A widely used principle in economics to understand how people make decisions is that of rationality : people behave in ways that achieve the greatest possible benefit. This benefit, mathematically represented by a utility function , is typically the economic gain we receive from our actions (in the context of those of others).

However, the emergence of experimental economics , which explores what people actually do in specific situations, has made it clear that people often do things that cause them to lose money. How can this evidence be reconciled with the idea of ​​maximizing the utility of decisions?

Economic utility vs. non-monetary benefits

A first approach is to forget about this idea and assume that people don’t seek the greatest benefit, that they can make their decisions based on what they’ve learned previously or by imitating others, for example. This is what is called bounded rationality in economics . The problem with this option is that it complicates the analysis and prediction of people’s decisions.

Alternatively, one can maintain the idea of ​​the utility function, but include non-monetary benefits. Again, this can be done in many ways. For example, the utility function proposed by Sergey Gavrilets includes psychological and social effects. Thus, it takes into account cognitive dissonance (doing things that go against our beliefs causes us harm), social pressure (we tend to imitate the actions of others), and social norms (we like to do what others expect of us).

Utility, personal values ​​and social pressure

To test the validity of this theory, we conducted two types of experiments in several series with participants from Spain and China:

1. Participants contributed to mitigating climate change through a joint effort. Those who contributed the most reaped the least economic benefits, but if they failed to prevent the crisis, everyone lost everything.Participants exploited a given resource in common. If done in moderation, everyone benefited, but excessive use depleted the resource.
2. Participants exploited a given resource in common. If done in moderation, everyone benefited, but excessive use depleted the resource.

The conclusions of these experiments were very clear: on average, in both experiments and in both countries, economic benefit weighed only 20% in decisions. The greatest influence was each participant’s personal or moral norms, which contributed 40%. Finally, the remaining 40% was divided between what participants thought others would do and what they believed was expected of them.

However, the average of the results obtained is one thing, and the weight of each participant’s decision is another.

The data obtained show the importance of economic utility and personal values ​​in decision-making. We found two very distinct groups: those who placed little importance on money and a lot on their moral standards, and those who focused on economic gain.

Obedience to rules, social behavior

To contrast these results, we also asked participants to place balls in two boxes. One box earned them 50 cents and the other one euro, but they were asked to place them in the 50-cent box. Those who paid more attention to the instructions were more sensitive to the rules, and this was reflected in their decision-making in the main experiment.

They were also given a questionnaire to measure their concern for well-being and their propensity to share wealth with others ( social value orientation ). People who scored high on this questionnaire made their decisions according to their moral standards and with little regard for money.

We also studied the effect of suggesting to participants the best behavior from the group’s perspective. Interestingly, the results in Spain showed no effect on average. However, analyzing the individual results showed that the most rule-sensitive people did as they were told.

In contrast, people with more economic motives took advantage and increased the actions that gave them the most benefits. In China, this effect was much less pronounced, and almost all participants adapted their behavior to what they were suggested to do.

A collectivist culture

Although the participants’ behavior was generally similar, there were other differences between the two countries.

In China, decisions were made more based on imitating others than on money. Participants also felt they were more influenced by what others expected of them. In short, the Chinese participants were more group-oriented than the Spanish, in line with the collectivist spirit that permeates Eastern societies.

In short, economic gain has relatively little weight in people’s decisions. Their personal convictions matter much more, but they are also influenced by social pressure (through imitation or following rules). Therefore, if we want to change socially undesirable behaviors, monetary incentives are not enough.

Although achieving similar results with two different experiments in two different countries lends weight to our research, we recognize that many other situations and countries require experimentation to further test decision-making and confirm our conclusions.

Author Bio: Angel Sánchez Sánchez is Professor of Applied Mathematics at Carlos III University