Handbook of Contemporary Behavioral Economics

Foundations and Developments

Morris Altman

• Publisher: Taylor & Francis
• Year: 2015
• eBook ISBN: 9781317469155
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

At a time when both scholars and the public demand explanations and answers to key economic problems that conventional approaches have failed to resolve, this groundbreaking handbook of original works by leading behavioral economists offers the first comprehensive articulation of behavioral economics theory. Borrowing from the findings of psychologists, sociologists, political scientists, legal scholars, and biologists, among others, behavioral economists find that intelligent individuals often tend not to behave as effectively or efficiently in their economic decisions as long held by conventional wisdom. The manner in which individuals actually do behave critically depends on psychological, institutional, cultural, and even biological considerations. "Handbook of Contemporary Behavioral Economics" includes coverage of such critical areas as the Economic Agent, Context and Modeling, Decision Making, Experiments and Implications, Labor Issues, Household and Family Issues, Life and Death, Taxation, Ethical Investment and Tipping, and Behavioral Law and Macroeconomics. Each contribution includes an extensive bibliography.

PART 1
Inside the Economic Agent

CHAPTER 1
Inside Economic Man

Behavioral Economics and Consumer Behavior

PAUL ALBANESE

The enigmatic title of this essay stems from the psychoanalytic approach to personality and consumer behavior—psychoanalytic object relations theory of the personality, to be precise. Object relations theory is what psychoanalytic theory became after more than a century of refinement of Freud’s most fundamental insights. Object relations theory is an interpersonal theory of personality development that concentrates on the internalization of interpersonal relationships and the formation of the intrapsychic structure of the personality organization. The "inside" of the title refers to the intrapsychic structure of the personality organization. All that is left inside Economic Man of neoclassical ordinal utility theory is the scale of preferences of the individual consumer. The theoretical linkage between psychoanalytic object relations theory of the personality and neoclassical ordinal utility theory of the consumer is that the intrapsychic structure of the personality organization is reflected in the structure of the consumer’s preferences.

While the scale of preferences is the last vestige of the consumer left in ordinal utility theory, the conception of rational Economic Man is the sine qua non for research on consumer behavior because it is the only theoretical conception of the individual consumer. To be rational, a consumer must have a transitive preference ordering. The mathematical property of transitivity can be translated in this context into a consumer who makes consistent choices. A consistent pattern of observable behavior is a surprisingly powerful postulate upon which to base a theory of consumer behavior. Thus the place to begin is the behavior of the individual consumer, whether we observe that behavior ourselves or draw upon the observations of others.

In this essay I intend to synthesize the essence of The Personality Continuum and Consumer Behavior (2002) for broadening the behavioral foundations of economic analysis and expanding the limits of applicability of economic theory. Broadening the behavioral foundations of economic analysis means including observable patterns of consumer behavior that do not fit into the neoclassical conception of the rational consumer. Expanding the limits of applicability of economic theory means that neoclassical ordinal utility theory can be modified to apply to these qualitatively different patterns of consumer behavior. In a positive way, the realistic limits of applicability of ordinal utility theory are being circumscribed and those limits are being expanded to include other qualitatively different patterns of observable consumer behavior.

The Personality Continuum is an integrative framework for the interdisciplinary study of consumer behavior. The Personality Continuum is divided into four discrete ranges representing qualitatively different levels of personality development that are hierarchically arranged in descending order from highest to lowest level: normal, neurotic, primitive, and psychotic. In object relations theory, personality development is a series of interpersonal achievements, and the level of personality development is defined by the level of intrapsychic structural formation achieved in the personality organization and the predominant defense used by the person against severe anxiety in interpersonal relationships. The importance of the Personality Continuum for the study of consumer behavior is that each level of personality development is reflected in a qualitatively different pattern of consumer behavior, and the Personality Continuum facilitates the comparison of these variations. Everything varies qualitatively with the level of personality development along the Personality Continuum.

The Personality Continuum was conceived as a one-page document befitting an integrative framework; because of page-size limitations, here it is reproduced as a table spread over four pages (Table 1.1), just as it was presented in The Personality Continuum and Consumer Behavior (though I have made some refinements since the 2002 publication of that book).¹

I relate consumer behavior to personality because the personality provides a larger organizational framework that includes a person’s pattern of behavior as a consumer and relates it to his or her pattern of behavior as a human being. The goal is a human understanding of consumer behavior. The focus here will be on consumer behavior; although I do intend to go into the substance of object relations theory on the internalization of interpersonal relationships and the formation of the intrapsychic structure of the personality organization, I cannot plumb the true depth in this essay and will leave it to the interested reader to see Albanese 2002. I will proceed by elaborating on the pattern of consumer behavior for each of the four qualitatively different levels of personality development, beginning with the normal range of the Personality Continuum and then descending downward to the neurotic, primitive, and psychotic ranges.

The Normal Range of the Personality Continuum and Consumer Behavior

The crowning achievement of psychoanalytic object relations theory of the personality is the clear conception it provides of what it means to be a normal person—not as a rigid ideal of perfection, but as a realistic person who would simply be described as a mature human being (Albanese 2002). Psychoanalytic object relations theory of the personality grew out of the intense observation of the individual’s behavior in the clinical situation by a trained psychoanalyst, and out of this situation has grown an interpersonal theory of personality development based upon the quality of interpersonal relationships (Fairbairn 1952, 34, 40). The portrait of the normal personality organization will be presented as a set of human capacities, from the basic to the highest, and patterns of behavior, from the general pattern of human behavior to an overall pattern of consumer behavior and then to a more specific pattern of consumption behavior.

