Meet the researcher: Shabnam Mousavi, Gerd Gigerenzer & Shyam Sunder

Posted on March 13, 2019

Selected for the TFI long-term research grant: Dr. Shabnam Mousavi, Prof. Dr. Gerd Gigerenzer & Prof. Dr. Shyam Sunder! They will analyse tools and decision aids for policy makers, financial regulators and consumers. Who are the researchers, what is their project about and what motivated them to apply?

Policy makers and regulators design the financial rules for both the financial industry and consumers. All of these stakeholders interact with each other, yet have separate goals and roles to play in the design of financial decision tools. The goal of this study is to explore to what extent these motivations and financial regulations misalign and, consecutively, to provide effective tools based on behavioural science to improve financial stability on the individual and public policy level.

First, we will analyse data from six European countries to identify the role of habits in spending and saving behaviour. Furthermore, we will accumulate evidence on the role of financial literacy and awareness in financial decisions, and analyse similarities between medical and financial decision making. Based on these insights we will create a handbook for the general audience, called “Little Book of Financial Decision Making”. On the policy level, we aim to document which policy interventions and decision tools have been effective in improving financial stability and decision making, and why others have not. Furthermore, we will create a manual of the behavioural elements that influence the formation and implementation of financial regulations. Taken together, this research project will lay the basis for designing effective interventions and decision aids for policy makers, financial regulators and the general public.

“We believe that directly applying feasible decision tools on the basis of heuristics can assist regulators and policymakers in designing the structures within which these decisions are made.”

What was your motivation to apply for the Think Forward Initiative research grant?

Upon examination of the existing activities at the TFI and after communication with the TFI team, it became clear that its platform is congruent with our vision of disseminating research findings for the benefit of society. In particular, we perceived this as an opportunity to translate the findings from the study of fast-and-frugal heuristics to decision aids for the general public in the domain of financial decision making.

How do you expect that your research will contribute to people's financial well-being?

Better decisions improve lives in many aspects. Although this statement seems self-evident, it remains unclear as to how decisions can be usefully assessed. Improvement techniques can be operationalized only if assessment methods are identified. At the heart of the study of fast-and-frugal heuristics lies the conviction that exploration of what ought to be cannot be performed independent of what is. Notably, however, this is-ought separation is the hallmark of numerous methodologies, where stylized facts and cognitively insurmountable requirements constitute normative benchmarks for good decisions. We believe that directly applying feasible decision tools on the basis of the study of heuristics can generate efficient pathways for improving individuals’ financial decision-making methods and outcomes, and for assisting regulators and policymakers in designing the structures within which these decisions are made.

Shabnam Mousavi is Associated Scientist at the Harding Center for Risk Literacy at the Max Planck Institute for Human Development in Berlin. Holding a PhD in Economics as well as a PhD in Statistics from Virginia Tech, she is an interdisciplinary scientist exploring the many aspects of human choice behaviour. She is president of the Society for the Advancement of Behavioral Economics (SABE). Her academic work has appeared in outstanding journals across various disciplines, including Brain and Behavioral Science, Business Research and Economic Methodology. Furthermore, she is co-author/co-editor of the Routledge Handbook of Behavioral Economics (2017), Behavioral Finance Revolution (2018), and A Fast and Frugal Finance (2019). Currently, she is writing her book entitled Fast and Frugal Decision Making elaborating on the implications and applications of the behavioral and cognitive sciences in policy making, as well as individual and collective choice processes in business and other organizations.

Gerd Gigerenzer is Director of the Harding Center for Risk Literacy at the Max Planck Institute for Human Development in Berlin and partner of Simply Rational - The Institute for Decisions. He is former Director of the Center for Adaptive Behavior and Cognition (ABC) at the Max Planck Institute for Human Development, Professor of Psychology at the University of Chicago and John M. Olin Distinguished Visiting Professor, School of Law at the University of Virginia. Awards for his work include the AAAS Prize for the best article in the behavioral sciences, and the Association of American Publishers Prize for the best book in the social and behavioral sciences. He wrote the award-winning books Calculated Risks, Gut Feelings: The Intelligence of the Unconscious, and Bounded Rationality (with Reinhard Selten, a Nobel Laureate in economics). Furthermore, he has trained U.S. federal judges, German physicians, and top managers in decision making and understanding risks and uncertainties.

Shyam Sunder is the James L. Frank Professor of Accounting, Economics, and Finance at the Yale School of Management and Professor in the Department of Economics. He is a pioneer in the fields of experimental finance and experimental macroeconomics. Dr. Sunder has won many awards for his research that includes ten books and more than 200 articles in the leading journals of accounting, economics and finance, as well as in popular media. He is a past president of the American Accounting Association, former director of the Millstein Center for Corporate Governance and Performance at Yale, honorary research director of Great Lakes Institute of Management in Chennai, and distinguished fellow of the Center for Study of Science and Technology Policy in Bengaluru.