why we aren’t behavioral economists: a guest post by nina bandelj, fred wherry, and viviana zelizer

This month is “Money Month” on the blog. We have three utterly amazing and HUGE guests – UC Irvine’s Nina Banelj, Yale’s Fred Wherry and Princeton’s Viviana Zelizer. This first guest post investigates the boundary between economic sociology and allied disciplines. 

Rather than retreat to disciplinary corners, let us begin by affirming our respect for the generative work undertaken across a variety of disciplines. We’re all talking money, so it is helpful to specify what’s similar and what’s different when we do. That’s what we tried to do in our just born volume Money Talks: Explaining How Money Really Works where we brought together scholars from sociology, economics, law, political science, anthropology, history, and philosophy. In this post, we address our closest cousins: behavioral economics and cognitive psychology. (Mind you, the first chapter’s author is Jonathan Morduch who has co-authored a widely used economics principles textbook with Dean Karlan. Morduch’s essay in our book develops the first sustained comparison between economic and sociological approaches to money.)

In our introduction to Money Talks, we illustrate differences between mental accounting and relational approaches with the following example. Consider the case of a child’s “college fund.” Marketing professors Soman and Ahn recount the dilemma one of their acquaintances, who is an economist, faced with the option of borrowing money at a high rate of interest to pay for a home renovation or using money he already had saved in his three-year-old son’s low-interest rate education account. As a father, he simply could not go through with the more cost-effective option of “breaking into” his child’s education fund. Soman and Ahn use this story to frame how consequential the emotional content of a particular mental account can be. And by mental account, we mean the “set of cognitive operations used by individuals and households to organize, evaluate, and keep track of financial activities” (Thaler 1999: 183).

How does the sociological approach differ?

Note that when managing these accounts, individuals are really managing their relationships with others. The account is thus relational as well as psychological as individuals engage in what we call relational work. In the anecdote of the college savings account, for instance, we find the parents reluctant to dip into money earmarked for their children’s education. Why? Because these funds represent and reinforce meaningful family ties: they include but transcend individual mental budgeting; the accounts are therefore as relational as they are mental. Suppose a mother gambles away money from the child’s “college fund.” This is not only a breach of cognitive compartments but involves a relationally damaging violation. Most notably, the misspending will hurt her relationship to her child. But the mother’s egregious act is likely to also undermine the relationship to her spouse and even to family members or friends who might sanction harshly the mother’s misuse of money. These interpersonal dynamics thereby help explain why a college fund functions so effectively as a salient relational earmark rather than only a cognitive category.

We hope that the volume and our ongoing discussions this month encourage other scholars to ask how we can compare, contrast, but also complement our sociological approaches with those of behavioral economists and cognitive psychologists.

What will follow will be some focused discussions of how emotions and morality shape money and why all this matters from a policy perspective.

Forward! Adelante! Let’s Talk!

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Written by fabiorojas

May 15, 2017 at 12:40 am

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  1. […] We are not behavioral economists. […]


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