June 23, 2012
If you want to know how ethical your broker is, give him or her a moral dilemma and see how much he sweats before deciding what to do.
It's quite a jump from the laboratory to real-world decisions about asset management, but British researchers have found that gut feeling can override rational thought when people are faced with financial offers that look unfair.
Even when we could benefit, a physical response like sweating can make people reject a financial proposition they consider to be unjust. The key is how tuned in they are to their own bodies.
Researchers from the University of Exeter, the Medical Research Council Cognition and Brain Sciences Unit and the University of Cambridge, gave 51 people a series of offers based on dividing 10 pounds ($16) between two people. They found that although an offer to split the money 50:50 was mostly accepted, an offer of less than a ‘fair share' was often rejected, even though rejecting it left them with nothing.
The game, a version of a well-known psychological test called the Ultimatum Game, showed gut reactions, especially made under time pressure with incomplete information, can lead to decisions that are irrational from a purely economic perspective.
The researchers measured how much participants sweated through their fingertips and how much their heart rate changed.
The research adds to growing evidence that our bodies can sometimes govern how we think and feel, not the other way around.
Clinical psychologist Barney Dunn, who led the study, told Reuters that participants were also tested on how accurately they could monitor their physical responses by counting their own heartbeats. Those who were most accurate were more prone to having their bodies dictate their decisions in the game.
"It's a bizarre finding, but it's very robust," said Dunn.
Millionaires Pulling Their Money from Big Brokers
It's uncontroversial to say that thoughts trigger responses in your body. But the research, published recently in the journal Cognitive Affective and Behavioural Neuroscience, adds to growing evidence that our bodies can sometimes govern how we think and feel, rather than the other way round.
"Humans are highly attuned to unfairness and we are sometimes required to weigh up the demands of maintaining justice with preserving our own economic self-interest," said Dunn. "At a time when ideas of fairness in the financial sector – from bankers' bonuses to changes to pension schemes – are being widely debated, it is important to recognize why some individuals rebel against perceived unfairness, whereas other people are prepared to accept the status quo."
Once you know how ethical your broker is, the next decision is whether he'll make you the most money, of course.
(Reporting by Chris Wickham)