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How much would you play for that beer?

Imagine you are at the beach on a sunny day and a friend offers to pick up a beer and bring it back to you.  How much would you pay?  How do you make the decision?  Does the amount you would pay depend on whether it comes from a grocery store or an expensive resort?  Does it depend on how much money you make?

In an April Psych Science paper, Shah, Shafir, and Mullainathan describe a bunch of studies with more than 4000 subjects.  Across a variety of tasks those who were poor (whether in money or time) were more likely to make their decisions based on tradeoffs (“If I buy the beer there’s something else I can’t buy…”), and so were more likely to be unaffected by frame (so, for instance, they will pay the same for the beer whether it is from a grocery store or a resort).  Wealthy people do not report thinking in terms of tradeoffs and they are willing to pay more for the beer from the resort than the grocery store.

The paper focuses on the implications for economics.  “Economics makes concrete predictions about how preferences should unfold, whereas psychology and behavioral economics have identified several ways in which those predictions break down.  Economics makes those predictions because it is built on the (correct) assumption that humans navigate a world of scarcity and regularly make tradeoffs. Remarkably, however, when people experience sufficient abundance, those trade-offs recede from attention.”

I wonder about which factors bring about or alleviate a scarcity mentality.  I study gratitude, and one part of the practice of gratitude seems to be recalling that our lives are abundant.  Take a second to recall the last hour or day. What good things have happened?  How full is your life when you stop to think about it?  Would the practice of gratitude reduce scarcity effects?  I just did a PsycInfo search and found no studies on this.  (“Gratitude” and “scarcity” produced only 6 hits, none on topic.)

But if gratitude reduces scarcity effects that would seem to make people less rational in an economic sense.  But…gratitude seems to be good for us. (The evidence is yet young so I’m not entirely convinced.  See my chapter with Courtney Forbes for more detail.  Still, it looks promising.)  How does one reconcile this?  Is economic irrationality good for us?

I’m not sure what I think, and I suspect my thoughts are at this point incoherent.  I’m mostly just curious.  But perhaps it says something about what rationality is when there is real scarcity (when, for instance,it is unclear where the next meal will come from) as opposed to rationality when there is abundance (when, for instance, we might focus on the needs of others, since our own are met).

Here in the US we live in one of the wealthiest countries in history, yet the psychology in which so many of us live seems one of scarcity.  How much does that lead us to think in terms of specific tradeoffs (if I pay too much for this beer I won’t be able to buy lunch), and how much does it lead us not to think in other ways (the cost of the beer is just not that important to me–what is more important in my life?)

Here is a link to a piece on the Shah et al. article.  http://www.sciencedaily.com/releases/2015/02/150212131828.htm

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