INDIAN INSTITUTE OF MANAGEMENTAHMEDABAD

Term Paper Assignment

Desires and Decisions

A look into how positive emotions influence decision making in people

Submitted to Prof. Neharika Vohra

In Partial fulfillment of the requirements of coursePsychology

Submitted on: September 27th, 2014

By

Shiva Kakkar

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Desires and Decisions

A look into how positive emotions influence decision making in people

In the past few years the field of emotions has increasingly attracted the attention of researchers. A major

reason for this is the ability of emotions to influence human motivation and actions by influencing the

cognitive processes of the brain (Latham, 2007). Research by Kahneman and Tversky (1973) has for long

suggested that not all human decisions are rational in nature. A significant part of irrational decision

making can be attributed to the play of emotions in human beings. Thus, it is interesting to see how

emotions interfere with the thinking process of individuals. The paper specifically attempts to view the

effect of positive emotions i.e. feeling of happiness, joy and/or enthusiasm on the decision making process

in human beings. In order to achieve this, two opposite scientific views in the form of a critique and a

refutation are presented to understand the utility of positive emotions in decision making.

‘It is human nature to think wisely and act absurdly’

– Anatole France

During the past few decades, the field of I/O psychology has witnessed a period of tremendous

turmoil and upheaval in terms of managerial concepts. For a large part of history, managerial

thought was deeply entrenched into the fundamentals of behaviorism. There has been an

immense focus on the role of reasoning and cognition in human action and decision making.

F.W.Taylor’s ‘Principles of scientific management’ is a prime example of this. Taylor believed

that humans were inherently rational and logical beings (Ashkanasy, Hartel, & Zerbe, 2000) who

would work towards a task without question on being suitably incentivized (or penalized). This

thinking led to a systematic simplification of jobs - a ‘division of labor’ in order to increase

efficiency and boost production. The whole system never accounted for the emotional experience

of individuals in the workplace. Rather, emotions were considered to be unnecessary obstacles to

productive work behavior (Muchinsky, 2000).

The re-emergence of the field of emotions as a stream of study came through in the 1990’s when

Daniel Goleman published his seminal work ‘Emotional Intelligence’. The highlight of the book

was the fact that emotions could help in understanding people and making better decisions in an

organizational setup. Subsequently, a wide variety of research has been conducted in the field to

decode the complex puzzle of emotions. Another reason for this sudden development of interest

in the field of emotions is due to the inability of cognition to explain certain aspects of divergent

job behavior (Latham, 2007). While performance can be attributed to cognitive abilities, the

relationship does not hold true for non-performance (Lord, Klimoski, & Kanfer, 2002). Two

similarly qualified and competent individuals, getting similar rewards can deliver varying

degrees of performance. What makes this difference is their orientation and attitude towards the

job. Attitude is nothing but a function of emotions and feelings (Howard M Weiss & Beal,

2005).

This inquiry into the hindrances to job performance has shed new light on the role of emotions in

driving cognitive processes in human beings. Researchers agree that emotions form an important

part of human thinking (Seo, Barrett, & Bartunek, 2004). In the past few years, decision making

has been seen and studied as a scientific discipline. Researchers have acknowledged that decision

making is a complex process that is not necessarily rational. A significant contribution came

from Tversky and Kahneman (1974) who studied the nature and scope of irrationality in decision

making in economics.

The objective of this paper is to study the role of positive emotions in decision making and task

judgments at work. To get a holistic view, the paper is divided into two parts. The first part

builds an argument against the utility of positive emotions in decision making. The prevailing

scientific literature is consolidated and presented to this effect. The second part of the paper

refutes the critique laid against the utility of positive emotions and builds up a defense. The

position taken by OB and psychology researchers is cited and evidence is provided to counter the

critique. Finally, the paper attempts to reconcile the two positions and derive key insights from

the arguments covered in the paper.

The Basics - Affect, mood, emotions and cognition

Before attempting to understand the role of emotions in decision making, it is necessary to define

the three closely associated concepts of affect, mood and emotions. According to Frijda (1986)

‘mood’ and ‘emotions’ differ in terms of object directedness and response. Emotions are directed

towards an object (like a person or a task) while mood may not be directed towards any object.

