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1 Running head: THE MYOPIA OF MISERY Sadder, but Not Wiser: The Myopia of Misery Jennifer S. Lernera,1, Ye Lib, and Elke U. Weberb 1 Harvard Kennedy School, Harvard University, Cambridge, MA 02138 2 Center for Decision Sciences, Columbia University, New York, NY 10027 Classification: Social Sciences – Psychological and Cognitive Sciences Secondary classification: Social Sciences – Economic Sciences a To whom correspondence should be addressed: Jennifer Lerner 79 John F. Kennedy Street Cambridge, MA 02138 617-495-996 Jennifer_Lerner@harvard.edu 2 THE MYOPIA OF MISERY Abstract Hundreds of studies have examined the “sadder-but-wiser” hypothesis—that sad people make wiser decisions—and most find support for it. However, such studies typically examined judgments and decisions in domains without precisely quantifiable, normative standards of “wisdom.” Moreover, virtually no tests of the hypothesis examined financial decisions, arguably the most frequent and consequential decisions people make. To address these gaps, the present experiments examined the effects of sadness on intertemporal financial choices of the form $X now versus $(X+Y) later—typical of the choices people make when considering whether to spend now or save to spend more later. Studies of intertemporal choices typically reveal extreme impatience. That is, people typically choose earlier rewards over significantly larger, later rewards, leading to regret. Would sadness reverse the typical pattern by increasing wisdom and decreasing impatience—per the sadder-but-wiser hypothesis? Three experiments show the opposite and quantify the exact financial disadvantage of sadness: Whereas the median neutral- mood participant was indifferent between receiving $19 today and $100 in a year, the median sad-mood participant became indifferent at only $4 today. Moreover, sadness increased impatience even though the emotion was normatively irrelevant to the choice. In sum, sadder is not wiser when it comes to making tradeoffs between time and money, calling into question the otherwise long-supported view that “sadder is wiser.” Explanations and implications are discussed. 3 THE MYOPIA OF MISERY \body People typically make the most consequential choices of their lives while in emotional states. Love drives a decision to propose or accept marriage; anger drives a decision to strike someone; fear drives a decision to abandon one’s home amidst disaster. Sometimes a particular emotion holds inextricable links to a particular set of decisions. Consider, for example, the intense sadness one feels after the death of a family member and the numerous financial decisions that must be made to settle that person’s estate. The classic view holds that emotions exert an irrational, even contemptible, influence on judgment and decision making (1, 2). According to this view, sadness would trigger biases in judgment and decision making, presumably costly biases in the case of settling an entire financial estate. According to an opposing view however, sadness is a special-case emotion. Since the initial demonstration of “depressive realism” (3), hundreds of papers have examined the “sadder-but-wiser” hypothesis—that sadness and depression make individuals wiser. Most studies have found support for the sadder-but-wiser hypothesis. Due in part to the fact that a sad mood triggers systematic thought, sadness has been shown to reduce a range of biases, including having overly optimistic views of one’s importance, reputation, and abilities (3), relying on stereotypes (4), and over-attributing causality to individuals (5). However, some studies have also found the opposite, noting increased bias among sad individuals (6, 7). Several methodological factors in the literature have limited the ability to draw clear conclusions. Specifically, studies have overly relied on small samples, correlational designs, tasks without real financial consequences, and judgment or choice paradigms without quantifiable standards for rationality. We attempted to reconcile this debate by improving upon each of the limiting factors described above. We chose to focus on the domain of intertemporal choice, for three reasons. 