the health indicators was somewhat stronger for housewives and the elderly, two groups that are assumed to be more dependent on, and therefore exposed to, the local environment. Furthermore, for all three health indicators the relationship with greenspace was somewhat stronger for lower educated people. Implications for policymaking and spatial planning are discussed briefly.

StudyModerate

A Behavioral Approach to Law and Economics

Christine Jolls, Cass R. Sunstein, Richard H. Thaler · Stanford Law Review · 1998 · 1,237 citations

Economic analysis of law usually proceeds under the assumptions of neoclassical economics. But empirical evidence gives much reason to doubt these assumptions; people exhibit bounded rationality, bounded self-interest, and bounded willpower. This article offers a broad vision of how law and economics analysis may be improved by increased attention to insights about actual human behavior. It considers specific topics in the economic analysis of law and proposes new models and approaches for addressing these topics. The analysis of the article is organized into three categories: positive, prescriptive, and normative. Positive analysis of law concerns how agents behave in response to legal rules and how legal rules are shaped. Prescriptive analysis concerns what rules should be adopted to advance specified ends. Normative analysis attempts to assess more broadly the ends of the legal system: Should the system always respect people's choices? By drawing attention to cognitive and motivational problems of both citizens and government, behavioral law and economics offers answers distinct from those offered by the standard analysis.

StudyModerate

Values, Environmental Concern, and Environmental Behavior

Wouter Poortinga, Linda Steg, Charles Vlek · Environment and Behavior · 2004 · 1,112 citations

In this study, the role of values in the field of household energy use is investigated by using the concept of quality of life (QOL). Importance judgments on 22 QOL aspects could be summarized into seven clearly interpretable value dimensions. The seven value dimensions and general and specific environmental concern contributed significantly to the explanation of policy support for government regulation and for market strategies aimed at managing environmental problems as well as to the explanation of the acceptability of specific home and transport energy-saving measures. In line with earlier research, home and transport energy use were especially related to sociodemographic variables like income and household size. These results show that it is relevant to distinguish between different measures of environmental impact and different types of environmental intent. Moreover, the results suggest that using only attitudinal variables, such as values, may be too limited to explain all types of environmental behavior.

StudyModerate

Smart Technology, Artificial Intelligence, Robotics, and Algorithms (STARA): Employees’ perceptions of our future workplace

David Brougham, Jarrod Haar · Journal of Management & Organization · 2017 · 897 citations

Abstract Futurists predict that a third of jobs that exist today could be taken by Smart Technology, Artificial Intelligence, Robotics, and Algorithms (STARA) by 2025. However, very little is known about how employees perceive these technological advancements in regards to their own jobs and careers, and how they are preparing for these potential changes. A new measure (STARA awareness) was created for this study that captures the extent to which employees feel their job could be replaced by these types of technology. Due to career progression and technology knowledge associated with age, we also tested age as a moderator of STARA. Using a mixed-methods approach on 120 employees, we tested STARA awareness on a range of job and well-being outcomes. Greater STARA awareness was negatively related to organisational commitment and career satisfaction, and positively related to turnover intentions, cynicism, and depression.

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The individual and societal burden of chronic pain in Europe: the case for strategic prioritisation and action to improve knowledge and availability of appropriate care

Harald Breivik, Elon Eisenberg, Tony O’Brien · BMC Public Health · 2013 · 639 citations

BACKGROUND: Chronic pain is common in Europe and elsewhere and its under treatment confers a substantial burden on individuals, employers, healthcare systems and society in general. Indeed, the personal and socioeconomic impact of chronic pain is as great as, or greater, than that of other established healthcare priorities. In light of review of recently published data confirming its clinical and socioeconomic impact, this paper argues that chronic pain should be ranked alongside other conditions of established priority in Europe. We outline strategies to help overcome barriers to effective pain care resulting in particular from deficiencies in education and access to interdisciplinary pain management services. We also address the confusion that exists between proper clinical and scientific uses of opioid medications and their potential for misuse and diversion, as reflected in international variations in the access to, and availability of, these agents. DISCUSSION: As the economic costs are driven in part by the costs of lost productivity, absenteeism and early retirement, pain management should aim to fully rehabilitate patients, rather than merely to relieve pain. Accredited education of physicians and allied health professionals regarding state-of-the-art pain management is crucial. Some progress has been made in this area, but further provision and incentivization is required. We support a tiered approach to pain management, whereby patients with pain uncontrolled by non-specialists are able to consult a physician with a pain competency or a specialist in pain medicine, who in turn can recruit the services of other professionals on a case-by-case basis. A fully integrated interdisciplinary pain service should ideally be available to patients with refractory pain. Governments and healthcare systems should ensure that their policies on controlled medications are balanced, safeguarding public health without undue restrictions that compromise patient care, and that physician education programmes support these aims. SUMMARY: Strategic prioritization and co-ordinated actions are required nationally and internationally to address the unacceptable and unnecessary burden of uncontrolled chronic pain that plagues European communities and economies. An appreciation of the 'return on investment' in pain management services will require policymakers to adopt a long-term, cross-budgetary approach.

