Physical Wellness

Think in a Foreign Language to Make More Rational Economic Decisions

By Jennifer Lee | Update Date: Apr 27, 2012 12:32 AM EDT

People make more rational economic decisions when they think through a problem in a foreign language, according to a new study.

Prior research tells that because people tend to be loss-averse, they often forgo attractive opportunities. But a University of Chicago study shows that such aversion to losses is greatly reduced when people make decisions in a non-native tongue.

"A foreign language provides a distancing mechanism that moves people from the immediate intuitive system to a more deliberate mode of thinking," said Dr. Boaz Keysar, a professor of psychology at the University of Chicago.

 The team led by Keysar conducted six experiments that spanned three continents and involved over 600 participants who spoke either English, Korean, French, Spanish and Japanese. Those participants had proficiency in a second language.

In one of the experiments, the researchers tested native English speakers at the University of Chicago with Spanish proficiency, in order to see how loss aversion affected their decision-making. The experiment examined how likely the students were to take attractive bets depending on the language in which they considered their options.

Each student received $15 in dollar bills, and could bet $1 at a time on either heads or tails. They could either keep the dollar or risk it for the possibility of getting an extra $1.50 if they won a coin toss. So in each round, they could net $2.50 if they won the toss, or get nothing if they lost. The bets were attractive because statistically, the students stood to come out ahead if they took all 15 bets.

When making the decision in English, the authors found the participants to think myopically in their decisions because they were focused on fear of losing; this group only bet 54 percent of the time. On the contrary, those making the decision in Spanish, bet 71 percent of the time.

"Perhaps the most important mechanism for the effect is that a foreign language has less emotional resonance than a native tongue," co-author UChicago graduate student Sayuri Hayakawa said. "An emotional reaction could lead to decisions that are motivated more by fear than by hope, even when the odds are highly favorable."

The new findings are relevant to how people in a global society make decisions as more individuals use a foreign language on a daily basis, the researchers said. The results show that thinking in a foreign language could be greatly helpful in making economic decisions.

"People who routinely make decisions in a foreign language might be less biased in their savings, investment and retirement decisions, as they show less myopic loss aversion. Over a long time horizon, this might very well be beneficial," the authors wrote.

The study, titled "The Foreign Language Effect: Thinking in a Foreign Tongue Reduces Decision Biases," is published in the current issue of Psychological Science.  

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