Toward the integration of personality theory and decision theory in explaining economic behavior: An experimental investigation

Abstract

Highlights We systematically assess the relationships between economic preferences and personality traits.  We analyze a large set of adult non-student subjects with data on several life outcomes.  Personality traits statistically predict outcomes as well or better than economic preferences.  Decision theory and personality variables are meaningfully statistically related. Neuroticism and cognitive ability together explain much of risk preferences.Abstract: Economics and trait-based personality psychology have taken different approaches to understanding individual differences. The former emphasizes variables measured according to formal decision theory; the latter instead emphasizes variables derived from the factor analysis of trait assessments.In a data set on trainee truckers in a large US company, we provide a systematic assessment of the empirical pattern of relationships and correlations between the measurements used in these two approaches by comparing the predictive power of variables derived from personality theory and decision theory for several individual characteristics and outcomes, and relating the two sets of measurements to each other.We show that personality traits have a comparable or stronger statistical predictive power than do economic preferences for several dependent variables, including credit score, job persistence, and heavy truck accidents. They also have strong predictive power for Body Mass Index (BMI) and smoking status. Further, decision theory and personality variables are meaningfully related. For example, we confirm that cognitive ability explains a substantial part of time preferences, and find that Neuroticism and cognitive ability and together explain attitudes toward risk. In an experimental game, cognitive skills and Agreeableness explain important aspects of strategic behavior.

On the interpretation of non-cognitive skills – What is being measured and why it matters

“…19 Papers using self-reported behaviors to construct non-cognitive factors are common, see for example Heckman et al (2013b) 20 Some papers that study cognitive and non-cognitive skills do not explicitly use a two-factor structure (for example, Cobb-Clark and Tan (2011); Farkas (2003); Rustichini et al (2012);Lleras (2008)). Rather, these papers include a number of measures which they believe serve as proxies for non-cognitive skills and discuss how these measures affect the outcome of interest.…”

“…Exceptions that connect (incentivized) preference measures and real-life outcomes are e.g. Burks et al (2015Burks et al ( , 2012, Golsteyn et al (2014), Sutter et al (2013), Rustichini et al (2012) and Chabris et al (2008). Burks et al (2015) is most closely related to this paper and considers the relation between education outcomes, personality measures and economic preferences.…”

Cognitive abilities and economic behavior

“…The measures of cognitive ability include well-known measures, such as the Cognitive Reflection Test (CRT; Frederick, 2005 ) 5 and the Raven Progressive Matrices ( Raven, 1936;Raven et al, 20 0 0 ). On the other hand, papers in this SI also employ less-standard measures of cognitive ability, including success at a strategic board game ( Baghestanian and Frey, 2016 ), a working memory test and an arithmetic test ( Prokosheva, 2016 ), Faith in Intuition ( Alós-Ferrer and Hügelschäfer, 2016 ), the Red Hat puzzle ( Bayer and Renou, 2016a ), and success in the Hit 15 game ( Rustichini et al, 2016 ).…”

Cognitive Ability, Character Skills, and Learning to Play Equilibrium: A Level-kAnalysis

“…More self-controlled, more tough-minded and less extraverted subjects offer more in the ultimatum game (Brandstätter and Königstein, 2001). More agreeable subjects send more in a sequential prisoner's dilemma (Rustichini et al, 2012). Higher need-for-cognition and premeditation give rise to fewer dominated choices in dominance-solvable games (Rydval et al, 2009).…”