The Conflict Between Economic and Social Preferences: Social Investing, Social Enterprise, Mind-Sets and Nudges

50 Pages Posted: 6 Mar 2018

See all articles by Neal Hinvest

Neal Hinvest

University of Bath - Department of Psychology

Richard J. Fairchild

University of Bath - School of Management

Habiba Elkholy

University of Bath - Department of Psychology

Date Written: February 28, 2018

Abstract

Investing into the financial markets has become increasingly complex in recent years, with a multitude of investment products and motives. With the rapid growth in social investing and social entrepreneurship, scholars recognise that investors and entrepreneurs often consider a wide range of social factors, in addition to financial return, when making their financial decisions.

Behavioural economists argue that it is important to understand the complex economic and behavioural/psychological factors affecting social investors’ decision-making. In this paper, we draw upon lessons from behavioural economics (and in particular, social preference theory) in order to develop neuro-economic tests of investors’ social and financial mind-sets. We focus on two main research questions: a) How heterogeneous are (social-) investors, in terms of the unconscious weightings that they place upon financial and social returns? Can investors’ mind-sets be placed upon a continuum from focussing on social returns, through mixed motivations/weightings, through to focussing on financial returns? b). Can investors be nudged along this continuum?

We address these two research questions by means of two neuro-experiments. We employ eye-tracking techniques to examine investors’ attention to, and fixation on, social and financial aspects of financial market investment. In addition, we employ nudges in the form of images relating to positive and negative social behaviour. Our experiments demonstrate that a) investors can indeed be placed on the financial-social motivation continuum (and that there is heterogeneity in social-investors’ motives along this scale), and b) investors can be nudged along the scale. Our experiments thus provide policy implications regarding nudges towards social investment. Practically, we suggest the development of a phone application that integrates real-time stock-tracking with nudges in order to inspire socially responsible investing; banks would play a key role in encouraging its download. Nudges can help to overcome the conflict between social and financial returns.

Keywords: Social Investing; Neuro-Economics; Behavioural Economics; Social Preferences; Nudges

JEL Classification: G02; G11

Suggested Citation

Hinvest, Neal and Fairchild, Richard J. and Elkholy, Habiba, The Conflict Between Economic and Social Preferences: Social Investing, Social Enterprise, Mind-Sets and Nudges (February 28, 2018). Available at SSRN: https://ssrn.com/abstract=3135226 or http://dx.doi.org/10.2139/ssrn.3135226

Neal Hinvest

University of Bath - Department of Psychology ( email )

United Kingdom

Richard J. Fairchild (Contact Author)

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
01225 323456 (Phone)
01225 323902 (Fax)

Habiba Elkholy

University of Bath - Department of Psychology

United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
328
Abstract Views
1,333
rank
135,499
PlumX Metrics