The Financial Cost of Being Sad

Helen Holmes December 06, 2012

Tweet

Making decisions when you are sad can lead to huge financial losses, a study suggests.

Myopic misery theory states that sadness arises from a sense of loss. As a consequence, the person creates an unconscious need to replace what has been lost, which leads to decisions or choices that are based on urgency and impatience.

Jennifer Lerner of Harvard, and Ye Li and Elke Weber of Columbia University, performed an experiment to know whether or not myopic misery exists.

The Cost of Sadness

In their study, the researchers investigated the effects of sadness when people make financial decisions. Participants were divided into three and were asked to watch videos of varying themes. The first group watched an emotionally distressing video about the death of a young boy’s mentor to arouse the feeling of sadness. The second group watched a video about an unsanitary toilet to create a feeling of disgust, while the third group, which served as the control, watched an unemotional video. The researchers included the feelings of disgust in their study to rule out the possibility that all negative feelings lead to poor judgements.

After watching the videos, all the participants performed an activity in which they will decide whether to take a smaller amount of money immediately or to wait for several months in exchange of huge cash.

Sad volunteers chose to take $37 at the very moment instead of waiting three months to receive $85. Out of their decision, they lost 43% discount, which is relatively big. On the other hand, the group that watched the disgusting video as well as the control group required $56 for the same deal.

Their findings, which were published in the journal Psychological Science, clearly shows that unhappy people don’t drive a hard bargain despite the opportunity of a bigger gain. The myopic misery theory therefore holds true.

Sadness triggers irrational choices

In a follow-up study, Lerner, Li and Weber did the same experiment, this time involving diverse people ages 10 to 69 nationwide. Everyone was offered $50 immediately or $105 in three months. But for this experiment, the volunteers were asked what was going on in their minds as they made their decisions, including the reasons of why they chose to take the cash immediately or wait for three months.

Researchers found that sad participants listed more impatient thoughts than the rest, and they also listed impatient thoughts much earlier.

Their study was the first to show how sadness can trigger the mind to reap the rewards the soonest, particularly when it comes to finances. This may lead to excessive credit card spending and overeating, researchers note.

Aside from money matters, irrational impatience also brings potential harm to other areas of life which can make sad people even sadder.

 

Source for this article