48 International Journal of Applied Behavioral Economics, 3(3), 48-63, July-September 2014
An Empirical Exploration
of Mental Representations
in the Individual Saving
Decision Process
Rodica Ianole, Faculty of Business and Administration, University of Bucharest, Bucharest,
Romania
ABSTRACT
The article tackles the analysis of the saving process by reviving a research methodology that explores
mental representations and their economic implications. The conceptual background is updated to the latest interdisciplinary literature in behavioral economics and social psychology, extending the applications
of construal level theory. The results are pointing out to a new way of understanding differences of opinion
between groups (economists and sociologists) about saving behavior, usually considered irrational in the
light of standard economic theory.
Keywords:
Behavioral Economics, Construal Level Theory, Mental Representations, Savings
INTRODUCTION
A great part of the recent behavioral literature on
savings is dedicated to the problem of intertemporal choice and on how our time preferences
are really discounted (Frederick et al., 2002,
Prelec, 2004). Even if these developments are
very illuminating in terms of pointing out our
inherent time inconsistencies and negative consequences for our wellbeing, they usually lack
is the step forward for their proper integration
in some more generalized recommendations or
more sound public policies.
In order to fill this gap we have taken a step
back in order to understand the entire process
and for that we have made appeal to the mental
representation of a specific category of decisions, usually prone to be time inconsistent, and
posing great social costs – saving decisions.
While nowadays it is an accepted claim that
the general understanding of economic phenomena is based on mental representations, the role
played by these representations is yet unclear
in relation with decision-making and as a consequence it is an underexplored research topic,
even in the behavioral economics literature.
DOI: 10.4018/ijabe.2014070104
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International Journal of Applied Behavioral Economics, 3(3), 48-63, July-September 2014 49
In our opinion, the most plausible explanation for this state of facts resides in the volatile
nature of these representations that makes it
hard to operationalize them in well-defined
variables. This is of course a founded take on
the matter but at the same time it underlines the
opportunities for conducting extensive analyses on this more neglected area of decisional
mechanisms, in comparison with the popular
fast and frugal heuristics.
The paper aims to analyze how these
representations interact for students of different specializations (Business Administration
and Sociology). In order to achieve this, the
proposed path consists in partially adapting
and refining a research methodology initially
used for the elicitation of mental representation
for the case of expected inflation (Svenson &
Nilsson, 1986).
The mental representations of the saving
process and saving decisions are particularly
interesting in the era of debt and overconsumption society (Leiser et al.,2008; Allen et
al.,2005;Verges,1998) and their analysis is far
from being only of a conceptual importance,
given the fact that a proper identification of
them may lead us to a better understanding of
saving decisions (determinant factors and motivations) for different groups of individuals and
of potential sources of conflict. Furthermore, it
can hopefully constitute a more solid basis for
designing effective saving plans, financial education programs and also for the use of nudges
(if we find a coherent set of mental representations the nudge will be for effective in terms of
ease of implementations and expected results).
The Literature “Representation”
On Mental Representations
Despite their appearance of a very complex
concept (a valid postulate as we will see in the
end), mental representations are usually defined
in a very simplistic manner - the way we imagine,
define, categorize, interpret, explain or express
something in words, images etc – creating a
type of perceptive dissonance around them.
However, even from this imprecise characterization, it is hard not to notice their fundamental
position of an intermediary between us and the
world and the key functionalities they have in
this sense: to describe, to predict and to explain
(Rouse and Morris, 1986). Our general opinion
on mental states and representations subscribes
to the mentalist approach of economics, arguing
that these are as real as electrons or the electromagnetic field, despite the fact they cannot be
observed in a direct manner (Dietrich and List,
2012). Furthermore, this is a point of view also
under the auspices of the theory of mind and the
understanding that others have a mind, a way of
reasoning and thinking that are different than
your own (Leslie, 1987).
Delving into more intricate definitions, a
first clarification that needs to be done is regarding the different measures used to capture
„the mental”: models, construals and representations. The conceptual borderline is far from
being very well established and usually it may
vary depending on the issuing discipline and its
authority in the field of research: psychology,
cognitive sciences, philosophy or artificial intelligence. This is an aspect that would be ignored
without any doubt by the standard economics
logic, still mainly dominated by behaviorism,
but they usually do not reach this step because
such research topics are out of the question
from the start.
However, without entering in a complicated
labyrinth of meanings, we need to identify
some degree of comparison between them. For
instance, the semantic relationship between a
model and representation is one of equivalence
in colloquial terms but the association with the
mental rings quite different for the two notions.
The syntagm of mental models was coined
per se by Phillip Johnson-Laird in 1983, with
the publication of Mental Models: Towards
a Cognitive Science of Language, Inference
and Consciousness. The large family of usages encountered for the term from that point
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