What Your Cable Service Tells Us About the Buffett Rule

There’s a bundle of research demonstrating the human preference for fairness (even 4th graders are on board), but many of these experiments seem too far removed from real world situations where real money is on the table. The question remains: What are people willing to give up in the name of fairness?

A new study by Yu Wang and Aradhna Krishna avoids the shortcomings of previous research by having the monetary consequences of a subject’s decisions affect the payout they receive for participating in the experiment. The researchers presented subjects with the hypothetical opportunity to save money on their cable bill by switching companies. The catch was that the savings arose because the new company gave them a discount for being a new customer. Meanwhile, the company’s old customers had to pay a higher price, something that could be deemed unfair. Interestingly, even though making the switch could earn participants a few more real-world dollars, Wang and Krishna found that almost a quarter of subjects avoided switching because they deemed the deal they were being offered was unfair to the company’s current customers.

The fact that subjects were willing to forgo a real monetary gain to protest hypothetical unfairness shows a chunk of people actually do care enough about the treatment of others to impose a type of Buffett Rule on themselves. It also suggests that support for the OWS movement is not merely driven by people upset that they’ve ended up at the bottom of the income distribution. Finally, if fairness can affect real life monetary decisions, it means manipulating perceptions of fairness has the potential to be a useful policy tool (e.g. “it’s unfair to others that your lack of medical insurance means they must cover your emergency care.”)
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Wang, Y., & Krishna, A. (2012). Enticing for me but unfair to her: Can targeted pricing evoke socially conscious behavior? Journal of Consumer Psychology DOI: 10.1016/j.jcps.2011.11.004

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The 1% Do Not Appreciate Your Favors

The economic debate on inequality largely focuses on the question of economic mobility: Does rising inequality make it harder for families to move up in society?

Now a new study on power by M. Ena Inesi, Deborah Gruenfeld, and Adam Galinsky may hint at another socio-economic consequence of inequality. Through a series of experiments the researchers discovered new evidence that a gap in power can make people respond to a favor with thoughts about ulterior motives.

Five studies explored whether power undermines the quality of relationships by creating instrumental attributions for generous acts. We predicted that this cynical view of others’ intentions would impede responses that nurture healthy relationships. In the first three studies, the powerful were more likely to believe that the favors they received were offered for the favor-giver’s instrumental purposes, thereby reducing power-holders’ thankfulness, desire to reciprocate, and trust. These effects emerged when power was manipulated through hierarchical roles or primed semantically, and when participants recalled past favors or imagined future ones. Using income disparity as a proxy for power, Study 4 found that instrumental attributions for favors in marriages led to lower levels of relationship commitment among high-power spouses. Study 5 provided evidence that favors are critical in triggering power-holders’ diminished trust.

Favors involving power gaps are more likely to have less reciprocity, trust, and all that other good stuff that comes from productive human interaction. Assuming that gaps in power are highly correlated with gaps in money, it means the make-up of an income distribution can have a direct effect on the level of altruism in a society. If inequality in its current form is causing more favors to involve high power gaps, it may be decreasing our level of altruism. That would be bad for business. Of course it’s also possible that rising inequality has decreased the number of favors with a significant power gap.

On another note, bonus points to the authors for working a quote from Gary Coleman’s will into their discussion.
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Inese, M.E., Gruenfeld, D.H, and Galinsky, A.D. (2012). How Power Corrupts Relationships: Cynical Attributions for Others’ Generous Acts Journal of Experimental Social Psychology

Why Are Some Scientists More Innovative Than Others?

Given our tendency to say the purpose education is to prepare people for a job, I think it’s a bit odd that there is such a big gap between our emphasis on delivering a good 1960’s-style elementary school education and our emphasis on creating post-college professional skills. I suspect this is largely a function of interest group politics — a lot of people have a personal interest in high school kids learning better, but not many have an interest in understanding what makes an expert operations analyst. There’s also the fact that ensuring every 13-year-old knows algebra is a pretty good way of developing post-college professional skills.