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Getting to the Top of Mind: How Reminders Increase Saving

Dean Karlan, Margaret McConnell, Sendhil Mullainathan +1 more · AEA Randomized Controlled Trials · 2016 · 611 citations

We provide evidence from field experiments with three different banks that reminder messages increase commitment attainment for clients who recently opened commitment savings accounts. Messages that mention both savings goals and financial incentives are particularly effective, whereas other content variations such as gain versus loss framing do not have significantly different effects. Nor do we find evidence that receiving additional late reminders has an additive effect. These empirical results do not map neatly into existing models, so we provide a simple model where limited attention to exceptional expenses can generate undersaving that is in turn mitigated by reminders. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2015.2296 . This paper was accepted by Teck-Hua Ho, behavioral economics.

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Housing as a social determinant of health and wellbeing: developing an empirically-informed realist theoretical framework

Steve Rolfe, Lisa Garnham, Jon Godwin +3 more · BMC Public Health · 2020 · 333 citations

BACKGROUND: The role of housing as a social determinant of health is well-established, but the causal pathways are poorly understood beyond the direct effects of physical housing defects. For low-income, vulnerable households there are particular challenges in creating a sense of home in a new tenancy which may have substantial effects on health and wellbeing. This study examines the role of these less tangible aspects of the housing experience for tenants in the social and private rented sectors in west central Scotland. METHODS: The paper analyses quantitative data from a mixed methods, longitudinal study of tenants from three housing organisations, collected across the first year of their tenancy. The paper postulates causal hypotheses on the basis of staff interviews and then uses a Realist Research approach to test and refine these into a theoretical framework for the connections between tenants' broader experience of housing and their health and wellbeing. RESULTS: Housing service provision, tenants' experience of property quality and aspects of neighbourhood are all demonstrated to be significantly correlated with measures of of health and wellbeing. Analysis of contextual factors provides additional detail within the theoretical framework, offering a basis for further empirical work. CONCLUSIONS: The findings provide an empirically-informed realist theoretical framework for causal pathways connecting less tangible aspects of the housing experience to health and wellbeing. Applying this within housing policy and practice would facilitate a focus on housing as a public health intervention, with potential for significant impacts on the lives of low-income and vulnerable tenants. The framework also offers a basis for further research to refine our understanding of housing as a social determinant of health.

StudyTop journalModerate

Financial cost of social exclusion: follow up study of antisocial children into adulthood

Stephen Scott, Martín Knapp, Juliet Henderson +1 more · BMJ · 2001 · 901 citations

OBJECTIVES: To compare the cumulative costs of public services used through to adulthood by individuals with three levels of antisocial behaviour in childhood. DESIGN: Costs applied to data of 10 year old children from the inner London longitudinal study selectively followed up to adulthood. SETTING: Inner London borough. PARTICIPANTS: 142 individuals divided into three groups in childhood: no problems, conduct problems, and conduct disorder. MAIN OUTCOME MEASURES: Costs in 1998 prices for public services (excluding private, voluntary agency, indirect, and personal costs) used over and above basic universal provision. RESULTS: By age 28, costs for individuals with conduct disorder were 10.0 times higher than for those with no problems (95% confidence interval of bootstrap ratio 3.6 to 20.9) and 3.5 times higher than for those with conduct problems (1.7 to 6.2). Mean individual total costs were 70 019 pounds sterling for the conduct disorder group (bootstrap mean difference from no problem group 62 pound sterling; 898 pound sterling 22 692 pound sterling to 117 pound sterling) and 24 324 pound sterling (16 707 pound sterling; 6594 pound sterling to 28 149 pound sterling) for the conduct problem group, compared with 7423 pound sterling for the no problem group. In all groups crime incurred the greatest cost, followed by extra educational provision, foster and residential care, and state benefits; health costs were smaller. Parental social class had a relatively small effect on antisocial behaviour, and although substantial independent contributions came from being male, having a low reading age, and attending more than two primary schools, conduct disorder still predicted the greatest cost. CONCLUSIONS: Antisocial behaviour in childhood is a major predictor of how much an individual will cost society. The cost is large and falls on many agencies, yet few agencies contribute to prevention, which could be cost effective.