4 THE MYOPIA OF MISERY First, quantifiable standards of wisdom apply. Second, intertemporal choices requiring a decision between a sooner (usually smaller) reward and a later (usually larger) reward are pervasive in daily life. Third, intertemporal choices have important consequences. In one well-known experiment, Mischel and Ebbesen (8) offered preschoolers one marshmallow and promised them a second if they could wait 15 minutes before eating the first one. Those who were able to postpone immediate gratification developed into more cognitively and socially competent adolescents. They had greater self-esteem, higher SAT scores, and better educational and economic achievements as adults (9, 10). To be sure, future gains have less utility than equivalent immediate gains and should be discounted to a smaller present value (11). But the extent to which people discount future outcomes tends to be irrationally impatient (12), leading to such societal problems as credit card debt (13), insufficient savings (14), and overeating/under-exercising (15). Field studies (16), natural experiments (17, 18), and laboratory experiments (12) report discounting that far exceeds market-based interest rates. Although emotion has been posited as the main driver for irrationally high impatience (11, 19), we know of almost no studies that have tested for its causal role. One notable exception (20) is a study of positive emotion, finding that amusement diminished impatience. On the one hand, sadness may also diminish impatience, if the sadder-but-wiser effect holds. On the other hand, given that amusement—a positive emotion—decreases impatience, it may be that sadness—a negative emotion—increases impatience. In support of this view, sadness has been shown to trigger a generalized devaluation of the self (7, 21), which may create an urgent implicit desire to enhance what William James (22) called the “material self” by changing one’s circumstances, perhaps by seeking immediate rewards. But it would be overly simple to 5 THE MYOPIA OF MISERY hypothesize outcomes only on the basis of emotional valence. Results of prior research (23, 24) can be interpreted to imply that only sadness, and not other negative emotions, should increase impatience. Disgust should, if anything, diminish impatience, since it triggers a goal of expelling rather than acquiring (25). Three experiments that randomly assigned decision-makers to emotional states tested these hypotheses. Experiment 1. Experiment 1 induced 202 participants to feel sad, neutral, or disgusted using standard video-watching and essay-writing protocols. The emotion-induction procedure was effective in both magnitude and speciﬁcity for all three experiments. Sad-condition participants reported feeling more sad (M = 3.72) than neutral (M = 1.66), t(78) = 6.72, p < .0001, disgusted (M = 1.00), t(78) = 13.68, p < .0001, or any other measured negative emotion, including anger (M = 1.30), t(78) = 13.50, p < .0001, and fear (M = 1.31), t(78) = 13.12, p < .001. Comparable effects were found for neutral and disgust conditions. Participants then made 27 choices between receiving money today or more money in the future (26). All three experiments used real financial consequences and followed standard behavioral-economics methods for increasing the veracity of participants’ choices (27). From a rational perspective, there should have been no carry-over of the incidental emotions induced by the videos and writing to the financial decisions. Nonetheless, substantial carry-over occurred. Sad participants were more impatient than neutral participants in their choices, i.e., more willing to forego larger rewards in the future to obtain smaller rewards now. We fit choices to exponential discounting functions and analyzed participants’ annual discount factors, such that smaller discount factors are more impatient. Sad participants were more impatient, discounting more (Mδ=.21, medianδ=.04) than neutral participants (Mδ=.28, medianδ=.19) [Mann-Whitney Z=2.04, p=.04]. Whereas the median sad participant was willing to settle for $4 today instead of 6 THE MYOPIA OF MISERY receiving $100 in a year, the median neutral participant required $19 today instead. Importantly, disgusted participants (Mδ=.31, medianδ=.24) discounted about the same as neutral participants [Z=.46, ns] and less than sad participants [Z=1.87, p=.06]. Results using a hyperbolic discounting function were similar. Thus, sadder was not wiser for intertemporal choices. Even though induced sadness should be irrelevant to these decisions, it increased preference for immediate rewards whereas disgust did not. Experiment 2. Experiment 2 addressed two goals, first testing the reliability of this effect using a web-based, nationwide sample. Second, it applied Query Theory (27), a psychological process model of preference construction, to explain how intertemporal decisions are made differently by individuals who feel sad versus disgusted or neutral. Query Theory assumes that people implicitly and sequentially query their knowledge base for arguments that support either of the two choice options, and that the first query retrieves more support than subsequent queries. Because decision-makers who first think about the earlier option have been shown to be more impatient (27), we hypothesized that sadness would make people more likely to first generate reasons favoring the earlier reward, consistent with the notion that sad people seek self- enhancement by acquiring external goods (21). Experiment 2 tested this hypothesis on 189 participants who—after emotion-induction— were given a chance to win a $50 Amazon.com gift-certificate today or one for a larger amount in three months. Participants provided their thoughts on this choice, made their decision, and subsequently coded their thoughts on whether each one favored receiving the money now, later, both, or neither. As in Experiment 1, sad participants were more impatient, requiring more additional compensation to wait for three months (M=$30.72) than neutral participants (M=$22.72) [t=2.42, 7 THE MYOPIA OF MISERY P<.05] or disgusted participants [(M=$22.74), t=2.39, P<.05]. This translated into steeper discounting for sad (Mδ=.24) than neutral [(Mδ=.37), t=2.82, P<.01] or disgusted participants [(Mδ=.37), t=2.67, P<.01]. Participants listed up to 23 thoughts (M = 3.73, SD = 2.74, median = 3) about their decisions. Of these thoughts, 40% were patient (favored receiving more money later), 39% were impatient, and 21% were neither. Sad participants listed more impatient thoughts than both neutral and disgusted participants (Msad = 1.73 vs. Mneutral = 1.22 and Mdisgust = 1.15, ts = 1.80 and 2.37, p = .07 and p < .05) but did not have significantly more patient thoughts (Msad = 1.58 vs. Mneutral = 1.32 and Mdisgust = 1.37, ts = .82 and .62, ns). We analyzed the ordering of the listed thoughts by calculating the standardized median rank difference (SMRD, 27, 28), with scores of +1 corresponding to all “impatient” thoughts coming before all “patient” thoughts and scores of - 1 corresponding to the opposite. Sad participants generated impatient thoughts significantly earlier (SMRD = .47) than neutral participants [(SMRD = .03), t = 2.88, p < .01] and disgusted participants (SMRD = .005), t = 2.86, p < .01. SMRD scores fully mediated the difference in discount factors between the sad participants and neutral participants (p < .01, bootstrapped mediation) (29). Thus, sadness again induced greater impatience: sad participants valued $50 in three months’ time $6.50 less than neutral or disgusted participants. Moreover, Experiment 2 identified a mechanism for how sadness affects impatience: Reasons for the immediate reward came to mind sooner and more frequently when participants had been made sad as opposed to disgusted or neutral. Experiment 3. Experiment 3 introduced a new question. Does sadness produce a general increase in impatience or is its effect limited to choices offering an immediate payoff? A key 8 THE MYOPIA OF MISERY innovation in modeling discounting distinguishes between two types of processes that are represented in the quasi-hyperbolic discounting function, D(t)=βδt, for t > 0 (30, 31). One process (δ) reflects economically-rational exponential discounting of rewards that is sensitive to the length of delay, t. The other process, “present bias” (β), discounts all future rewards when there is any delay (regardless of its length) and is therefore far from rational. We hypothesized that sadness increases the desire to get something now, not just sooner, and should therefore increase present bias (β) but not rational discounting (δ). To isolate the effect of sadness on present bias, Experiment 3 asked 203 participants— induced to feel sad or neutral—to make 42 choices between immediate rewards versus later rewards; or later rewards versus even later rewards. As predicted, sadness increased choices in favor of immediate rewards but did not affect impatience in choices between later options. Sad participants displayed more present-bias (Mβ=.94) than neutral participants [(Mβ=.98), t(201)=1.94, p=.05], discounting all non-immediate rewards by almost four percentage points more than neutral participants. In contrast, sad (Mδ=.23) and neutral (Mδ =.24) participants discounted already delayed rewards equally, t(201)=.32, ns. Discussion In sum, these findings do not support the maxim that sadder is wiser. Sadness may make people more accurate in some contexts (3), but it also makes them prefer immediate gratification—not an attribute associated with wisdom. Across experiments, sadness increased discounting by 35% to 79% relative to a neutral state. These differences emerged even though real money was at stake in each experiment. Moreover, sadness increased present bias. Present bias can be a particularly harmful form of impatience, as evidenced by the life outcomes associated with Mischel and Ebbesen’s marshmallow experiments (described earlier). 