Of course some professional skills are extremely important, and therefore it was nice to see that Robert Keller of the University of Houston looked into what characteristics make for a more innovative scientist.

A study of 644 scientists and engineers from 5 corporate research and development organizations investigated hypotheses generated from an interactionist framework of 4 individual characteristics as longitudinal predictors of performance and innovativeness. An innovative orientation predicted 1-year-later and 5-years-later supervisory job performance ratings and 5-years-later counts of patents and publications. An internal locus of control predicted 5-years-later patents and publications, and self-esteem predicted performance ratings for both times and patents.

None of the findings are too earth shattering, but they are a reminder that the socio-emotional competencies that positively influence achievement in school — things like having an internal locus and self-esteem — also positively influence performance at work. There is still no reason to abandon our efforts to perfect academic instruction for people ages 5-22 , but I do think we might be surprised how much of the heavy lifting takes care of itself if we spend more time teaching some simple behavioral and emotional management.
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Keller, R. (2012). Predicting the performance and innovativeness of scientists and engineers. Journal of Applied Psychology, 97 (1), 225-233 DOI: 10.1037/a0025332

Why You Think Food From Whole Foods is Healthier

All those ethical free trade labels have a halo effect:

In Study 1, participants evaluating chocolate provided lower calorie judgments when it was described as fair trade—a claim silent on calorie content but signifying that trading partners received just compensation for their work. Further establishing this effect, Study 2 revealed that chocolate was perceived as lower-calorie when a company was simply described as treating its workers ethically (e.g., providing excellent wages and health care) as opposed to unethically (e.g., providing poor wages and no health care) among perceivers with strong ethical food values, consistent with halo logic. Moreover, calorie judgments mediated the same interaction pattern on recommendations of consumption frequency, suggesting that amid the ongoing obesity crisis, social ethics claims might nudge some perceivers to overindulge.

Not a good sign for Weight Watchers’ new line of “un-fair trade” cheeses.

Why Disrupting Higher Education is Difficult

Matthew Yglesias has an interesting theory about STEM education that seems spot on:

Different universities are structured differently, but what I recall from reporting on university finance when I was in college was the following dynamic. The STEM departments received large quantities of outside money to conduct research, and they used their pool of graduate students as laboratory labor. An increase in the number of undergraduate students the STEM departments had to teach was a drain on the supply of graduate students, since graduate students would need to be diverted from lab work to teaching assistant work. In the humanities, the situation was quite different. The humanities departments don’t have lucrative outside research grants that require graduate student labor. Instead, their economic problem is a lack of demand for the labor of humanities Ph.D. students. An influx of undergraduates into the major prompted a disbursment of central university funds to employ more teaching assistants and lecturers thus helping to solve the problem of underemployed humanities Ph.D.s. Not coincidentally, the humanities faculties tended to be very eager to recruit people into majoring in their field and were eager to get nonmajors to  take at least a few elective classes. The STEM faculties, by contrast, tended to ward people off with intro classes designed to scare people away and complicated webs of pre-requisites that aimed to weed out nonmajors.

This is also a reminder that transforming higher education is always more difficult than it seems because universities are vertically and horizontally integrated into a range of different institutions. Researchers around the country might say they wish tuition was 90% cheaper (via online distance learning, for example), but if that type of disruption requires them to acclimate to new systems for student labor, funding, and reputation maintenance, they’ll probably fight the changes. Another example is big-money collegiate athletics. The disruption of higher education is a threat to that institution, and in the end athletic departments, boosters, and many fans will likely choose to fight change.

Is There a Downside to High Achievement Standards?

“High achievement standards” is a buzz-phrase that gets thrown around a lot in the ed-reform debate. Unfortunately, because it’s a buzz-phrase not enough attention is paid to its actual substance. For example, what do high standards entail? How do they affect students?

A new study on truancy rates conducted by a group of German researchers provides some interesting answers. The study found that although “high standards” lead to less truancy, poor instructional pace can lead to more truancy.

