Learning to take risks : three essays on the relationship between early life resource availability and adults’ risk preferences

Abstract

Why are some people systematically more willing to take risks than others? Risk preferences affect multiple aspects of life, from personal finances to health-related behavior. In crisis like the recent COVID-19 pandemic, the implications of risk-taking tendencies can be magnified—they can affect, for example, the extent to which people expose themselves and others to pandemic-related risks. Yet, individual differences in risk preferences remain poorly understood. The essays in this dissertation contribute to the understanding of how people develop long-lasting risk preferences by building upon and advancing a fast-growing literature focused on the role of socioeconomic factors in people’s early, formative years of life. Essay 1 reconciles diverging perspectives identified in this literature and generates concrete predictions centered on the idea that early life socioeconomic conditions imprint two factors in lifelong risk preferences: baseline preferences, which manifest in most contexts, and threat responses, which are induced by widespread threats like economic recessions and global pandemics. At baseline, wealthier upbringings predict greater willingness to take risks. Threat responses, however, lead adults with wealthier upbringings to reduce risk-taking and adults with less privileged upbringings to increase it. Essay 2 tests these two factors across five experiments conducted during COVID-19. Pandemic-based threat primes were employed to elicit baseline versus threat response risk-taking patterns and risk preferences were assessed based on participants’ susceptibility to COVID-19 scams—i.e., their willingness to take their chances with attractive yet potentially fraudulent offers, like early access to a vaccine that, at the time, was not available. Essay 3 clarifies how baseline risk preferences and threat responses play out during prolonged periods of crisis. Six studies suggest that threat responses exist, but are ephemeral; they arise when crises feel novel or suddenly worsen, but risk preferences return to baseline even while reality remains threatening. Thus, even in circumstances that, like the pandemic, warrant caution from everyone, adults brought up in more privileged socioeconomic conditions are more prone to engage in risky behaviors than their less privileged counterparts.