9 THE MYOPIA OF MISERY Taken together, the results are consistent with the previously-tested hypothesis that sadness is associated with both self-depletion and an implicit goal to enhance the self (7, 21). In this case, decision makers may have chosen immediate rewards to bolster what William James termed “the material self” (22). Indeed, the effects observed here were unique to sadness; they did not hold in the disgust condition. This pattern implies that unique characteristics of sadness—and not just a generalized negative mood—account for the findings. The present studies advance the literature in multiple ways. Whereas prior studies have typically involved small samples, correlational designs, paradigms without quantifiable standards for rationality, a lack of a comparison emotion, and tasks without real financial consequences, the present studies improve upon each of these dimensions. They involved over 600 subjects across different laboratories; experimental designs that allow causal conclusions; precise, widely-accepted, and quantifiable normative standards; a comparison negative emotion (disgust); and meaningful motivations (i.e., money) for participants to optimize choice outcomes. Despite the advances, a significant limitation remains. For ethical reasons we could induce only low-intensity emotion. Assuming monotonicity, high-intensity sadness—such as arises from the loss of a family member—may be expected to show far greater effects on the high-stakes intertemporal decisions involved in settling a deceased person’s estate. But this remains to be tested. Methodological and theoretical implications aside, the results also have implications for the design of public policy. High-intensity sadness and depression are common experiences for people who have lost their jobs. Our results suggest that such individuals might exacerbate their financial hardship by making intertemporal consumption decisions that favor immediate consumption more than is wise. Although the United States’ Federal Trade Commission (FTC) 10 THE MYOPIA OF MISERY has a “cooling-off rule,” giving individuals three days to cancel a sale, this rule exempts such sales as real estate, insurance, and securities—exactly the sorts of sales one might engage in after the death of a family member, loss of employment, or a natural disaster. The results may also assist in the identification of mental health mortality risk, as degree of discounting has been shown to differentiate among individuals prone to serious-premeditated versus less serious- unplanned suicidal acts (32). In this and other ways, public policy design and implementation needs to take into consideration the full range of psychological processes through which decisions are made (27, 33, 34). In conclusion, these experiments, combining methods from psychology and economics, reliably reveal that sadder is not necessarily wiser. Instead, sadness made people more myopic, and thus willing to forego greater later gains for instant gratification. Given the number of societal problems resulting from a “need-it-now” mentality, these results may inform not only theories of emotion and financial decision making but also the formation of powerful interventions for optimizing decision-making environments (33). Methods Experiment 1. We randomly assigned 202 participants (57% female; ages 18 to 63) to either a neutral, sadness, or disgust condition. Each participant sat in a private cubicle within a laboratory at a large Northeastern university. Drawing on established methods (7, 35), our emotion-induction procedure was the same in all three experiments. Participants first watched three-minute video clips about the death of a boy’s mentor (35) in the sadness condition, about an unsanitary toilet (7) in the disgust condition, and about the Great Barrier Reef (7) in the neutral-state condition. Depending on condition, participants next wrote an essay about a 11 THE MYOPIA OF MISERY situation during which they had experienced sadness or disgust, or an essay about their nightly activities. Both before the emotion-induction procedure and immediately after the choice task, participants reported how intensely they felt 19 emotions, including emotions measuring sadness, disgust, and a neutral state. Participants then made 27 choices between receiving cash amounts today (between $11- $80) and larger cash amounts (between $25-$85) at points in the future ranging from one week to six months (26). Following standard procedures (27), we incentivized participants to express their true preferences by randomly selecting one of the choice pairs for one of the participants in each session (median of 13 participants per session) and paying out that person’s preferred alternative. Choices of a reward that day were paid at the end of the session in cash. Later rewards were paid by