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From: BusinessWeek

To Avoid Stupid Mistakes, Think in French

Bloomberg BusinessWeek:

Would you take a bet that offered you an even chance of winning $12 and losing $10? If you’re like most people, you would not. But what if someone offered you the bet in French? New research in the journal Psychological Science suggests that, assuming you understand French, you would.

What is going on here? The explanation is not—as a France-bashing wag might suggest—that it’s always good to bet against the French. The same effect appears when wagers are presented in Japanese, Spanish—even English, if it’s a person’s second language. Instead, says Boaz Keysar, a University of Chicago psychologist and the paper’s lead author, thinking in a non-native language seems to make people more rational.

Over the past decade, the growing field of behavioral economics has shown all the ways that human beings don’t act the way traditional economics says they should. We have an aversion to loss that leads us to avoid certain kinds of smart bets (like the one above) even as we take other, foolish ones, or to stick with the status quo even when we have something to gain by changing it. And we privilege the present over the future, a tendency that has real ramifications in the financial decisions of people and governments alike. A big part of the problem is that our gut instincts can be tripped up by certain sorts of questions about probability. In one example, most people would choose a medicine that they were told will save the lives of 200,000 people out of 600,000, rather than a medicine that will allow 400,000 people out of 600,000 to die, even though the number of lives saved is the same.

Read the whole story: Bloomberg BusinessWeek

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