Emotions are generally a response to a particular event, while mood is a general feeling of well-

being that persists over a period of time (Basch & Fisher, 1998). Moods are passive, less intense

and sustain for a longer time whereas emotions are active, intense but persist for a shorter

duration of time. ‘Affect’ is an umbrella term encapsulating both mood and emotions. Emotional

experience of any kind is termed as ‘Affective experience’ (Howard M. Weiss & Cropanzano,

1996).

While affect and cognition are distinct concepts, researchers argue that the production of

emotions itself is a function of cognition (Reeve, 2005). On encountering a situation, an

individual ‘appraises’ the situation. According to Magda Arnold (as cited in Reeve, 2005)

‘appraisal’ is the interpretation and evaluation of various characteristics of the situation which

leads to the elicitation of certain emotions in response. Therefore, it is not the situation in itself

but the appraisal of the situation that elicits emotions. Hence, cognitive appraisal precedes the

elicitation of emotions. On the other hand, once emotions are produced, the affective component

is introduced into the thinking process, which in-turn influences the evaluation of the situation or

object (Forgas, 1995). This phenomenon can be understood by the concept of ‘affect-as-

information’ explained in the next section.

Affect-as-information

Decision making is a complex process that operates at various cognitive, emotional and

psychological levels. The role of emotions (affect) in decision making and judgment can be

understood by the concept of ‘affect-as-information’ (Clore, Gasper, & Garvin, 2001; Schwarz,

2011). According to the theory, before making a judgment an individual looks for emotional cues

to reach at a decision. He or she may ask, ‘How do I feel about this situation (or object)?’

Through this the individual attempts to seek ‘information’ pertaining to the situation (or object).

The person receives an emotional response to this query (affective response) which can be

positive or negative in nature. The (positive or negative) response in turn, leads to an evaluation

of the situation (or object) as being positive or negative. Schwarz (2000) terms this as ‘mood

congruent processing’ as the prevailing affective state (mood) contributes to the decision making

process by influencing the interpretation of presented information. The problem with mood

congruent processing is that it tends to influence a person in overestimating (in case of positive

emotions) or underestimating (in case of negative emotions) the likelihood of outcomes as per

his or her expectation (Johnson & Tversky, 1983). This problem arises because mood-congruent

processing depends upon other extraneous factors that are not directly related to the situation at

hand. A person in a bad mood is more likely to take a pessimistic view of the situation than a

person in a good mood. The mood itself may have resulted from another incident throughout the

day (for ex. an argument with the boss). The individual is completely unaware that emotions

activated in one situation are influencing his or her judgment in another situation (Johnson &

Tversky, 1983; Loewenstein & Lerner, 2003). This eventually results into an unrealistic and

ultimately incorrect estimation of outcomes.

The relationship between affective state and its impact on decision making has been repeatedly

studied and replicated in various psychological experiments. In an experiment by Clore and

Huntsinger (2007), a telephonic survey on life satisfaction was conducted with participants. The

calls to the participants were either made on bright-sunny days or cold-rainy days. Before asking

the survey question, the respondents were subtly asked about the weather prevailing that day.

This preceding question was asked to deliberately set a positive or negative affective tone and to

check whether it impacts the response to the life satisfaction question. The researchers found that

cold-rainy days decreased the life satisfaction scores of people, while bright-sunny days

increased them. A larger and more complex version of the experiment was replicated by

Hirshleifer and Shumway (as cited in Schwarz, 2011) wherein the researchers observed a reliable

influence of weather on stock market return in 26 countries. It was found that the market was

more likely to go up if the city hosting the stock exchange experienced a sunny day. A likely

reason for this is that the speculation behavior of the traders changed with respect to the weather.

Processing errors - Overestimation and underestimation of outcomes

The overestimation and underestimation of outcomes are fundamentally processing errors that

lead to faulty inferences. There is a high amount of error (overestimation) associated specifically

with positive emotions. According to Schwarz (2000), this is due to the use of a ‘heuristic

processing strategy’ that forms the basis for positive affect induced judgments. In heuristic

processing strategy, pre-existing knowledge structures (called scripts) are utilized in making

decisions. Scripts are nothing but heuristics formed on the basis of knowledge attained from

similar situations encountered in the past. Tversky and Kahneman’s (1974) have also pointed out

the extensive use of heuristics as a ‘short-cut’ in decision making. According to them, three

heuristics are employed in making judgments: 1. Availability (of information), 2.

