Extreme Events and Economic Preferences
with John Lynham
When are economic preferences stable and when do they change? Individual preferences tend to be consistent across time and space but extreme shocks, such as natural disasters, appear to change how people make economic decisions. We conduct an artefactual field experiment with fishers on a remote island in the Philippines and investigate the effect of Typhoon Haiyan on fairness, risk, and time preferences. Comparing individuals from communities that were directly hit by the typhoon with those that were not, we observe weak evidence that some groups affected by the typhoon have become less generous and strong evidence that those affected by the typhoon are willing to accept greater risk in order to make more money and are willing to wait longer periods of time in order to receive more money. Our results are consistent with the hypothesis that extreme negative events cause individuals to place more emphasis on financial outcomes, fundamentally changing how they make economic decisions.