Psychology have developed a plenty of “psychological scales” that captures people’s inclinations
When meeting someone for the first time, many people probably tend to judge based on the person’s social categories. For instance, gender, age, educational background, and occupation. Certainly, we can see the characteristics of a person within these categories.
However, when we actually get to know a person, often discover aspects of them that don’t conform to these categories, revealing their individuality and behavioral patterns.
This can have implications for policy development because societal dynamics are reflected through various actions of individuals. Therefore, predicting people’s behavior based solely on social categories and formulating theoretical and rational policies often falls short.
In other words, making general judgments about people based solely on social categories is very imprecise approach. Furthermore, these categories often lead to stereotypical judgments that lead to prejudice.
Falling into biases from social categories such as gender, elderly, youth can lead to a disregard for diversity and human rights.
However, it is also impossible to have a long-term relationship with all the people and capture their individuality. That is where psychology comes in.
When people think of psychology, they may imagine conducting some psychological tests to categorize individuals into one of several types and capturing their behavioral patterns along those lines.
At first glance, it may seem that way, but the most important aspect is not to classify people into types, but to create a scale to measure the characteristics of those types.
At first glance, it may appear this way, but the most crucial aspect is not categorizing people into types but creating a “scale” to measure the characteristics of those types. In fact, both the characteristics describing people and the scales for measuring them don’t already exist. They are developed by psychologists based on the objectives of their investigations and research at the time.
For example, I’m researching Japanese financial behavior patterns. People have different financial inclinations, some preferring savings while others prefer investments., and I aim to elucidate the psychological factors and mechanisms that motivate these different preferences.
To do this, we start by seeking scales that are useful for visualizing people’s characteristics. For instance, gender or age may be part of a comparative framework, but they are merely organizational tools for the content we want to investigate. Therefore, improving the accuracy of scales is important in psychology. It’s a field that has developed highly reproducible and scientifically rigorous research methods.
Financial psychology scales developed over several years
To be more specific about how we develop the scale, we begin by conducting interviews using questions based on theories of financial risk, targeting the general working population. We then analyze the collected data.
Over several years, we conducted a web survey of several thousand people and developed a financial psychological scale that has validity with financial behavior. The scale consists of three subscales.”
Using these scales, we measure individuals’ financial behavior.
As a result, we found that individuals with a strong inclination for high-risk, high-return investments have a stronger desire to invest in stocks and a reduced desire to save. Conversely, people with high loss anxiety tend to have their desire to invest in stocks reduced and a stronger inclination to save.
In other words, by using such scales to measure individuals, we can understand their investment inclinations and financial behaviors.
Understanding oneself can be a catalyst for change
The effectiveness of understanding financial behavior through psychology lies in the fact that human behavior isn’t purely rational.
For example, remember the term “Financial Big Bang”? The term was first used in the United Kingdom in 1986, when the securities market was reformed to strengthen international competitiveness.
In Japan, the term was used during the major reform of the financial system that began in 1996. One of those reforms was to encourage individuals to shift from savings to investment, and low-interest rates were part of the financial policy to achieve this goal.
Indeed, providing an incentive in the form of low-interest rates makes sense, and transitioning from savings to investment is a rational choice. However, personal investment in Japan has not increased significantly. This suggests that there are psychological factors and mechanisms beyond rationality at play. Psychology can capture these factors.
So, what can be changed by understanding these factors and mechanisms?
For example, we can provide financial products that are tailored to people’s individual preferences.
If factors like high loss anxiety hinder investment behavior, people with these tendencies could be offered government bonds or principal-protected financial products. It’s essentially personalizing financial products.
Moreover, personalization can introduce diversity, which can lead to diversifying portfolios and reducing overall investment risk. It can also help in overcoming various forms of financial crises.
On the other hand, if it becomes apparent that there are too many people with an extreme aversion to risk, efforts can be made to change this mindset. Education is one such approach.
In Japan, from elementary school to university, education focuses on finding the correct answer. Pursuing a single answer in a straight line may be efficient, but it can also stifle the exploration of various possibilities.
This approach is in stark contrast to the idea of taking risks and starting something new. Learning the importance of taking risks, even if it means making mistakes, should be part of the education system from a young age.
Fostering such thinking could serve as a catalyst for changing the situation in Japan, where innovation is said to be lacking.
Such thinking is essential not only for financial behavior but also for making Japan a better society. I encourage everyone to start by understanding their own characteristics, inclinations, and behavioral patterns.
What you should be mindful of is seeking guidance from psychology experts who have developed psychological scales or understand how to use them. Some company occupational health professionals may also be clinical psychologists.
If you do not have such a doctor close by, it is a good idea to read books by specialists. Those books come with a kind of psychometric scale that will help you get to know yourself.
If you don’t have access to such experts nearby, reading books by specialists in the field is a good idea. These books often include psychological measurement scales that can serve as a starting point for self-discovery.
Making decisions about your behavior using AI on your smartphone, or assuming that men and women, young and old, have specific ways of behaving without considering individual differences, can lead to ineffective and forced approaches.
It’s important to understand your own way of doing things and your behavioral patterns, and then work on improving the current situation.
Even in a diverse and individuality-focused society, understanding oneself is the first step to achieving personalized optimization.
* The information contained herein is current as of May 2023.
* The contents of articles on Meiji.net are based on the personal ideas and opinions of the author and do not indicate the official opinion of Meiji University.
* I work to achieve SDGs related to the educational and research themes that I am currently engaged in.
Information noted in the articles and videos, such as positions and affiliations, are current at the time of production.