On the bright side, an experiment involving soap opera fans suggests TV can teach better money habits. But if we can learn good habits from TV, it stands to reason that we can pick up bad ones too.
Seinfeld share trading?
Trading shares is typically a serious business. However, a comedy routine by TV’s Jerry Seinfeld was used to test the way emotion influences trading decisions. The researchers got people to trade some artificial shares under laboratory conditions. Before trading, some people were shown the comedy film and some weren’t. They found that people shown the film traded the same asset at higher prices. “Positive mood leads to bigger bubbles,” the study concluded.
It is highlighted by economist Chris Dillow in a blogpost for eZonomics about the share market saying “sell in May”. Like bright moods from comedy, bright moods from better weather in spring is credited with creating greater optimism about the economy and increased willingness to take risk.
Scandal! of soap operas
It’s not only comedy shows that influence the way people manage money, soap operas appear to have an effect too. A World Bank study introduced a financial storyline for two months to popular South African soap opera Scandal! to test whether viewers learned from the TV drama. It showed a leading character borrowing excessively and irresponsibly through hire purchase, gambling, ending up in financial distress, and eventually seeking help to find her way out. The study found viewers of the show had significantly higher financial knowledge of the issues raised and exhibited better financial behaviour by the end of the study. More about it is in Nathalie Spencer’s eZonomics article here.
We love a Christmas special
American sitcom King of Queens devoted an episode to behavioural finance and economics, as detailed on Nudge blog. It features the decisions the main characters Doug and Carrie make about how to use their Christmas bonus. Nudge writes that Carrie follows the herd when she pushes to invest it in high-flying internet stock, which goes up for a day but quickly falls. The pair don’t sell because it’s too painful, holding out in the hope of a recovery – characteristic of loss aversion.
The Simpsons and creative destruction
The TV exploits of Homer Simpson and his animated family no doubt carry many messages about managing money.
One is the idea of creative destruction, highlighted by famed Austrian economist Joseph Schumpeter in 1942. Detailed on eZonomics, again by Dillow, Schumpeter saw economic growth as a process of creative destruction: new firms are created and old ones destroyed.
The Simpsons’ character Montgomery Burns thinks of Transatlantic Zeppelin and Amalgamated Spats as blue-chip stocks long after the world has moved on. Burns serves as a warning in Dillow’s blogpost about the importance of rebalancing a share portfolio in recognition of creative destruction.
Deal or No Deal lessons for pre-retirees
In the game show Deal or No Deal (or Hunt for Millions), originally seen on Dutch TV, contestants have to bet on whether a “bank” or “house” offer of money or prizes will exceed another amount hidden from view.
Amounts available are in boxes and revealed, and then eliminated, one-by-one in each round.
The chance of guessing correctly shrinks as the game progresses. Yet some contestants keep playing round-after-round, perhaps spurred by the “house money” thinking trap in which people reason: “I arrived with nothing, so anything I take away is a win.”
Renowned behavioural economist Richard Thaler writes in his 2015 book Misbehaving that this effect can be particularly damaging when investors mistakenly think their loss is limited to previous winnings. He gives the example of people feeding share market bubbles with their retirement savings as forgetting that losses can be larger than the “easy come, easy go” sentiment evoked by the house money thinking trap seen on Deal or No Deal.
Have you learned a lesson about money from TV or film? Tell us here or on Twitter.