Sunday, April 27, 2008

How much do we know about regret?

Like most other people, I usually think of regret as arising from short-sighted behaviour or lack of sufficient resolve to resist temptations that I had decided to resist. However, some recent psychological research on self-control regrets, by Ran Kivetz and Anat Keinan, reminds me that people can also experience regrets about missing out on the pleasures of life (see here). The research actually suggests that while the passage of time attenuates feelings of regret and guilt about indulgences, it accentuates feelings about missing out on pleasures.

What should we make of these results? Before rushing to the shops to give your credit card a workout it is probably worth considering research results about the effects of excessive debt on personal well-being. This research shows, not surprisingly, that people who have difficulty in repaying debt tend to have lower subjective well-being than those who do not have such problems. (See, for example, Australian Centre on Quality of Life, Survey 11, Report 11, August 2004). I am not aware of surveys that have asked people who have difficulty in repaying debt whether they regret the purchases that led to this problem, but it seems to me to be likely that they would feel ongoing regret.

Gregory Burns suggests that people want more money because of “the accrual of possibilities” that money provides ("Satisfaction", 2005, p 39). The act of buying something closes off any number of other possibilities. This makes a lot of sense to me.

However, Burns asserts that the idea that people value having options is contrary to what most economists think. I disagree with him about that. His comments bring to mind the options approach to capital investment developed by Avidash Dixit and Robert Pindyck in the early 1990’s as an alternative to exclusive reliance on estimating the present net value of an investment. (I would be surprised if this approach is not now widely accepted as applicable to the theory of consumer behaviour as well). There are two underlying ideas. First investments are often irreversible – once the investment has been made funds cannot be recovered if market conditions turn out to be worse than anticipated. Second, investments can often be delayed - they are rarely now-or-never propositions. As a result, it often pays for investors to delay investment even when estimated net present values are positive. There are often benefits in keeping options open and making decisions that increase flexibility (e.g. through more R&D spending) rather than committing resources to irreversible uses. (For a non-technical discussion of the theory, see the Harvard Business Review article, here.)

The idea that buying things closes off opportunities helps to explain why some of us sometimes find moths in our wallets. The idea of investing in R&D (or was that R&R) is also relevant to personal decision-making. Greg Burns’ research suggests that dopamine is released into the striatum whenever a stimulus in the environment – good or bad – causes an animal to change what it is doing (p 43). The theme of Burns’ book is the human desire for novelty. He suggests that to get a satisfying feeling you need to get some cortisol into the striatum (as well as dopamine) and in order to get this you need a little discomfort. In other words, you need a challenge (p 147).

Now, I am about to speculate far beyond my expertise in order to relate this idea about the benefits of challenge back to the point at which I began – the research finding about the accentuation over time of the regrets we have about pleasures of life that we have foregone. My suggestion is that the foregone pleasures we regret most are those that we might have felt if we had not decided to avoid some of the more challenging experiences that were available to us .

Postscript: Since writing this in September 2007 I have learned that research findings suggest that my speculations may not be far off the mark. In his book, “Stumbling on Happiness”, Dan Gilbert sums up relevant research findings as follows: “Indeed, the long run, people of every age and in every walk of life seem to regret not having done things much more that they regret things they did, which is why the most popular regrets include not going to college, not grasping profitable business opportunities, and not spending enough time with family and friends” (p 197). Spending more time with family and friends may not be challenging but the other examples mentioned certainly would involve challenges.

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