a check mailed at the later time. We used maximum likelihood estimation to fit participants’ choices to an exponential discounting function, D(t) = δt, where smaller values of δ indicate more impatience. We also replicated all results by fitting participants’ choices to a hyperbolic discounting function, D(t) = (1 + κ·t)-1, where larger values of κ and smaller values for D indicate more impatience. All results were similar across both discounting functions for Experiments 1 and 2. Experiment 2. One hundred and eighty-nine participants (133 females, 56 males; age range from 19-69 years, with a mean of 40) from the Columbia University Center for Decision Sciences Virtual Lab participant pool responded to an email solicitation for this online study. All procedures other than the intertemporal choice task were the same as in Experiment 1. After the emotion induction procedure, participants were given a chance to win an Amazon.com gift certificate worth $50 now or a larger amount in three months, in addition to a $5 fee for completing the study (27). This titration task asked participants to make 11 choices between 12 THE MYOPIA OF MISERY receiving $50 today or amounts between $55 and $105 (in $5 increments) in three months. We calculated discount rates at the implied indifference point midway between where participants preferred the earlier versus later payments. We incentivized participants to express their true preferences by randomly selecting 1 out of every 50 participants to have one of their choices played out for real. All gift certificates were sent electronically. Thought listing. After the emotion induction procedure and after being told about the upcoming choice between receiving $50 now or a larger amount in three months, but before making the actual decisions, participants were asked to indicate what was going through their mind as they thought about this decision, using an established thought-listing protocol (27). Participants typed their thoughts into a customized interactive web form one thought at a time for as many thoughts as they could think of. Participants had previously practiced listing thoughts this way at the beginning of the study. After making the actual decisions, they were later shown their previously listed thoughts, one at a time, and asked to indicate whether each favored receiving the money now, later, both, or neither. Experiment 3. In Experiment 3, all procedures other than the intertemporal choice task were the same as in the first two experiments, except that disgust was not studied. After the emotion induction, a total of 203 participants in two labs (66.5% female, median age of 34.5) made 42 choices (36) between receiving smaller cash amounts (between $6-$40) earlier (today, 2 weeks from today, or 4 weeks from today) and larger cash amounts (between $7-$57) later (2, 4, or 6 weeks from today). As before, we incentivized participants by randomly selecting a portion of the participants to have one of their choices played out for real. Participants’ choices were fit to the quasi-hyperbolic discounting function (30, 31) using maximum-likelihood estimation. 13 THE MYOPIA OF MISERY Acknowledgments: This research was supported by NSF grants PECASE SES-0239637 and SES-0820441 to Lerner and SES-0820496 to Weber. We thank Viral Gandhi and Irving Dominguez as well as Cindy Cryder, Ron Dahl, Mark Edington, Dan Gilbert, Jennifer Gross, Dave Hardisty, Yoel Inbar, George Loewenstein, Eric Mattison, Nicole Otchy, and Deborah Small. 14 THE MYOPIA OF MISERY References 1. Schönfeld M (2008) Kant's Philosophical Development. in The Stanford Encyclopedia of Philosophy, ed Zalta EN. 2. Schmitter AM (2010) 17th and 18th Century Theories of Emotions. in The Stanford Encyclopedia of Philosophy ed Zalta EN. 3. Alloy LB & Abramson LY (1979) Judgment of contingency in depressed and nondepressed students: Sadder but wiser? Journal of Experimental Psychology: General 108(4):441-485. 4. 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McClure SM, Laibson DI, Loewenstein G, & Cohen JD (2004) Separate neural systems value immediate and delayed monetary rewards. Science 306(5695):503-507 16 THE MYOPIA OF MISERY Figure Legends Figure 1. Average patience levels in choices between rewards today or later, as determined by exponential discounting (δ) in experiments 1 and 2. Closer to 1 is more patient. Error bars represent ±1SEM. Figure 2. Average patience levels in choices between rewards today or later, or between rewards later or even later, as modeled by quasi-hyperbolic discounting, in experiment 3. Closer to 1 is more patient. Error bars represent ±1SEM. (A) Rational discounting. (B) Present bias (discounting of non-immediate rewards).
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