The Interplay of Skills, Digital Financial Literacy, Capability, and Autonomy in Financial Decision Making and Well-Being

Behavioral development economics promotes the nudge theory as a mechanism to incorporate people’s cognitive biases, steering their behavior in the desired direction through coercive state intervention. Cognitive biases become a reason to doubt the efficiency of decision-making psychology in the free market process. A fundamental assumption of this approach is that political decision-makers know the people’s means and ends in ways that protect them from cognitive biases. This article reviews and discusses the nudge theory, based on the boost theory developed by the Austrian School of Economics. The boost theory consists of a comparative institutional perspective to provide the empowerment people need to realize their errors and correct them “on the fly” to cultivate economic development. It is argued that the nudge theory overlooks the cognitive biases of political decision-makers, neglects the comparative perspective of the institutional environment in the face of such biases, and does not consider how construction of on-the-fly judgments works. After reviewing the principles of the nudge theory, its main criticisms from the boost theory are discussed, forming novel conclusions about and research avenues on behavioral development economics, according to the steering or empowering quality of the institutional environment.

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Principles of Nudging and Boosting: Steering or Empowering Decision-Making for Behavioral Development Economics

Problem gambling is a gambling disorder often described as continued gambling in the face of increasing losses. In this article, we explored problem gambling behaviour and its psychological determinants. We considered the assumption of stability in risky preferences, anticipated by both normative and descriptive theories of decision making, as well as recent evidence that risk preferences are in fact 'constructed on the fly' during risk elicitation. Accordingly, we argue that problem gambling is a multifaceted disorder, which is 'fueled on the fly' by a wide range of contextual and non-contextual influences, including individual differences in personality traits, hormonal and emotional activations. We have proposed that the experience of gambling behaviour in itself is a dynamic experience of events in time series, where gamblers anchor on the most recent event-typically a small loss or rare win. This is a highly adaptive, but erroneous, decision-making mechanism, where anchoring on the most recent event alters the psychological representations of substantial and accumulated loss in the past to a representation of negligible loss. In other words, people feel better while they gamble. We conclude that problem gambling researchers and policy makers will need to employ multifaceted and holistic approaches to understand problem gambling.

Problem Gambling 'Fuelled on the Fly'.

Recent decision-making research provides empirical evidence that human risk preferences are constructed “on the fly” during risk elicitation, influenced by the decision-making context and the method of risk elicitation (Kusev et al., 2020). In this article, we explore the lability of human risk preferences and argue that the most recent choices guide decision-making. Accordingly, our novel proposal and experimental method provide a psychological tool that measures people's shift in preferences. Specifically, in our experiment (240 participants, registered UK users of an online survey panel), we developed and employed a two-stage risk elicitation experimental method. The results from the experiment revealed that providing participants with false feedback on their initial decisions (stage 1) changes their risk preferences at the feedback stage of the experiment in the direction of the false feedback. Moreover, participants' final decisions (stage 2) were influenced by the type of feedback (correct or false) and informed by their altered risk preferences at the feedback stage of the experiment. In conclusion, our work provides experimental evidence that human preferences are constructed “on the fly,” influenced by the decision-making context and recent decision-making experience (e.g., Kusev et al., 2020; Slovic, 1995). 

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How false feedback influences decision‐makers' risk preferences

Intertemporal choices are very prevalent in daily life, ranging from simple, mundane decisions to highly consequential decisions. In this context, thinking about the future and making sound decisions are crucial to promoting mental and physical health, as well as a financially sustainable lifestyle. In the present study, we set out to investigate some of the possible underlying mechanisms, such as cognitive factors and emotional states, that promote future-oriented decisions. In a cross-sectional experimental study, we used a gain and a loss version of an intertemporal monetary choices task. Our main behavioural result indicated that people are substantially more impulsive over smaller and sooner monetary losses compared to equivalent gains. In addition, for both decisional domains, significant individual difference predictors emerged, indicating that intertemporal choices are sensitive to the affective and cognitive parameters. By focusing on the cognitive and emotional individual factors that influence impulsive decisions, our study could constitute a building block for successful future intervention programs targeted at mental and physical health issues, including gambling behaviour.

Are Impulsive Decisions Always Irrational? An Experimental Investigation of Impulsive Decisions in the Domains of Gains and Losses

Making morally sensitive decisions and evaluations pervade many human everyday activities. Philosophers, economists, psychologists and behavioural scientists researching such decision-making typically explore the principles, processes and predictors that constitute human moral decision-making. Crucially, very little research has explored the theoretical and methodological development (supported by empirical evidence) of utilitarian theories of moral decision-making. Accordingly, in this critical review article, we invite the reader on a moral journey from Jeremy Bentham’s utilitarianism to the veil of ignorance reasoning, via a recent theoretical proposal emphasising utilitarian moral behaviour—perspective-taking accessibility (PT accessibility). PT accessibility research revealed that providing participants with access to all situational perspectives in moral scenarios, eliminates (previously reported in the literature) inconsistency between their moral judgements and choices. Moreover, in contrast to any previous theoretical and methodological accounts, moral scenarios/tasks with full PT accessibility provide the participants with unbiased even odds (neither risk averse nor risk seeking) and impartiality. We conclude that the proposed by Martin et al. PT Accessibility (a new type of veil of ignorance with even odds that do not trigger self-interest, risk related preferences or decision biases) is necessary in order to measure humans’ prosocial utilitarian behaviour and promote its societal benefits.

https://www.mdpi.com/2076-328X/11/5/66/pdf

Joseph Teal

Papers

Moral Decision Making: From Bentham to Veil of Ignorance via Perspective Taking Accessibility

Problem Gambling 'Fuelled on the Fly'.

How false feedback influences decision‐makers' risk preferences

Are Impulsive Decisions Always Irrational? An Experimental Investigation of Impulsive Decisions in the Domains of Gains and Losses