Sociological Approaches to Behavioral Economics
A second strand of my work involves rethinking behavioral economics and “irrational” economic action from a sociological perspective, challenging the psycho-cognitive explanantia put forth by economists.
The Behavioral Economics of Pierre Bourdieu (2019)
(Forthcoming in Sociological Theory)
This paper argues for a sociological intervention into the field of behavioral economics, and develops the case that Bourdieu’s dispositional theory of practice: [(habitus) (field)] + capital = practice can be used to explain empirical phenomena such as bounded rationality, loss-aversion, and issues of intertemporal choice…
Pierre Bourdieu was not only antagonistic of neoclassical economics with its heroic assumptions of rational action, but was also critical of behavioral economics grounded in cognitive psychology. Indeed, both schools of economics painstakingly reduce economic behavior to individual action carried out in isolation and disregard the role of social and cultural forces. Bourdieu’s thought, and in particular his conception of habitus, can usefully be applied to the empirical findings of behavioral economics to understand deviations from rational action as not only cognitive but also socially structured – for example in explaining such empirical phenomena as loss aversion and time inconsistency bias. Given the prestige of behavioral economics, and the interest in the sociology of Pierre Bourdieu, it is surprising that little work has been done to connect the two. While some scholars have alluded to or have made a few remarks, nobody has quite undertaken a general analysis of Bourdieu’s challenge to contemporary behavioral economics and how it might be applied in practice.
Earmarking Risk: Relational Investing and Portfolio Choice;
(Revise & Resubmit at Social Forces, w/Rourke O’Brien)
This survey experiment tests the impact of relational earmarking on portfolio choice and investment risk-taking…
Ordinary individuals are increasingly charged with making investment decisions not just for themselves but also for close others. A child’s college savings account or a spouse’s retirement savings are instances where investing has become unmistakably relational. In this paper, we posit a theory of relational investing that extends Zelizer’s relational perspective from the domain of transactions to that of financial risk-taking. Through two original survey experiments we demonstrate that: 1) individuals are less risky with dollars earmarked for others; 2) risk tolerance varies as a function of for whom the dollars are earmarked; and 3) labeling accounts for culturally significant life-stage events (such as retirement or college) also shapes risk tolerance. Because allocation decisions determine financial returns achieved by portfolios invested in the market, our framework and findings have important implications for understanding potential drivers of wealth inequality as well as for the study of culture and economic behavior.
The social meaning of financial wealth: relational accounting in the context of 401(k) retirement accounts (2019)
(in Finance & Society, 5(1), 61-83)
This paper draws on and extends Viviana Zelizer’s social meaning of money in conjunction with new work in’ relational accounting’ to suggest a sociological counterpoint, by looking at the social and symbolic meaning valorized into individual 401(k) retirement accounts…
Behavioral economics has become a dominant set of theories in explaining economic behavior, yet explaining such behavior remains under the limited purview of psychological, cognitive, or neural explanations. Following a market downturn, neoclassical and behavioral economics predict various types of behavioral responses, in particular loss aversion – where investors seek to increase risk-taking rather than locking in a sure loss (a loss is more painful to bear than an equivalent gain). A sociological theory that understands the shared meaning of retirement saving would predict something different, a behavior I call durable conservatism. In this paper, I will demonstrate how this concept better explains observed risk behavior in Americans’ 401(k) accounts following the 2002 and 2008 bear markets in stocks, and how that response differed from the behavior documented in non-retirement brokerage accounts.
The Relational Context of Economic Behavior: Evidence from Two Survey Experiments (2019)
(with Rourke O’Brien and Barbara Kiviat)
In this paper, we make an affirmative case for incorporating relational context into models of economic behavior, borrowing from the experimental methodological toolkit of the behavioral economists and utilizing a Zelizerian framework…
We do so by operationalizing key theoretical and empirical insights from the related economic sociology literature to generate predictions about how relational context shapes financial behavior – specifically actions related to borrowing and lending. We then test these predictions through a series of online survey experiments (N=1,750) focused on borrowing and the second focused on informal lending, conducted on a diverse sample of U.S. adults. In so doing, we introduce the idea of a “relational interest rate” which offers a measure of the ‘value/cost’ to individuals of constituting a social relationship as a financial relationship, specifically an indebted one. Here, relational interest rates both describe and will vary by: (1) the value ascribed to funds (or the “media” for transactions [Zelizer 2012: 151]) received from a particular relation; (2) the reluctance to spend money earmarked for a particular relation; (3) generosity in providing financial aid to a particular relation (e.g. lending larger dollar amounts at lower interest rates); and (4) proclivity in seeking financial aid from a particular relation (e.g. instead of going to a bank for a loan). A higher relational interest should correspond to an increase in each of these cases – and an increased level in each of these factors is consistent with a greater relational interest rate. These predictions are affirmed empirically through our experimental studies.