Media Briefings

THE IMPACT OF ANGER ON ECONOMIC WELLBEING: Experimental evidence

  • Published Date: April 2014

Anger has a negative impact on people’s short-term economic behaviour, according to experimental research by Michalis Drouvelis and Brit Grosskopf, to be presented at the Royal Economic Society’s 2014 annual conference. The researchers inducedfeelings of either happiness or anger in student subjectby showing them video clipsbefore asking them to make economic decisions that affected the whole group. The angry mood students made decisions that damaged both themselves and the group.

 

The experiment involving putting individuals into groups of three and paying them a sum of money. They were then asked to contribute some of that money to a common source from which everyone will benefit. Next, they were informed about the contributions of the other group members and given the opportunity to ‘punish’ them by reducing their income. The results show that:

 

Angry subjects contribute about 25% less than happy subjects, who in turn contribute just about the same as subjects whose moods have not been manipulated.

 

Angry subjects punish their counterparts about 75% more compared with subjects in a happy mood.

 

Angry mood subjects earn 10% less than happy mood subjects.

 

The authors comment:

 

‘Our study shows that anger can be detrimental to the outcomes of social interactions, be it in small groups, institutions or even societies. Economic interventions should target emotional wellbeing to maintain social cooperation.’

 

More…

 

Emotions are pervasive in many social environments and our everyday interactions. For example, the experience and display of emotions play an important role in fostering and maintaining cooperative relationships.

 

While there is a long tradition in investigating moods and emotions in psychology, the role of emotions has been largely neglected in traditional economics. Mostly, economic theories assume agents to be fully rational, self-interested, emotionless maximisers of what is called expected utility, a probability weighted measure of the outcome of one’s choices.

 

Recently, some advances have been made to identify whether emotional states have any influence on economic outcomes. In most cases, researchers have looked at effects on so-called individual decision-making, that is, effects on decisions whose outcomes only affect the decision-maker and nobody else.

 

But we live in a social world and interactions with others are the norm. Understanding how emotions affect behaviour in interactive environments, in particular those were cooperation is necessary to achieve mutually beneficial outcomes is a crucial step in identifying acceptable standards in human behaviour and people’s so-called social preferences.

 

This study designs a laboratory experiment (using undergraduate students as subjects who are paid according to the decisions they make in the experiment) to investigate the impact of induced emotions on two measures of social preferences: cooperation and sanctioning behaviour.

 

The framework is a mixed-motive social environment, where personal interests are in conflict with group benefits. In this so-called public goods game, individuals are randomly assigned to groups of three and decide how much of their initial endowment to contribute voluntarily to a common resource.

 

The setup is parameterised such that selfish and rational individuals would contribute nothing and keep their whole endowment for themselves; whereas social efficiency is achieved when all individuals contribute their total endowment.

 

The game is completed with the addition of a second stage in which individuals are informed about the contributions of the other group members and are given the opportunity to reduce the income of their counterparts by assigning costly sanctioning points to other group members.

 

The researchers induce emotions by showing different video clips to the students prior to making their contribution decision (a method long successfully used by psychologists). These video clips are chosen to induce feelings of either happiness or anger.

 

The study finds that angry subjects contribute about 25% less than happy subjects, who in turn contribute just about the same as subjects whose moods have not been manipulated. Angry subjects punish their counterparts about 75% more compared withsubjects in a happy mood.

 

Overall welfare is also affected by induced emotions: angry mood subjects earn 10% less than happy mood subjects. To this extent, the study provides evidence that anger, when induced, causes a negative impact on economic behaviour and reduces efficiency at least in the very short run.

 

By asking subjects what they think others will be contributing, the researchers are able to figure out whether these effects of anger are driven by a change in preferences or by a change in beliefs about other people’s actions. They find that beliefs about the actions of other people appear to be unchanged.

 

This makes the choices of angry subjects appear irrational as there seems to be a disconnection between beliefs and reality, that is, a gap between what they do themselves and how they think others will behave. This gap does not show up for happy subjects.

 

This study shows that anger can be detrimental to the outcomes of social interactions, be it in small groups, institutions or even societies. Economic interventions should target emotional wellbeing to maintain social cooperation.

 

ENDS

 

 

Notes for editors:

‘The Effects of Anger and Happiness on Pro-Social Behaviour’ by Michalis Drouvelisand Brit Grosskopf

 

For further information, contact:

Romesh Vaitilingam: romesh@vaitilingam.com, +44 7768 661095