Star Track: Peter McGraw

Following on the success of our Research Heroes interviews, we’re launching a new interview series: Star Track. In this series, we turn the spotlight on researchers who will play an important role in shaping the future of the field. These people have already made a significant contribution with their ground breaking research and engagement in the research community –  you might know about them or might not, but you should definitely listen to what they have to say – enjoy!
First in our new series is Peter McGraw, an DSC_0667-1associate professor of marketing and psychology at the University of Colorado Boulder, who is an expert in the interdisciplinary fields of emotion and behavioral decision theory. His research examines the interrelationship of judgment, emotion, and choice, with a focus on consumer behavior and public policy. Lately, McGraw has been investigating what makes things funny. He directs at the Humor Research Lab (aka HuRL), a laboratory dedicated to the experimental study of humor, its antecedents, and consequences. He has co-authored The Humor Code: A Global Search for What Makes Things Funny, which hit the bookstores on 4/1/2014. Of recent note, McGraw made the 2013 Stylish Scientist List – probably because he likes to rock a sweater vest.

I wanted to pursue an academic career in this field because… I thought that pursuing an academic career would yield a stimulating yet leisurely intellectual life. (I was half right.) While researching grad programs, I read Tom Gilovich’s book: How We Know What Isn’t So: The Fallibility of Human Reason in Everyday Life. By the end of chapter 2, I was hooked on the idea of studying judgment and decision making.

I find the inspiration for my research mostly from… Entrepreneurs and artists. Scientists don’t often think of their research as a creative endeavor that is important to share broadly with the world. I believe that the process of creating and disseminating scientific insights is enhanced by emulating people who have a different perspective and a broader array of tools. Also, behaving like an artist or an entrepreneur is much more fun than just trying to please peer reviewers.

When people ask me what I do, I say…. I study what makes things funny.

The best research project I have worked on during my career… In the summer of 2008, Caleb Warren and I set out to answer the question of why people laugh at moral violations. That project changed my life, as it spurred a quest to crack the humor code (something that behavioral decision theory’s “emotional revolution” had overlooked). The resulting paper, which published in Psychological Science in 2010, brought together my two main research areas at the time: moral judgment and mixed emotions. Caleb and I introduce the benign violation theory of humor and showed that moral violations can be a source of pleasure (something every good comic knows).

Everything came together just right; the paper was accepted with no requested changes – something that I never expect to happen again.

The paper that has most influenced me is… When Caleb and I were examining the research on humor, the theories didn’t seem quite right. Fortunately, we found a little-cited paper published by a linguist named of Thomas Veatch. To us, it was a huge advance over existing theories. Veatch’s work served as the foundation for the benign violation theory, which in turn, serves as the foundation for the research conducted in the Humor Research Lab.

If I wasn’t doing this, I would be… Starting some sort of business.

The most important quality for a researcher to have is… Perseverance. Repeat after me, “They can slow us down, but they can’t stop us.”

The biggest challenge for our field in the next 10 years… Finding a way speed the peer-review process.

My advice for young researchers at the start of their career is… Write every day. Start today – and purchase the book: How to Write A Lot.

The one thing I’ve found most challenging is… Staying asleep until my alarm goes off. The work academics do is highly evaluative and uncertain – two conditions that contribute to anxiety. And anxiety gets me out of bed early. On the other hand, it has a silver lining. I believe that every day is a big day and should be lived with a sense of urgency. And big days rarely start with the snooze button.

For more information on Peter McGraw visit his page: http://www.petermcgraw.org/

For more information on his book see: http://humorcode.com/

Resource Scarcity: Improving microfinance with mental accounting

In this first post of the resource scarcity series, Shereen talks about how we could potentially improve microfinance with the help of mental accounting. 

There is an anomaly in the economic literature called the “flypaper effect” that can be leveraged to help poor people make better investments. To understand what this phenomenon is, consider the food stamp program of the U.S. government. Food stamps are an example of what economists call “in-kind” grants. Basically, it is money that can only be spent on a specific good. When the government gives out food stamps to poor people, it expects that they will now be able to spend their money on other necessities, like paying bills. However, because people view in-kind grants differently than they see an equivalent amount of money, food stamp recipients might actually buy more food than they did before receiving food stamps. This would be an example of the “flypaper effect.”