A person with a personality organization at the normal level of personality development would have the capacity for concern for another person and oneself, the capacity to experience guilt for violating an internalized moral system, the capacity to fall and remain in love and to form intimate interpersonal relationships, the capacity for foresight and to plan realistically for the future, the capacity for genuine insight and the urge to change in meaningful ways, and a range of mature defenses against severe anxiety in interpersonal relationships (humor, sublimation, altruism, anticipation, and suppression) (Albanese 2002).

A person with a personality organization at the normal level of personality development would have a stable and consistent general pattern of human behavior. Consistency applies to a person’s pattern of behavior at one point in time and stability refers to a consistent pattern of behavior over time. In object relations theory, the determinant of a consistent pattern of behavior is the interpersonal achievement of accepting both oneself and another person as both good and bad, and therefore as a whole and more realistic person (Kernberg 1984). This interpersonal achievement in personality development results in the integration of whole object relations, the most momentous development in the formation of the intrapsychic structure of the personality organization. In the course of personality development, interpersonal relationships are internalized continuously and the formation of the intrapsychic structure of the personality organization develops in levels that are hierarchically organized. The intrapsychic structure is the enduring part of the personality organization. In the beginning of personality development, good and bad interpersonal relations are internalized completely separately—in early infancy through introjection and in late infancy through identification—reflecting the inborn physiological capacity for positive and negative affective experience. In childhood, the good and bad introjections and identifications must be integrated to form whole object relations.

The integration of whole object relations signals the coming into existence of the ego. The outcome of the synthetic function of the ego is the formation of an ego identity as an integrated intrapsychic structure (Albanese 2002, 101–2, 104–5; Kernberg 1984, 31). The integration of whole object relations is the foundation for the human capacity for concern for another person and oneself, an ego capacity, and the human capacity for guilt, a superego capacity. The prohibitive superego is the intrapsychic structure that gives a person the human capacity for guilt. The contents of the prohibitive superego represent an internalized moral system that begins with the internalization of the more realistic parental prohibitions and demands. The formation of the prohibitive superego begins with the integration of whole object relations because good and bad must be juxtaposed for the person to be able to tell right from wrong. The integration of whole object relations is the foundation for a sense of continuity of the self, and it is the first precondition for an intimate interpersonal relationship: it gives the person the human capacity to fall in love.

In object relations theory, the determinant of a stable pattern of behavior is the interpersonal achievement of fully integrating satisfying genital sexual activity into an interpersonal relationship by successfully resolving the oedipal situation. In simpler terms, a person discovers the preferred pattern of genital sexual activity in a relationship with another person (Sullivan 1953, 297). This interpersonal achievement in personality development represents the second precondition for the human capacity for intimacy in an interpersonal relationship: it gives the person the capacity to remain in love. It is built upon the foundation of the integration of whole object relations (the first precondition for intimacy) and represents a higher interpersonal achievement in personality development. A person at the normal level of personality development would form stable and deep interpersonal relationships.

At the highest reaches of the normal level of personality development, a person would have a protective superego, an intrapsychic structure built upon the foundation of the prohibitive superego and the human capacity for guilt (Kernberg 1977). The formation of the protective superego at the normal level of personality development is the outcome of the interpersonal achievement in personality development: Sexual intercourse culminating in orgasm and the subjective experience of transcendence in an intimate interpersonal relationship form a new common social boundary around the couple, connecting the past, present, and future (Kernberg 1977). The subjective experience of transcendence involves crossing the boundaries of the self and momentarily becoming one with another person. The new common social boundary that forms around the couple is the protective superego, an intrapsychic structure that protects the couple from guilt for violating the more realistic parental prohibitions and demands internalized in the prohibitive superego—many directed explicitly toward sexual behavior—and from the parents as well, who may still be around, making them feel guilty (Albanese 2002, 127; Kernberg 1977, 102–4).

The protective superego is the foundation for the human capacity for commitment and for a future orientation. A commitment by definition is made for the future. The contents of the protective superego represent an internalized value system shared with another person. Freud clearly recognized the lofty position of the protective superego and equated the value system with the culture: “Thus a child’s super-ego is in fact constructed on the model not of its parents but its parents’ super-ego; the contents which fill it are the same and it becomes the vehicle of tradition and of all time-resisting judgments of value which have propagated themselves in this manner from generation to generation” (Freud 1933, 67).

This is how the past, present, and future become connected. A value system is built on the foundation of a moral system, the contents of the prohibitive superego. A value system reflects the culture and represents a higher level of superego functioning involving more abstract concepts that inform the person’s life and provide guidance for the future but remain realistic, flexible, and widely shared by other members of society (Albanese 2002, 134). The dominant value system of American culture would include the core values of individualism, freedom, democracy, capitalis...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• List of Tables and Figures
• Introduction
• Part 1: Inside the Economic Agent
• Part 2: Context and Modeling
• Part 3: Decision Making
• Part 4: Experiments and Implications
• Part 5: Labor-Related Issues
• Part 6: Gender and Decision Making
• Part 7: Life and Death
• Part 8: Taxation, Ethical Investment, and Tipping
• Part 9: Development, Behavioral Law, and Money
• About the Editor and Contributors
• Index