High achievement standards were associated with a lower truancy rate at both the student and the class level, whereas fast instructional pace was associated with more truancy at both levels. A perception of the workload as being too low was an additional predictor of high truancy at both the student and the class level.

The problem for the “high standards” chorus is that holding students to high standards often involves cramming as much material as possible into the school year. Although the display of confidence implicit in the standards could initially benefit students, the accelerated classroom pace could leave them worse off.

The lesson is that people need to have a more nuanced view of “high achievement standards.” It doesn’t matter how perfectly crafted or widespread a set of standards might be; little will be accomplished if those standards are not enforced in a productive way.

The study also points to the promise of a true blended learning environment (think Rocketship on steroids.) When a single teacher attempts to teach a room of 30 students it’s impossible for each student to learn at his ideal pace. It takes a great teacher to even maintain a pace that works for half the kids. But if each student is guided by a computer tutor finely calibrated to his skill level and pace, the student can reap the benefits of high standards without the drawbacks of a classroom that doesn’t move at his speed.
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Sälzer, C., Trautwein, U., Lüdtke, O., & Stamm, M. (2011). Predicting adolescent truancy: The importance of distinguishing between different aspects of instructional quality Learning and Instruction DOI: 10.1016/j.learninstruc.2011.12.001

Why We Enjoy Experiences More Than Material Things

Ask a social scientist about the keys to happiness and you’re likely to hear that it’s better to buy experiences than buy possessions. What you’re unlikely to hear is a good explanation for why experiences make people happier.

Two Cornell psychologists, Emily Rosenzweig and Thomas Gilovich, attempted to answer this question by examining regret rather than satisfaction in the aftermath of a purchase. They theorized that with material purchases the strongest regret stems from action (i.e. buying the wrong thing), whereas with experiential purchases the strongest regret comes from inaction (not having the experience.) The result is that those who make a purchase are more likely to feel regret when buying a material good, and therefore buying a material good leads to comparatively less happiness.

Rosenzweig and Gilovich confirmed their hypothesis in a series of five experiments. In the most telling experiment subjects were told about somebody who bought a 3-D television — a purchase that could be construed as an experience or a material good. When subjects were asked if the buyer would regret the purchase, subjects for whom the purchase was framed as a material good believed the buyer would feel more regret than subjects for whom the purchase was framed as as an experience.

Why might regret stem from inaction when it comes to experiences, but action when it comes to possessions? The answer involves our propensity to imagine all the things we don’t have.

There is a smaller set of items that feel like effective substitutes for experiential goods. Singular experiences are less likely to prompt counterfactual thoughts that focus on upward comparisons because the class of items with which an experience can be compared is small. Instead, the easiest and most likely comparison is between having missed out on the experience and not having missed out, yielding regrets of inaction. Conversely, the greater interchangeability of material goods affords myriad opportunities for upward comparisons after a purchase, making material purchases more likely to spark rumination about alternative purchases and hence regrets of action.

The influence of interchangeableness makes a lot of sense. When you buy a car, you wonder about what you didn’t get, whereas if you choose not to buy a car, you can always get one next week. On the other hand, if you go to the World Cup in Rio de Janeiro, it’s hard to think about what you’re missing out on. If you decide not to go, you probably won’t get another chance to have that experience.

It would be interesting to see if this effect still holds when it comes to gifts. When somebody else does the buying people tend not to engage in counterfactuals, and therefore in those instances material possessions may not lead to regret. In fact, because gifts are generally material goods, if somebody else buys you an experience you may be more likely to think about what material goods they could have bought you instead. The lesson, as always, is buy fancy vacations for yourself and tube socks for others.
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Rosenzweig, E., & Gilovich, T. (2012). Buyer’s remorse or missed opportunity? Differential regrets for material and experiential purchases. Journal of Personality and Social Psychology, 102 (2), 215-223 DOI: 10.1037/a0024999