Decision research at Chicago Booth

Richard Thaler on how behavioral science research enables the understanding of beliefs, judgment, and choices

By Richard H. Thaler     

From: Magazine

The Center for Decision Research was born from a desire almost four decades ago to reorganize the behavioral science program at Chicago Booth by emphasizing discipline-based research using rigorous scientific methods. The original direction that the group took was based on the psychology of judgment and decision making, but the group now has broadened its scope to also include social psychology and behavioral economics. The Center for Decision Research provides the research facilities that our faculty and graduate students use to conduct studies, including two laboratories—one in Harper Center and another downtown. We also run studies in an ongoing collaboration with the nearby Museum of Science and Industry.

Our faculty’s emphasis on empirical research allows them to investigate the power of intuition, reasoning, and social interaction to shape beliefs, judgment, and choices in all domains of life. We aim to produce knowledge that can improve judgments and decision making in a range of contexts, including management, finance, marketing, and public policy. his issue of Capital Ideas highlights some of the faculty’s pathbreaking studies in advancing behavioral science research.

Eugene Caruso, together with Nicole Mead of Tilburg University in the Netherlands and Emily Balcetis of New York University, shows how a person’s political views can shape how he or she sees a political candidate’s skin color. When participants in a series of experiments were shown photos of a male mixed-race candidate, those whose political views matched those of the candidate’s consistently chose a lightened rather than a darkened or unaltered version of a photo as one that best represented the candidate. Moreover, the more participants thought that the candidate in the lightened picture shared their political views, the more likely they were to vote for him.

Jane Risen’s research paper with Clayton Critcher of Berkeley’s Haas School of Business also highlights the role of intuition in making decisions. Risen and Critcher found that regardless of students’ political views, those who experienced heat while participating in an experiment in a warm cubicle tended to believe more in global warming. That people may think of global warming and other pressing environmental and social concerns in intuitive rather than intellectual ways suggests that scientists and researchers may be more successful in communicating their findings if they make it easier for people to imagine the urgency and consequences of these issues.

Devin Pope teamed up with Nicola Lacetera of the University of Toronto and Justin Sydnor of the University of Wisconsin to investigate people’s natural tendency to rely on simple rules of thumb when making decisions, instead of using all available information, even when it’s right in front of them. The authors analyzed millions of transactions at one of the largest operators of wholesale used-car auctions in the country, and they found that a buyer typically paid much more for a car with an odometer reading just under a 10,000-mile threshold than for a similar car with an odometer reading just over that threshold. This finding suggests that car buyers were paying attention to the first two digits on the vehicles’ odometers and ignoring the rest of the digits.

The order in which tasks are presented to people is an important factor in how well they will perform these tasks, as the research paper by Ayelet Fishbach with Chicago Booth PhD student Maferima Touré-Tillery finds. In particular, people are more likely to cut corners while performing tasks in the middle of a series, and they’re less likely to do so on the first and last tasks. People feel freer to slack in the middle because they believe their achievements at the beginning and end are better indicators of their true characters. If people care more about their tasks at the beginning and end of projects, then managers can use that to increase worker productivity, for example by restructuring a long sequence of assignments and calling some tasks the first or last of a certain type.

Much has been written about people’s capacity for selfcontrol, but Wilhelm Hofmann—together with Roy Baumeister of Florida State University, Georg Förster of the University of Würzburg, and Kathleen Vohs of the University of Minnesota—wanted to find out how people get into situations that would require self-control in the first place. They employed a new method called experience sampling that used smartphones to follow people around for seven days. Through regular text messages, the participants revealed whether they were experiencing desires. They also related the type and strength of each desire, whether they felt conflicted about it, if they tried to resist it, and whether they eventually gave in. One of the study’s interesting findings was that those who had a greater capacity for self-control, as measured by a personality test, were more successful at resisting temptations because they avoided situations that would make them too vulnerable to refuse their desires.

Another paper we highlight in this issue is by Christopher Hsee, who, along with coauthors Chicago Booth PhD student Adelle Yang and Liangyan Wang of Shanghai Jiaotong University, argues that the real reason people engage in activities is a fear of idleness. But although idleness makes people unhappy, people don’t always choose to be busy because they need a reason to take action. In this case, “forcing” or nudging people to be busy can make them happier than those who remain idle and who are reluctant to be busy without a purpose. The results of the study have a wide range of implications for businesses and governments that are designing policies that could keep people happily busy.

The Center for Decision Research has launched a new project thanks to a $3.6 million grant from the John Templeton Foundation. The New Paths to Purpose project aims to study how people can more effectively pursue and fulfill their stated purposes in life. This project will put the Center for Decision Research at the center of a new network of scholars that will bring together multiple institutions, regions, and academic disciplines to expand the behavioral study of purpose. This generous grant comes shortly after the recently-concluded Human Nature/Human Potential Project, which was also supported by the John Templeton Foundation. With a highly collaborative and multidisciplinary effort, Chicago Booth faculty researchers produced deeper insights into the human spirit and potential, identifying people’s basic capacities and tendencies that can be harnessed to improve their potential and their lives.