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Value Maximisation, Stakeholder Theory, and the Corporate Objective Function

Michael C. Jensen · European Financial Management · 2001 · 2,287 citations

This paper examines the role of the corporate objective function in corporate productivity and efficiency, social welfare, and the accountability of managers and directors. I argue that since it is logically impossible to maximise in more than one dimension, purposeful behaviour requires a single valued objective function. Two hundred years of work in economics and finance implies that in the absence of externalities and monopoly (and when all goods are priced), social welfare is maximised when each firm in an economy maximises its total market value. Total value is not just the value of the equity but also includes the market values of all other financial claims including debt, preferred stock, and warrants. In sharp contrast stakeholder theory, argues that managers should make decisions so as to take account of the interests of all stakeholders in a firm (including not only financial claimants, but also employees, customers, communities, governmental officials and under some interpretations the environment, terrorists and blackmailers). Because the advocates of stakeholder theory refuse to specify how to make the necessary tradeoffs among these competing interests they leave managers with a theory that makes it impossible for them to make purposeful decisions. With no way to keep score, stakeholder theory makes managers unaccountable for their actions. It seems clear that such a theory can be attractive to the self interest of managers and directors. Creating value takes more than acceptance of value maximisation as the organisational objective. As a statement of corporate purpose or vision, value maximisation is not likely to tap into the energy and enthusiasm of employees and managers to create value. Seen in this light, change in long‐term market value becomes the scorecard that managers, directors, and others use to assess success or failure of the organisation. The choice of value maximisation as the corporate scorecard must be complemented by a corporate vision, strategy and tactics that unite participants in the organisation in its struggle for dominance in its competitive arena. A firm cannot maximise value if it ignores the interest of its stakeholders. I offer a proposal to clarify what I believe is the proper relation between value maximisation and stakeholder theory. I call it enlightened value maximisation, and it is identical to what I call enlightened stakeholder theory. Enlightened value maximisation utilises much of the structure of stakeholder theory but accepts maximisation of the long run value of the firm as the criterion for making the requisite tradeoffs among its stakeholders. Managers, directors, strategists, and management scientists can benefit from enlightened stakeholder theory. Enlightened stakeholder theory specifies long‐term value maximisation or value seeking as the firm’s objective and therefore solves the problems that arise from the multiple objectives that accompany traditional stakeholder theory. I also discuss the Balanced Scorecard, the managerial equivalent of stakeholder theory. The same conclusions hold. Balanced Scorecard theory is flawed because it presents managers with a scorecard which gives no score—that is, no single‐valued measure of how they have performed. Thus managers evaluated with such a system (which can easily have two dozen measures and provides no information on the tradeoffs between them) have no way to make principled or purposeful decisions. The solution is to define a true (single dimensional) score for measuring performance for the organisation or division (and it must be consistent with the organisation’s strategy). Given this we then encourage managers to use measures of the drivers of performance to understand better how to maximise their score. And as long as their score is defined properly, (and for lower levels in the organisation it will generally not be value) this will enhance their contribution to the firm.

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Individual and Corporate Social Responsibility

Roland Bénabou, Jean Tirole · Economica · 2009 · 2,199 citations

Society's demands for individual and corporate social responsibility as alternative responses to market and distributive failures are becoming increasingly prominent. We draw on recent developments in the psychology and economics of prosocial behaviour to shed light on this trend and the underlying mix of motivations. We then link individual concerns to corporate social responsibility, contrasting three possible understandings of the term: firms' adoption of a more long‐term perspective, the delegated exercise of prosocial behaviour on behalf of stakeholders, and insider‐initiated corporate philanthropy. We discuss the benefits, costs and limits of socially responsible behaviour as a means to further societal goals.

