"Long before it's in the papers"
January 27, 2015


Sadness can hit your pocketbook, study finds

Nov. 15, 2012
Courtesy of The Association for Psychological Science
and World Science staff

Your emo­tions can cer­tainly in­flu­ence your de­ci­sions, but you might be sur­prised by how much they af­fect your pock­et­book, scient­ists say.

Sad­ness leads to an im­pa­tient sort of out­look that pro­duces sub­stan­tial fi­nan­cial loss, ac­cord­ing to new re­search by psy­cho­log­i­cal sci­ent­ist Jen­ni­fer Ler­ner of Har­vard Uni­vers­ity and col­leagues.

They found that study par­ti­ci­pants ran­domly as­signed to view a sad­ness-inducing vi­deo ex­hib­ited im­pa­tience and “my­opia,” man­i­fested in fi­nan­cial de­ci­sions that elicited high­er gains in the short term, but less­er gains over the long­er term. 

Thus, the sci­ent­ists found, these sub­jects earned sig­nif­i­cantly less mon­ey than sub­jects in a neu­tral con­di­tion. The sad group showed what’s known as “p­re­sent bi­as,” in which de­ci­sion mak­ers want im­me­di­ate gratifica­t­ion and so they ig­nore great­er gains as­so­ci­at­ed with wait­ing.

“Across three ex­pe­ri­ments, the me­di­an sad par­ti­ci­pant val­ued fu­ture re­wards (i.e., those de­layed by 3 months) 13 per­cent to 34 per­cent less than did the me­di­an neu­tral-state par­ti­ci­pan­t,” the re­search­ers wrote, re­port­ing their find­ings in the jour­nal Psy­cho­log­i­cal Sci­ence. “These dif­fer­ences emerged even though real mon­ey was at stake and even though dis­count rates in the neu­tral con­di­tion were al­ready high.”

“The sad­der per­son is not nec­es­sarily the wis­er per­son when it comes to fi­nan­cial choic­es,” they con­clud­ed. “In­stead, com­pared with neu­tral emo­tion, sad­ness — and not just any neg­a­tive emo­tion — made peo­ple more my­op­ic, and there­fore will­ing to for­go great­er fu­ture gains in re­turn for in­stant gratifica­t­ion.”

Ler­ner and her co-authors say the find­ings have im­por­tant im­plica­t­ions for the de­sign of pub­lic pol­i­cy — in ar­eas such as es­tate plan­ning and cred­it card regula­t­ions. “Public-pol­i­cy de­sign and im­ple­menta­t­ion need to be based on con­sid­era­t­ion of the full range of psy­cho­log­i­cal pro­cesses through which de­ci­sions are made,” they wrote. “Fully un­der­stand­ing these pro­cesses may al­so help ad­dress the eco­nom­ic prob­lems as­so­ci­at­ed with Amer­i­cans’ in­creas­ing re­li­ance on cred­it cards.”

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Your emotions can certainly influence your decisions, but you might be surprised by how much they affect your pocketbook. Sadness leads to an impatient sort of outlook that produces substantial financial loss, according to new research by psychological scientist Jennifer Lerner of Harvard University and colleagues. Using data collected at the Harvard Decision Science Laboratory and the Center for Decision Sciences at Columbia University, they found that study participants randomly assigned to view a sadness-inducing video exhibited impatience and “myopia,” manifested in financial decisions that elicited higher gains in the short term, but lesser gains over the longer term. Thus, the scientists found, these subjects earned significantly less money than subjects in a neutral condition. They showed what is known as “present bias,” in which decision makers want immediate gratification and so they ignore greater gains associated with waiting. “Across three experiments, the median sad participant valued future rewards (i.e., those delayed by 3 months) 13% to 34% less than did the median neutral-state participant,” the researchers wrote, reporting their findings in the journal Psychological Science. “These differences emerged even though real money was at stake and even though discount rates in the neutral condition were already high.” “The sadder person is not necessarily the wiser person when it comes to financial choices,” they concluded. “Instead, compared with neutral emotion, sadness — and not just any negative emotion — made people more myopic, and therefore willing to forgo greater future gains in return for instant gratification.” Lerner and her co-authors say the findings have important implications for the design of public policy — in areas such as estate planning and credit card regulations. “Public-policy design and implementation need to be based on consideration of the full range of psychological processes through which decisions are made,” they wrote. “Fully understanding these processes may also help address the economic problems associated with Americans’ increasing reliance on credit cards.”