psychology + the economy

• economic psychology: the discipline of Economic Psychology is a blend of economics and psychology - seeking a better understanding of people's behaviour in their economic lives
• economic psychology: the field is also referred to as 'behavioural economics' where researchers investigate the effects of social, cognitive and emotional factors on economic decisions
• economic psychology: the field is primarily concerned w/ the rationality (or irrationality) or decisions relating to economics
• irrational thinking: you have seen examples of irrational thinking in your studies of depression, but it isn't just depressed people who think irrationally all of us do
• irrational thinking: Daniel Kahneman has led the field of research into everyday irrational thinking and uncovered and explained many fascinating aspects of this behaviour
• availability heuristic: take for example the availability heuristic ('heuristic' is a fancy word for 'rule') people typically overestimate the likelihood of dying in a place accident - the reason for such irrational thinking is because we often read about such accidents and therefore they are more available when making a probability judgement about the likelihood of being in such an accident
• availability heuristic: the availability heuristic is the rule that the likelihood of selecting something is related to its 'availability'
• the framing effect: another example of irrational thinking is that people's decisions differ depending on whether a choice is presented as a gain or a loss
• the framing effect: Tversky and Kahneman (1986) asked participants to choose between 2 treatments that were going to be used w/ 600 people suffering from a deadly disease, 2 groups of participants were given the same facts about the success and failure rates of the treatment but the facts were 'framed' differently
• the framing effect: 1 group of participants were told that treatment A would result in 400 deaths, whereas treatment B would have a 33% chance that no one would die and a 66% chance that all 600 would die
• the framing effect: the 2nd group of participants were told that treatment A would save 200 lives, whereas treatment B had a 33% chance of saving everyone and a 66% chance of saving no one
• the framing effect: the 1st example is a positive framing and when participants were given this description 72% selected treatement A
• the framing effect: when participants were given the same scenario but in a negative frame only 22% selected treatment A
• real-world influences: understanding the systematic biases caused by such irrational thinking is important in improving our personal lives as well as the fabric of our society
• real-world influences: Economist Richard Layard (2014) states that Kahneman's work on understanding irrational thinking has tranformed business
• real-world influences: his ideas have been applied to almost any endeavour you can think of = decision-making in juries, treatment of mental health problems, financial advice, government programmes etc.
• there are many topics covered in this book that can be applied to improving the economy of our country and world = some include social change, improving memory and attachment
• the topics included in economic psychology is irrational thinking, availability heuristic, the framing effect and real-world influences
• social change: a campaign to reduce drink driving was discussed where attitudes and behaviour was changed by making people aware of social norms
• social change: similar ideas have been used to reduce social stereotypes and smoking, such practices have the potential to bring about positive changes that will impact on the economy however this approach is limited to tasks where behaviour is moderated by social criteria
• improving memory: cognitive interview a technique based on psychological research that has improved the amount of accurate information collected from eyewitnesses
• improving memory: in fact the whole topic of eyewitness memory research is focused on improving crime detection, the implication for the economy is to be able to reduce expenses on wrongful arrests and to ensure that criminals are caught
• attachment: Bowlby's theory and related research on attachment opened the eyes of the world to the importance of emotional care in early child developnent
• attachment: Unicef indicate the continuing influence this has on development policies in ensuring the healthy development of children to becoming productive members of society and thus improving world economy, Before Bowlby's research people believed that physical care was all that was necessary
• mental health: the McCrone report (2008) estimated the direct costs of mental health in England at around £22.5 billion a year, that includes spending in health and social care and a variety of other agencies but not the indirect costs of the impact on the criminal justice system and in lost employment
• mental health: of particular concern is the projected rise in dementia and a growing population of older people, psychologists are increasingly turning their attention to research on dementia
• mental health: the McCrone report commented on the use of drugs vs psychotherapies saying that 'the number of people receiving medication provides a much greater economic gain than psychological therapies which may produce similar benefits compared to medication but are far more expensive'
• mental health: evidence based research on effective drug therapies is important in reducing costs and helping people return to work
• biopsychology: neuroscience offers the possibility of revolutionising our understanding of the human brain
• biopsychology: an American government report suggested that this may have practical economic benefits in the area of 'smart' machines i.e. machines that will think like humans (NIH, 2013)
• biopsychology: this does not mean building human-like robots but just money-saving intelligent machines to deal w/ for e.g. questions on the telephone or recognising faces at airports
• evaluation L: journals tend to prefer to publish positive results possibly because editors want research that has important implications in order to increase the standing of their journal, this suggests that academic journals are as bad as newspaper for seeking eye-catching stories
• evaluation L: peer review results in a preference for research that goes w/ existing theory rather than dissenting or unconventional work meaning that journals should be aware of the damaging effects such as bias
• evaluation L: once a research study has been published the results remain in the public view even if they are later shown to be fraudulent or simply the result of poor research practices, peer review does not ensure that all data we are exposed to is valid, meaning that the general public need to be more critical in their acceptance of published information even from reputable sources
• evaluation S: peer review is essential = we need to have a means of establishing the validity of scientific research