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Decentralization of Governance and Development

Pranab Bardhan · The Journal of Economic Perspectives · 2002 · 1,771 citations

In this paper we note that the institutional context (and therefore the structure of incentives and organization) in developing and transition economies is quite different from those in advanced industrial economies, and this necessitates the literature on decentralization in the context of development to go beyond the traditional fiscal federalism literature. We review some of the existing theoretical work and empirical case studies of decentralization from the point of view of delivery of public services and of conditions for local business development, and point to ways of going forward in research.

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From Efficient Markets Theory to Behavioral Finance

Robert J. Shiller · The Journal of Economic Perspectives · 2003 · 1,741 citations

The efficient markets theory reached the height of its dominance in academic circles around the 1970s. Faith in this theory was eroded by a succession of discoveries of anomalies, many in the 1980s, and of evidence of excess volatility of returns. Finance literature in this decade and after suggests a more nuanced view of the value of the efficient markets theory, and, starting in the 1990s, a blossoming of research on behavioral finance. Some important developments since 1990 include feedback theories, models of the interaction of smart money with ordinary investors, and evidence on obstacles to smart money.

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The Economic Lives of the Poor

Abhijit V Banerjee, Esther Duflo · The Journal of Economic Perspectives · 2007 · 1,551 citations

The 1990 World Development Report from the World Bank defined the “extremely poor” people of the world as those who are currently living on no more than $1 per day per person. But how actually does one live on less than $1 per day? This essay is about the economic lives of the extremely poor: the choices they face, the constraints they grapple with, and the challenges they meet. A number of recent data sets and a body of new research allow us to start building an image of the way the extremely poor live their lives. Our discussion builds on household surveys conducted in 13 countries: Cote d'Ivoire, Guatemala, India, Indonesia, Mexico, Nicaragua, Pakistan, Panama, Papua New Guinea, Peru, South Africa, Tanzania, and Timor Leste (East Timor). These surveys provide detailed information on extremely poor households around the world, from Asia to Africa to Latin America, including information on what they consume, where they work, and how they save and borrow. We consider the extremely poor—those living in households where the consumption per capita is less than $1.08 per person per day—as well as the merely “poor”—defined as those who live under $2.16 a day—using 1993 purchasing power parity as benchmark. In keeping with convention, we call these the $1 and $2 dollar poverty lines, respectively.

StudyTop journalModerate

The i-frame and the s-frame: How focusing on individual-level solutions has led behavioral public policy astray

Nick Chater, George Loewenstein · Behavioral and Brain Sciences · 2022 · 511 citations

An influential line of thinking in behavioral science, to which the two authors have long subscribed, is that many of society's most pressing problems can be addressed cheaply and effectively at the level of the individual, without modifying the system in which the individual operates. We now believe this was a mistake, along with, we suspect, many colleagues in both the academic and policy communities. Results from such interventions have been disappointingly modest. But more importantly, they have guided many (though by no means all) behavioral scientists to frame policy problems in individual, not systemic, terms: To adopt what we call the "i-frame," rather than the "s-frame." The difference may be more consequential than i-frame advocates have realized, by deflecting attention and support away from s-frame policies. Indeed, highlighting the i-frame is a long-established objective of corporate opponents of concerted systemic action such as regulation and taxation. We illustrate our argument briefly for six policy problems, and in depth with the examples of climate change, obesity, retirement savings, and pollution from plastic waste. We argue that the most important way in which behavioral scientists can contribute to public policy is by employing their skills to develop and implement value-creating system-level change.

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Paying Not to Go to the Gym

Stefano Della Vigna, Ulrike Malmendier · American Economic Review · 2006 · 1,144 citations

How do consumers choose from a menu of contracts? We analyze a novel dataset from three U.S. health clubs with information on both the contractual choice and the day-to-day attendance decisions of 7,752 members over three years. The observed consumer behavior is difficult to reconcile with standard preferences and beliefs. First, members who choose a contract with a flat monthly fee of over $70 attend on average 4.3 times per month. They pay a price per expected visit of more than $17, even though they could pay $10 per visit using a 10-visit pass. On average, these users forgo savings of $600 during their membership. Second, consumers who choose a monthly contract are 17 percent more likely to stay enrolled beyond one year than users committing for a year. This is surprising because monthly members pay higher fees for the option to cancel each month. We also document cancellation delays and attendance expectations, among other findings. Leading explanations for our findings are overconfidence about future self-control or about future efficiency. Overconfident agents overestimate attendance as well as the cancellation probability of automatically renewed contracts. Our results suggest that making inferences from observed contract choice under the rational expectation hypothesis can lead to biases in the estimation of consumer preferences.

