Risk Preference: A Tale of Two Tribes and Implications for the Study of Individual Differences in the Appetite for Risk
In 1957, Lee Cronbach distinguished between two tribes in psychology: Experimental and correlational psychology. Six decades later, the partition of psychological research into these two streams is still noticeable—and perhaps nowhere more so than in research on the construct of risk preference, in which researchers have coalesced around their favourite measures, namely, behavioural tasks (e.g., choices between lotteries) and self-reports (i.e., single or multiple items probing risk-taking propensity), with little dialogue between the two tribes. I question this state of affairs by providing an overview of current knowledge from meta-analyses and large-scale experiments/surveys concerning the 1) temporal stability, 2) convergent validity, and 3) predictive validity of both types of measures. To summarize, when measured through self-report measures, risk preference may be thought of as a moderately stable, general psychological trait, and, thus, an important variable to consider in psychological and economic theories. In turn, the usefulness of behavioral measures to uncover a stable risk preference trait seems, at this time, surprisingly limited. Behavioral scientists should be aware that not all measures of risk preference are created equal.