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How Expensive It Is to Be Poor

Earlier this month, the Pew Research Center released a study that found that most wealthy Americans believed “poor people today have it easy because they can get government benefits without doing anything in return.”

This is an infuriatingly obtuse view of what it means to be poor in this country — the soul-rending omnipresence of worry and fear, of weariness and fatigue. This can be the view only of those who have not known — or have long forgotten — what poverty truly means.

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Consumer Neuroscience: Applications, Challenges, and Possible Solutions

The first decade of consumer neuroscience research has produced groundbreaking work in identifying the basic neural processes underlying human judgment and decision-making — with most such studies published in neuroscience journals and influencing models of brain function. Yet, for the field of consumer neuroscience to thrive in the next decade, the current emphasis on basic science research must be extended into marketing theory and practice. We suggest five concrete ways that neuroscientific methods can be fruitfully applied to marketing. We then outline three fundamental challenges facing consumer neuroscientists and offer potential solutions for addressing them. We conclude by describing how consumer neuroscience can become an important complement to research and practice in marketing.

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We Know How You Feel

Computers are learning to read emotion, and the business world can’t wait.

Three years ago, archivists at A.T. & T. stumbled upon a rare fragment of computer history: a short film that Jim Henson produced for Ma Bell, in 1963. Henson had been hired to make the film for a conference that the company was convening to showcase its strengths in machine-to-machine communication. Told to devise a faux robot that believed it functioned better than a person, he came up with a cocky, boxy, jittery, bleeping Muppet on wheels. “This is computer H14,” it proclaims as the film begins. “Data program readout: number fourteen ninety-two per cent H2SOSO.” (Robots of that era always seemed obligated to initiate speech with senseless jargon.) “Begin subject: Man and the Machine,” it continues. “The machine possesses supreme intelligence, a faultless memory, and a beautiful soul.” A blast of exhaust from one of its ports vaporizes a passing bird. “Correction,” it says. “The machine does not have a soul. It has no bothersome emotions. While mere mortals wallow in a sea of emotionalism, the machine is busy digesting vast oceans of information in a single all-encompassing gulp.” H14 then takes such a gulp, which proves overwhelming. Ticking and whirring, it begs for a human mechanic; seconds later, it explodes.

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The Politics of Financial Insecurity

A Democratic Tilt, Undercut by Low Participation

When it comes to choosing a party’s candidate in the voting booth, one pattern in modern American politics is so familiar it has become a truism: the rich vote Republican, the poor vote Democratic. And while the reality of the situation is much more nuanced, in broad strokes it has been the case that Republicans have consistently garnered disproportionate levels of support from the financially well-off, while the least financially secure Americans have been significantly more likely to back Democrats.

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Expense Neglect Bias in Forecasting Personal Finances

This paper shows evidence for an “expense neglect bias” in the manner that individuals forecast their future spare money or “financial slack.” We find that even though people generally think that both their income and expenses will rise in the future, they systematically under-weigh the extent to which their growing expenses will cut into their spare money (Studies 1-9). We test and rule out the possibility that these findings are due to: measurement error (Studies 2-5); a lack of confidence in predictions over expenses (Study 6); beliefs that future expenses will be flexible (Study 7); or a general optimism bias (Study 8). Study 9 shows that individuals who are chronically attuned to expenses (tightwads) are less likely to show an expense neglect bias than those who do not attend to expenses (spendthrifts). Finally, we conduct a meta-analysis of our entire file-drawer (25 studies and 7,214 participants) and find that on average, individuals place about 2.7 times the weight on income as they do expenses when forecasting their spare money.

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Computer-based personality judgments are more accurate than those made by humans

This study compares the accuracy of personality judgment—a ubiquitous and important social-cognitive activity—between computer models and humans. Using several criteria, we show that computers’ judgments of people’s personalities based on their digital footprints are more accurate and valid than judgments made by their close others or acquaintances (friends, family, spouse, colleagues, etc.). Our findings highlight that people’s personalities can be predicted automatically and without involving human social-cognitive skills.

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World Development Report 2015 explores “Mind, Society, and Behavior”

Real people are rarely as coherent, forward-looking, strategic or selfish as typically assumed in standard economic models—they sometimes do not pursue their own interests, and can be unexpectedly generous. Such dynamics should be factored more carefully into development policies, a point made in the World Development Report 2015: Mind, Society, and Behavior.

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Sound credit scores and financial decisions despite cognitive aging

At a time when the world’s 65-and-older population will double by 2035, policy changes have transferred many complex financial and healthcare decisions to individuals. Age-related declines in cognitive ability raise the specter that older adults facing major financial decisions may find them increasingly challenging. We explore whether knowledge and expertise accumulated from past decisions can offset age-related cognitive declines. Using a unique dataset that combines measures of cognitive ability, knowledge, and credit scores—a measure of creditworthiness that reflects sustained ability for sound financial decision-making—we find that cognitive decline does not spell doom. Instead, domain-specific knowledge and expertise provide an alternative route to sound financial decisions. These results suggest guidelines for designing effective interventions and decision aids across the life span.

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The Cool Scent of Power: Effects of Ambient Scent on Consumer Preferences and Choice Behavior

The present research examines how ambient scents affect consumers’ spatial perceptions in retail environments, which in turn influence customers’ feelings of power and, thus, product preference and purchasing behavior. Specifically, the authors demonstrate that in a warm- (vs. cool-) scented and thus perceptually more (vs. less) socially dense environment, people experience a greater (vs. lesser) need for power, which manifests in increased preference for and purchase of premium products and brands. This research extends knowledge on store atmospherics and customer experience management through the effects of ambient scent on spatial perceptions and builds on recent research on power in choice contexts.

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Household Finances and the ‘Big Five’ Personality Traits

Using data drawn from the British Household Panel Survey, we analyse the relationship between personality traits and financial decision-making focusing on unsecured debt and financial assets. Personality traits are classified according to the ‘Big Five’ taxonomy: openness to experience, conscientiousness, extraversion, agreeableness and neuroticism. We explore personality traits at the individual level and also within couples, specifically the personality traits of the head of household and personality traits averaged across the couple. We find that certain personality traits such as extraversion are generally significantly associated with household finances in terms of the levels of debt and assets held and the correlation is often relatively large. The results also suggest that the magnitude and statistical significance of the association between personality traits and household finances differs across the various types of debt and assets held in the household portfolio.

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