Heart Rules the Head When We Make Financial Decisions

Saturday, 25 August 2012 0 comments

Yes, what you have seen in the heading it is correct “heart rules head when we make financial decisions” (see how a heart rule head here). Our 'gut feelings' influence our decisions, overriding 'rational' thought, when we are faced with financial offers that we deem to be unfair, according to a new study. Even when we are set to benefit, our physical response can make us more likely to reject a financial proposition we consider to be unjust.

Conducted by a team from the University of Exeter, Medical Research Council Cognition and Brain Sciences Unit and University of Cambridge, the research is published in the journal Cognitive, Affective, & Behavioural Neuroscience.

The research adds to growing evidence that our bodies can sometimes govern how we think and feel, rather than the other way round. It also reveals that those people who are more in tune with their bodies are more likely to be led by their 'gut feelings'.

The study was based on a well-known psychological test, the Ultimatum Game. 51 participants were presented with a series of financial offers, based on different ways of dividing £10. Players frequently reject unfair offers in this game even though it leads to personal financial loss -- an 'irrational' decision from an economic perspective.

The researchers measured participants' physical responses to each offer by recording how much they sweated through the fingertips and how much their heart rate changed. How accurately participants could 'listen' to their bodies was measured on a different task by asking them to count their heartbeats and comparing their accuracy to their actual heart rate recording. Those people who showed a bigger physical response to unfair offers were more likely to reject them, but this was only the case if individuals were also able to accurately 'listen' to what their bodies were telling them.

The findings show that individuals who have a strong 'gut-reaction' and are in tune with their own physical responses are more likely to reject unfair financial offers, even if this decision results in personal losses.

Lead researcher Dr Barney Dunn of Psychology at the University of Exeter said: "This research supports the idea that what happens in our bodies can sometimes shape how we think and feel in our minds. Everyday phrases like 'following your heart' and 'trusting your gut' can often, it seems, be accurate."

"Humans are highly attuned to unfairness and we are sometimes required to weigh up the demands of maintaining justice with preserving our own economic self-interest. At a time when ideas of fairness in the financial sector -- from bankers' bonuses to changes to pension schemes -- are being widely debated, it is important to recognise why some individuals rebel against perceived unfairness, whereas other people are prepared to accept the status quo."
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