This year’s Nobel Prize laureate in Economics is Richard Thaler. Like the majority of former recipients of this award, he is American – and man. He receives the award for ”incorporating psychologically realistic assumptions into economic decision making and exploring the consequences of limited rationality, social preferences and lack of self-control”. He is thus representative of the relatively new area of behavioral economics, emphasizing that the classical economic theory, which relies on the premise that economic decisions are made by completely rational persons with complete information, does not hold. Thaler receives the award because he has shown that the individuals (or company’s) actual decisions are influenced by a number of psychological factors that are not taken into account in classical economic theory.
A predecessor in behavioral economic research is another Nobel laureate in economics, namely Daniel Kahneman, who is primarily a psychologist. He received the 2002 prize for ”having integrated economic analysis with fundamental insights from cognitive psychology and thus laying the foundations for a new field of research [behavioral economics.]” ‘
Looking at behavioral economic research all together, the common idea is that people’s (business) actual economic decisions do not follow what is rational from a strict economic perspective. Thaler’s contribution includes:
- There is an ownership effect – what you already own is perceived to be more valuable than something of the same kind you can get instead and having the same economic value.
- In economic decision-making, one can distinguish actors (”doers”), who aim for short-term rewards, and planners, who are for long-term planning. This is similar to a part of Kahneman’s distinction between thinking fast or slow, as illustrated in his best-selling book from 2011, ”Thinking, Fast and Slow.”
- One can ”nudge” people to a good decision for the individual himself or for the society. One best seller of Thaler and Sunstein 2009 is entitled ”Nudge” and there they develop this strategy more closely.
What implications do this have for psychological tests? First, one can add that a lot of psychological factors are not addressed in the above work. Not least what physical attractiveness means for human judgment and decision making in recruitment and selection. In a serious employment process, one should minimize this type of factors by using objective psychological tests. Objective in this context means removing irrelevant factors. All persons are faced with the same questions and the test results are evaluated on the basis of the same algorithms applied to all applicants. The test battery Psykometrika meets these requirements for an objective test instrument.
What Psykometrika also makes possible (by what we call mapping) is that in addition to test data, we also collect data from the company, for example assessments of the applicant’s work performance. These may be more subjective in terms of managerial assessments or more objective in terms of sickness absence, sales volume, etc. By making human resource calculations on these more objective criteria and estimate, for example, the cost of a sick day for the company, we have found some significant differences between those assessed by the Psykometrika test battery and those assessed in other ways.