Behavioral economic research has tended
to ignore the role of cultural differences in economic decision-making.
The authors suggest that a systematic bias affects existing behavioral
economic theory – cognitive biases are often assumed to be universal.
To examine how cultural background informs economic decision-making,
and to test framing effects, morality effects, and out-group effects in
a cross-cultural study, the authors conducted an experiment in the
United States and China. The experiment was designed to test cultural
and cognitive effects on a fundamental economic phenomenon – how people
estimate the financial values of objects over time.
Results
of the experiment demonstrated dramatic cultural differences in
financial value estimations, as well as on the influence of variables
such as framing effects. Chinese participants made higher object value
estimates than Americans did, even when adjusting for differing
national inflation rates. In addition, the results showed that
contextual information, such as framing, morality information, and
group membership affected judgments of financial values in complex
ways, particularly for Chinese participants. The results underscore the
importance of understanding the influence of cultural background on
economic decision-making. The authors discuss the results in the
context of behavioral law and economics, and propose that importing
cultural competence into behavioral models can lead to cognitive
debiasing, both temporary and permanent.
Here is the link to the paper. Bravo I say. Have you heard of the phenomenon of "running amok"? It is not rational in anything but the tautological Misesian sense. And it happens at much higher rates in nations where it is culturally central, such as Malaysia. Thanks to www.politicaltheory.info for the pointer.
Cool.
So the next question is: can we design ‘culture’ in an organization to more closely approximate rational decision-making?
Rather a problem for the neuroeconomics crowd, innit? (Or more generally, for anyone trying to deduce specific conclusions about economics from supposedly entirely general facts about human psychology, particularly evolutionary psychology)
I had the same reaction as “m” – some behavioral economists downplay cultural differences or deny that they are relevant and others believe cultural differences are important, but the existence of the controversy belies the “tended to ignore” claim.
In response to dsquared, I’d say the results are more a problem for economic theorists than for neuroeconomists. Where is their room in the typical microeconomic or macro theory for cultural differences? Neuroeconomists are by inclination empirically oriented – what is going on in the brain to support this economic behavior – and so the paper at most suggests something else to look for.
Mike G:
Why would you expect differences between the Asian American and Caucasian American participants? Many of the Asian American students at Berkeley are 3rd generation (or 4th or 5th or more), and are just as acculturated into mainstream US culture as their Caucasian counterparts. The fact that Americans of Asian descent behaved differently than their counterparts in China provides even stronger support for the authors’ theory, right?
[full disclosure: I'm a Berkeley grad, and Kaipeng Peng supervised my honors thesis in social (but not cultural) psychology]
Well, this ties in nicely with the ethnography-in-marketing post that caught Tyler’s eye earlier.
Hm. I wonder if “grad students participating in behavioral economists’ experiments” is a distinct culture from “people behavioral economists want to apply their experimental results to”?
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