The Power of Context

John Darley and Daniel Batson were two Princeton University psychologists who devised one of the most well-known social experiments of modern times, using the parable of The Good Samaritan to illustrate their point.

The experiment involved a group of theology students who were asked to prepare a seminar and then walk over to a nearby building to present.  Along the way, each student would pass an actor, slumped in an alley, pretending to be in distress.  The purpose of the experiment (unknown to the participants) was to see whether or not the students would stop.

Darley and Batson also split the group of students in two.  The first group were informed “it will be a few minutes before they’re ready for you, but you might as well head over now.” 

The second group however, were given a starkly different send off - “Oh, you’re late. They were expecting you a few minutes ago. We’d better get moving.”

The results of this study showed that of the first group, 63% of students stopped to help the man.  Of the second group, only 10% stopped to help.  In fact, in one instance, a student was actually on his way to give a talk on the parable of the Good Samaritan and actively stepped over the man in distress to get there on time!

This experiment shows the effect that context  has on human behaviour.  In the context of being in a rush, the behaviour of theology students differed greatly to those in the alternative context - having plenty of time to spare.  The intuition here is that as humans, we don’t behave in the same way (perhaps even rationally...) all of the time. Our behaviour is very much influenced by our environment.

The following is a clip from a meeting of the Institute of New Economic Thinking.  The speaker is Markus Brunnermeier, a leading academic in the field of financial crises, who gives some insight into the thinking of traders when it comes to financial bubbles.  He mentions a few of the concepts I've blogged about so far such as greater fool theory and indirectly, the Keynesian beauty contest.  I think it also shows how trader behaviour is altered when there is a change in context.  Rather than refusing to purchase assets that appear over-valued, traders consider purchasing in the context of a financial bubble.