While there are many potential explanations for the flypaper effect, several people, including Richard Thaler, suggest that this may be due to the ways people categorize and make their financial decisions, something called “mental accounting.” Mental accounting explains that people group different types of spending into different mental categories or “mental accounts”, which may result in seemingly irrational behavior. The flypaper effect happens because people fail to mentally transfer money between their different mental accounts. Continuing with the food stamps example, if people have a certain amount of money in their mental “groceries” account, then when they receive food stamps, it is as if they have more money in their groceries account. Instead of mentally transferring this extra money from their groceries account to, for instance, their “gas” account, people behave as if they are richer with respect to food, and they buy either more expensive food or greater quantities of food.

Although this could be a potential problem for the food stamps program, the flypaper effect could actually be used to improve microfinance initiatives in developing countries. Specifically, it could be used to get small business owners to invest more money and energy in their business.

For example, when researchers gave small Ghanaian business owners equipment or materials for their businesses, they behaved as if they were richer with respect to their business account: They spent more money on business-related items instead of using the extra money for household expenses, and this improved their situation. This was not true for the business owners who received an equal value in cash.

People also invest more money in their business if they receive a subsidy in an individual bank account as opposed to a joint (i.e., husband and wife) bank account. The researchers who discovered this phenomenon in rural Kenya argue that people “activate different behavioral savings rules” for these different accounts. People treat the individual bank account more like a “business account” and the joint bank account more like a “household” account, and thus, decide their account spending accordingly.

(Photo by Bryce Yukio Adolphson, © 2011)

(Photo by Bryce Yukio Adolphson, © 2011)

Thus, even though mental accounting can cause people to make poor decisions, it can sometimes work in their favor. The studies I described above indicate that microfinance institutions will have more success improving small businesses with in-kind loans rather than cash loans, and also more success with subsidies to individual, as opposed to joint, bank accounts. Might the flypaper effect also have implications for encouraging other types of saving among the poor? Or more spending on education? Would in-kind grants for vaccinations or routine physicals encourage greater uptake of and spending on preventative healthcare measures?

(For more, see Development Impact.)

Resource Scarcity: Is Less Really More?

Editor’s note: This week we’re proud to launch the first of our streams of curated content. These streams will introduce readers to different areas of judgment and decision making psychology, with our sub-editors bringing us their expertise in the topic. Each series will kick off with an introduction to the area, followed by a range of content such as interviews and posts discussing different topics. This first one on the impact of resource scarcity on decision making will be curated by Caroline Roux from Kellogg School of Management at Northwestern University and Shereen Chaudhry from Carnegie Mellon University.  

Whether we live in resource-poor circumstances or resource-rich ones, even if we’re loaded with more money or goods or everything you could possibly dream of wanting or needing, we live with scarcity as an underlying assumption. It is an unquestioned, sometimes even unspoken, defining condition of life.” – Twist and Barker (2006), The Soul of Money

LessMore

No matter whether we live in a resource-rich or a resource-poor environment, we are surrounded by reminders that resources may be insufficient to satisfy demand, which often inhibit us from acting on our needs and desires. Scarcity thus has important consequences on people’s judgment and decision making. Marketers have understood the appeal of scarcity for quite some time and have used it to sway consumers to want things more. There are however many other consequences to being exposed to scarcity-related cues or to living in scarce environments, which we are only beginning to understand. For instance, why are people willing to do all kinds of crazy things to get their hands on the best deals of the year? Why do poor people seem to always be making bad decisions (and are they really)? Scarcity seems to be a unique source of decision making errors and tendencies, which this series will attempt to unpack and explain.

More generally, living in deprived circumstances can also exacerbate the effects of many other psychological motivations and cognitive biases. The desire to buy status-related items is equally strong in, but more detrimental for, individuals who can hardly afford to buy staple goods. While we all struggle with self-control and saving for the future, payday loans appear most attractive to people in the lowest income brackets, the people least able to afford the astronomical interest rates. Aware of the challenges that people living under extreme resource scarcity face, organizations like “Innovations for Poverty Action” and the “Corporation for Enterprise Development” are beginning to address such issues by leveraging lessons from the fields of judgment and decision making, as well as behavioral economics.

In this series, we will present findings from behavioral research that helps better understand different consequences of resource scarcity. On the one hand, Shereen will take a “behavioral engineering” approach and present applications that help improve the lives of people living in poverty or developing countries, as well as other populations for which errors in human judgment and decision making are especially detrimental. Caroline, on the other hand, will present findings from different fields related to judgment and decision making to help explain the influence of scarcity in our everyday lives. We will cover a wide range of scarcity-related topics that will hopefully be of interest to you, readers of this blog, and we hope to stir your interest in this flourishing and fascinating field of research.