[escepticos] Lottery Tickets and Credit Cards: The Dangers of an Irrational Brain

[Pedro J. Hdez]

Creo que interesante para matizar algunos puntos de vista, incluido el mío.

Lottery Tickets and Credit Cards: The Dangers of an Irrational Brain
Why do we splurge on games of chance and rack up credit bills? A
neuroeconomist explains.
http://www.sciam.com/article.cfm?id=dangers-irrational-brain&print=true

George Loewenstein is a neuroeconomist at Carnegie Mellon University
who has studied everything from the brain activity triggered by retail
shopping to the psychology of lottery tickets. Mind Matters editor
Jonah Lehrer chats with Loewenstein about his latest research, and
what why credit cards are so dangerous.

LEHRER: Your most recent paper looked at some of the factors that seem
to influence the purchase of lottery tickets. What did you find?

LOEWENSTEIN: We [Emily Haisley, Romel Mostafa and I, all of whom are
researchers at Carnegie Mellon] have two papers addressing the motives
underlying lottery ticket purchases. All of the research was conducted
with low income samples recruited at the Greyhound bus station in
Pittsburgh. In all of the studies, we paid travelers $5 for completing
a survey on their attitudes toward Pittsburgh, then give them the
opportunity to purchase lottery tickets with the money. The variable
of interest was, in all studies, the number of tickets they purchased.

One of the papers, just out in the Journal of Behavioral Decision
Making was inspired by the empirical observation that the poor spend a
disproportionate percentage of their income on lottery tickets. We
conducted two experiments to examine whether making people feel poor
makes them want to play the lottery.

We randomly assigned subjects to either feel relatively poor or
relatively rich by having them complete demographic questions that
included an item on annual income. The group made to feel poor was
asked to provide its income on a scale that began at "less than
$100,000" and went up from there, ensuring that most respondents would
be in the lowest income tier. The group made to feel subjectively
wealthier was asked to report income on a scale that began with "less
than $10,000" and increased in $10,000 increments, leading most
respondents to be in a middle tier. The group made to feel poor
purchased twice as many lottery tickets (an average of 1.27) than
those made to feel relatively wealthier (0.67 tickets, on average).

In the second experiment, we indirectly reminded participants that,
while different income groups face unequal prospects when it comes to
education, employment and housing, everyone has an equal chance to win
the lottery. This reminder that the lottery is a kind of "social
equalizer" also increased lottery tickets purchases. The group given
this reminder purchased 1.31 tickets, on average, as compared with
0.54 for those not given such a reminder.

LEHRER: Have these experiments changed how you feel about the lottery?
Would you advocate any changes to the way the lottery system is run?

LOEWENSTEIN: Clearly there is a demand for playing the lottery, and
people seem to get something out of it; otherwise they wouldn't keep
playing. But it is well established that low income people spend a
higher percentage of their income on the lottery than other income
groups (with one study finding that those earning incomes less than
$12,400 spend an average of $645 on lotteries each year), so the
lottery ends up taxing the poor at a higher rate when it makes much
more sense to tax the rich at a higher rate.

The finding from our first study, that when you make people feel poor
they play more, is especially sad since playing the lottery is on
average a massively losing proposition. The propensity of low income
individuals to play the lottery has the perverse effect of
exacerbating their poverty. Although there are no easy solutions to
the problem, one obvious one would be to cease marketing and
advertising that targets the poor. It probably makes sense for the
state to sell lottery tickets, because otherwise they will be sold by
organized crime. However, does it really make sense for the state to
be inducing, through advertising, poor people to play who wouldn't
play in the absence of such inducement?

Similarly, states could promote and offer more games that appeal to
wealthier players, such as Powerball, and not those popular with
poorer players, such as instant scratch-off tickets. Another obvious
solution, though one that is even less likely to be implemented, would
be for the state to increase the payout on the tickets, and perhaps to
increase the number of moderate size prizes.

Finally, a third option would be for financial institutions to issue
investment instruments that have lottery-like qualities (for example,
offered in small amounts, available at many convenient points of
purchase, provide a small chance of a large upside) but offer a
positive rate of return, providing the pleasure of playing the lottery
without the steep cost. In many other countries "prize bonds" or other
savings instruments are available that pay lottery winnings in place
of, or in addition to, regular interest. Regulations in the United
States have stymied the development of such offerings.

LEHRER: In a recent paper on the neural mechanisms underlying our
purchasing decisions, you speculated that the "abstract nature of
credit cards" might "anaesthetize consumers against the pain of
paying." How might that occur?

LOEWENSTEIN: Unlike cash, where you are turning something over (bills
and coins) as you are receiving something (a good or service), with
credit cards you or the store clerk simply swipes the card, which
doesn't feel like giving something up. With credit cards it is also
easier to miss, or deliberately ignore, how much one is spending. (A
2001 study by Dilip Soman, a professor of marketing at the University
of Toronto, suggests that that people are less likely to recall, and
more likely to underestimate, how much they spent on a recent
transaction when they paid by credit card than with cash.) Worse, with
credit cards it is unclear whether or when you are going into debt
because there is uncertainty about whether you will be able to pay for
your cumulated expenditures at the end of the month. Credit cards
allow people to go into debt passively, without explicitly deciding to
take on the debt or feeling like they are going into debt. How many
credit card users who end up with $10,000 of debt at the end of the
year would have been willing, at the beginning of the year, to take
out a $10,000 loan to finance those same purchases? Many people who
end up massively in debt with credit cards would not have done so if
they had had to make an explicit decision to go into debt.

LEHRER: Have these experiments changed the way you make purchasing
decisions? Are you more reticent about using credit cards?

LOEWENSTEIN: Fortunately, my income is well above the poverty line and
I'm a tightwad to begin with—my problem is not spending money when I
shouldn't, but not spending money when I should. Credit cards are
wonderful for affluent tightwads. They are deadly for poor
spendthrifts.

LEHRER: You are a leading figure in neuroeconomics, a new field that
attempts to merge neuroscience and economics. What do you think are
some of the most successful and important findings in the field so
far? And what topics do you hope neuroeconomists address in the
future?

LOEWENSTEIN: Neuroeconomics is still in its infancy, and many of the
existing findings are speculative or contradictory. As of the present,
neuroscience has mainly been used to test existing economic, and
especially behavioral economic, theories. I am unaware of new, or at
least definitive, insights that have emerged from the field so far. I
believe that there is a danger that the field has been oversold, and
perhaps "over-bought," leading to inevitable disappointment and
disillusionment. People get very excited about any research that
includes colorful pictures of the brain "lighting up"—however weak the
methods or results might be. However, any progress on the research
frontier that links brain activity to complex behaviors, such as
economic decisions, is inherently interesting and important. Give us
another five to 10 years and there will almost surely be some very
exciting developments.

I personally am most excited about existing and in-progress work
examining the impact of emotions on economic behavior. So much of what
we see in the economy—such as market booms and busts—is clearly driven
by emotions. Conventional economics fails to account for the role of
emotions and only captures the more rational, calculating side of
human behavior. Neuroeconomics research has already begun to enhance
our understanding of the role of emotions in economic behavior.
Ultimately, I believe, neuroeconomics is going to provide a
perspective on human decision that integrates the duality of emotion
and deliberation.

-- 
Pedro J. Hdez
Ecos del futuro
ecos.blogalia.com