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Poverty and Economic Decision-Making: Evidence from Changes in Financial Resources at Payday

Leandro Carvalho, Stephan Meier, Stephanie W. Wang · American Economic Review · 2016 · 498 citations

We study the effect of financial resources on decision-making. Low-income U.S. households are randomly assigned to receive an online survey before or after payday. The survey collects measures of cognitive function and administers risk and intertemporal choice tasks. The study design generates variation in cash, checking and savings balances, and expenditures. Before-payday participants behave as if they are more present-biased when making intertemporal choices about monetary rewards but not when making intertemporal choices about non-monetary real-effort tasks. Nor do we find before-after differences in risk-taking, the quality of decision-making, the performance in cognitive function tasks, or in heuristic judgments.

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The Ricardian Approach to Budget Deficits

Robert J. Barro · The Journal of Economic Perspectives · 1989 · 930 citations

In recent years there has been a lot of discussion about U.S. budget deficits. Many economists and other observers have viewed these deficits as harmful to the U.S. and world economies. The supposed harmful effects include high real interest rates, low saving, low rates of economic growth, large current-account deficits in the United States and other countries with large budget deficits, and either a high or low dollar (depending apparently on the time period). This crisis scenario has been hard to maintain along with the robust performance of the U.S. economy since late 1982. Persistent budget deficits have increased economists' interest in theories and evidence about fiscal policy. At the same time, the conflict between standard predictions and actual outcomes in the U.S. economy has, I think, increased economists' willingness to consider approaches that depart from the standard paradigm. In this paper, I will focus on the alternative theory that is associated with the name of David Ricardo.

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Economic Well-Being and Children's Social Adjustment: The Role of Family Process in an Ethnically Diverse Low-Income Sample

Rashmita S. Mistry, Elizabeth A. Vandewater, Aletha C. Huston +1 more · Child Development · 2002 · 666 citations

Using latent variable structural equation modeling, a family economic stress model that links economic well-being to child well-being in an ethnically diverse, low-income sample of 419 elementary school-age children was evaluated. The sample was 57% African American and 28% Hispanic, and most families were headed by single mothers. The results provided support for the position that family process is a critical mediator of the effects of economic hardship on children's social adjustment. Lower levels of economic well-being, and the corollary elevated perceptions of economic pressure indirectly affected parenting behavior through an adverse impact on parental psychological well-being. Distressed parents reported feeling less effective and capable in disciplinary interactions with their child and were observed to be less affectionate in parent-child interactions. In turn, less than optimal parenting predicted lower teacher ratings of children's positive social behavior and higher ratings of behavior problems. Multiple-group analyses revealed that the pathways by which economic hardship influences children's behavior appear to operate similarly for boys and girls, and for African American and Hispanic families.

StudyLeading journalModerate

Wasted Food: U.S. Consumers' Reported Awareness, Attitudes, and Behaviors

Roni Neff, Marie L. Spiker, Patricia L. Truant · PLoS ONE · 2015 · 438 citations

The U.S. wastes 31 to 40% of its post-harvest food supply, with a substantial portion of this waste occurring at the consumer level. Globally, interventions to address wasted food have proliferated, but efforts are in their infancy in the U.S. To inform these efforts and provide baseline data to track change, we performed a survey of U.S. consumer awareness, attitudes and behaviors related to wasted food. The survey was administered online to members of a nationally representative panel (N=1010), and post-survey weights were applied. The survey found widespread (self-reported) awareness of wasted food as an issue, efforts to reduce it, and knowledge about how to do so, plus moderately frequent performance of waste-reducing behaviors. Three-quarters of respondents said they discard less food than the average American. The leading motivations for waste reduction were saving money and setting an example for children, with environmental concerns ranked last. The most common reasons given for discarding food were concern about foodborne illness and a desire to eat only the freshest food. In some cases there were modest differences based on age, parental status, and income, but no differences were found by race, education, rural/urban residence or other demographic factors. Respondents recommended ways retailers and restaurants could help reduce waste. This is the first nationally representative consumer survey focused on wasted food in the U.S. It provides insight into U.S. consumers' perceptions related to wasted food, and comparisons to existing literature. The findings suggest approaches including recognizing that many consumers perceive themselves as being already-knowledgeable and engaged, framing messages to focus on budgets, and modifying existing messages about food freshness and aesthetics. This research also suggests opportunities to shift retail and restaurant practice, and identifies critical research gaps.