Aging and Competence in Decision Making

Around the world, average life expectancy is increasing. Adults of all ages face important decisions that affect their life outcomes and overall well-being. This paper reviews recent developments in research on age differences in decision-making competence. The measurement of age differences in decision-making competence is grounded in normative theories of decision making, which posit how people should be making decisions, as well as descriptive research, which aims to examine how people actually make decisions. Studies on age differences in decision making have shown mixed patterns of results, perhaps because of having included a wide range of decision-making competence tasks. Each decision task may rely on a different combination of skills, with some showing age-related declines and others showing no change or improvements with age. Here, I discuss the potential skills that may contribute to making good decisions, including cognitive deliberation, experience, emotions, and motivation. Although fluid cognitive abilities that underlie cognitive deliberation are known to decline with age, the others show different developments with age. I also discuss potential interventions that aim to target cognitive deliberation, experience, emotions, and motivation, so as to promote better decisions and associated life outcomes across the life span

What comes to mind when considering looking into and/or adjusting one’s pension?:An empirical study among UK and US residents

Planning for retirement requires people to regularly examine their pension savings to see whether their plans are feasible (or still so) and whether adjustments need to be made. Little is known about how people perceive these decisions. We present the findings of a sample of US and UK participants, whom we probed for their underlying associations or motivations regarding these decisions. The findings reveal a wide range of associations that confirmed previous insights (e.g., concern for one’s future, anxiety) but also identified variables that are rarely considered in pension planning research (e.g., positive emotions and feelings). A ranking in terms of prominence indicated that the relevance of associations was very similar for both types of decisions (inspecting current pension savings and adjusting the pension plan). An exploratory regression analysis suggests, however, that the actual decisions of looking into one’s pension and adjusting it are differentially related to the underlying categories. The decision to look into one’s pension was most strongly, and positively, related to evaluation of one’s current situation. The decision to adjust one’s pension was negatively related to the category of ensuring safety and security. The main results are discussed, as well as the potential implications for pension researchers and practitioners

Measuring consumer uncertainty about future inflation

Survey measures of consumer inflation expectations have an important shortcoming in that, while providing useful summary measures of the distribution of point forecasts across individuals, they contain no direct information about an individual's uncertainty about future inflation. The latter is important not only for forecasting inflation and other macroeconomic outcomes, but also for assessing a central bank's credibility and effectiveness of communication. This paper explores the feasibility of eliciting individual consumers' subjective probability distributions of future inflation outcomes. In November 2007, we began administering web-based surveys to participants in RAND's American Life Panel. In addition to their point predictions, respondents were asked for their subjective assessments of the percentage chance that inflation will fall in each of several predetermined intervals. We find that our measures of individual forecast densities and uncertainty are internally consistent and reliable. Those who are more uncertain about year-ahead price inflation are also generally more uncertain about longer term price inflation and future wage changes. We find also that participants expressing higher uncertainty in their density forecasts make larger revisions to their point forecasts over time. Measures of central tendency derived from individual density forecasts are highly correlated with point forecasts, but they usually differ, often substantially, at the individual level. Finally, we relate our direct measure of aggregate consumer uncertainty to a more conventional approach that uses disagreement among individual forecasters, as seen in the dispersion of their point forecasts, as a proxy for forecast uncertainty. Although the two measures are positively correlated, our results suggest that disagreement and uncertainty are distinct concepts, both relevant to the analysis of inflation expectations

Improved Learning in U.S. History and Decision Competence with Decision-Focused Curriculum

Decision making is rarely taught in high school, even though improved decision skills could benefit young people facing life-shaping decisions. While decision competence has been shown to correlate with better life outcomes, few interventions designed to improve decision skills have been evaluated with rigorous quantitative measures. A randomized study showed that integrating decision making into U.S. history instruction improved students' history knowledge and decision-making competence, compared to traditional history instruction. Thus, integrating decision training enhanced academic performance and improved an important, general life skill associated with improved life outcomes. © 2012 Jacobson et al

Low Numeracy is Associated with Poor Financial Well-being Around the World

15 pagesNumeracy refers to the ability to use numbers, including converting percentages (e.g., 10%) into absolute frequencies (e.g., 1 in 10). Studies have suggested that numeracy is correlated to financial outcomes, suggesting its relevance to financial decisions. However, almost all research on numeracy has been conducted in high-income countries in Europe and North America. Our analyses suggest that low numeracy is much more common in low-income countries, thus potentially threatening the financial well-being of the world’s poorest. We analyzed data from the Lloyd’s Register Foundation World Risk Poll, which assessed basic numeracy in 141 countries, including 21 low-income, 34 lower middle income, 43 upper middle income, and 43 high-income countries. Numeracy was associated with being among the poorest 20% of one’s country, and with difficulty living on one’s income, even after accounting for income, education, and demographics. These findings underscore the importance of worldwide numeracy education.WBB gratefully acknowledges funding from the LLoyd’s Register Foundation (WRP \100003). The funder had no role in the presented research questions, secondary data analysis, preparation of the manuscript, or decision to publish. The funder did inform the original data collection, and was asked to comment on the paper (which involved minor edits.

People who are bad with numbers often find it harder to make ends meet – even if they are not poor

1 pagePeople who are bad with numbers are more likely to experience financial difficulties than people who are good with numbers. That’s according to our analyses of the Lloyd’s Register Foundation World Risk Poll. In this World Risk Poll, people from 141 countries were asked if 10% was bigger than, smaller than or the same as 1 out of 10. Participants were said to be bad with numbers if they did not provide the correct answer – which is that 10% is the same as 1 out of 10. Our analyses found that people who answered incorrectly are often among the poorest in their country. Prior studies in the United States, United Kingdom, the Netherlands and Peru had also found that people who are bad with numbers are financially worse off. But our analyses of the World Risk Poll further showed that people who are bad with numbers find it harder to make ends meet, even if they are not poor.Wändi Bruine de Bruin receives funding from the Lloyd's Register Foundation and support from USC Dornsife's Public Exchange for a research project entitled "Understanding and informing public perceptions of risk around the world: A behavioral science approach"