It’s not a Depression it’s a Disgust!

In this study[1]  the authors manipulated the emotions of their test subjects and then simulated a marketplace.  It is not surprising that your mood effects prices, both what your willing to pay and what your willing to accept.  They tested two emotions: sad and disgust.  Apparently a market should clear faster if everybody is sad.  The sad subjects lower prices for selling purposes while raising the price they are willing to pay.  Disgusted subject lower both.

A couple comments.

A severe economic recession is called a depression, but apparently it should be called a disgust.

I’m reminded that one of the theories of usury is that purpose of interest on borrowed money is to compensate the capitalist for the pleasures he is forgoing when he hands over the money, and in turn I am amused  by the idea that the usual macroeconomic prescription for a recession is to lower interest rates.  Presumably the intent is to make him sad.

I’ve been wondering if and when we will see the application of behavioral economics to macroeconomic problems.  Given the current recession, maybe we should prescribe a large does of sad?

Mostly you observe behavior economic research getting applied to sales and marketing.  No doubt evil legions are currently at work trying to puzzle out how to make shoppers sadder at the point of sale.

Hm, this would seem to explain why shopping malls make me so cranky.

[1]  Heart Strings and Purse Strings:  Carryover Effects of Emotions on Economic Decisions by  Jennifer S. Lerner, Deborah A. Small, and George Loewenstein Carnegie Mellon University  (pdf)

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