Was Sheldon Cooper right?

By | 14.9.2016

In one episode of The Big Bang Theory, Sheldon Cooper let dice to make decisions for him. A similar experiment was conducted by Steven Levitt. However, instead of studying decisions that affected him and his life, he investigated the decision process of people in a field experiment. In particular, he collected data about more than 20 000 people who faced an important decision (quitting a job, leaving a spouse or going back to school) and let them toss a coin. As a rule, when a head appeared the subject was asked to make the change, whereas a tail stands for maintaining the status quo for at least two months. After 2 and then also 6 months the participants were given a survey asking, among others, about their happiness.

As the author claims himself, there are two main research questions: (i) do the participants obey the coin and do as it says; and (ii) is there any impact on their reported level of happiness? Assuming that only the marginal agents join this experiment and thus a half of them are expected to take an action if there were no coin toss and the coin is fair, means that if there is no real effect of the coin then actions of 50% the participant should coincide with the coin suggestions. However, in this case, as the author reports, significantly more than 50% of participants follow the coin recommendation. In particular, while in more important issues it is around 55%, the ratio is even higher for the less important issues – 67%.

When it comes to the causal effect on happiness, using slightly more advanced statistical methods to combat the endogeneity problem, Steven Levitt argues that those individuals whose coin came up heads (take a change) report being happier than those with tails (status quo). It can be because having a head motivates to take a change which he/she would rather postpone or do not take at all (status quo biased observed in normal life). Overall, even though the conclusion may be biased for several reasons, it plants a seed of doubt if we would not be better off letting (at least the less important) decision were taken randomly.




Reference: Levitt, S. D. (2016). Heads or Tails: The Impact of a Coin Toss on Major Life Decisions and Subsequent Happiness (No. w22487). National Bureau of Economic Research. Available here.

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