Representativeness (similarity of information), 3. Adjustment (similarity with respect to the

anchor set by the encountered situation). This bears correspondence to Bless (1996) and Forgas

(1998) proposition that heuristics reduce cognitive load on the brain and make it easier to take

decisions (i.e. a short-cut). Schwarz (2000) takes Tversky and Kanheman’s idea further by

suggesting that positive affect leads to a greater use of heuristics than negative affect.

A good mood (positive affect) tries to influence a person to form inferences based on heuristics.

It informs the individual that the situation is favorable and a judgment can be taken based on

known information, reducing the cognitive load on the brain. Reduction in cognitive load is

desirable as it preserves the state of ‘happiness’ (positive affect) being experienced by the

individual (Bless et al., 1996; Forgas, 1998). In the process, specific details peculiar to the

situation may be avoided or ignored. This avoidance of information leads to inferential errors

and misattribution of causal factors which results in erroneous decisions.

Unlike positive affect, negative affect leads to a ‘systematic processing strategy’ (Schwarz,

2000). According to Schwarz, a person in a sad mood is less likely to rely on pre-existing

knowledge structures (scripts). This is due to less confidence and increased paranoia regarding

the situation resulting from the prevailing negative mood (Bless et al., 1996; Forgas, 1998). This

results into a processing strategy which increases focus on specific information at hand and

dissuades the individual from relying on previous experiences (Schwarz, 2011). Though this may

consume more time in making decisions, negative affect is more desirable for decision making as

it facilitates extensive processing and increased attention to details (Clore & Huntsinger, 2007).

Global and Local focus

The overestimation/underestimation of outcomes is also caused due to the impact of affective

state on attention focus. Positive affective state increases attention focus while negative affective

states narrow attention focus (Loewenstein & Lerner, 2003). The narrow attention focus is

known as ‘local focus’ and the broad attention focus is known as ‘global focus’. According to

Gasper and Clore (2002), feelings of joy and happiness influence individuals to look at the larger

picture wherein small details are suppressed. This is because happier individuals rely on

heuristics and information not matching the available heuristic is considered insignificant and

consequently suppressed or ignored. On the other hand, individuals experiencing a negative

affective state pay more attention to details and have a higher ‘local focus’. As heuristics are not

relied upon, the individuals consider the situation or event as an isolated instance and look for

specific attributes to make decisions.

In an experiment by Forgas (as cited in Loewenstein & Lerner, 2003) individuals were asked to

select a team partner for accomplishing a certain task. The researchers found that individuals in a

negative affective state were more goal oriented and hence, selected partners based on their

abilities and personal attributes after many rounds of exchange. After initial interpersonal

exchanges, they remembered more about the shortcomings and negative features in their

potential partners. Contrary to this, individuals in positive affective states made rapid decisions

with fewer rounds of exchange and overlooked personal attributes which may have played a

crucial role in task accomplishment.

Priming and memorization

Due to the extreme reliance on scripts and pre-existing knowledge, positive affect results into

greater instances of bias. This bias occurs as a result of selective attention, encoding and retrieval

of information (Forgas, 1995). Positive affect tends to increase the individual’s confidence in

existing information and increases the likelihood of relying on it (Isbell, 2004). This leads to the

knowledge of certain pre-existing notions being primed. The primed information is then

attributed by the mind to the object/situation. This results into incorrect decision making as

priming one piece of information impacts the processing of subsequent information (Forgas,

1995). Information consistent with the primed information is considered for decision making and

inconsistent information is ignored (Higgins, Bargh and Lombardi as cited in Forgas, 1995).

Another perplexing issue is that of false memorization and recall. According to Clore and

Storbeck (2005), positive affect tends to lure people into thinking that they already know the

information being presented. An example of this is when a group of participants is given a list of

words that include bed, pillow, rest, awake, dream, etc., they falsely recall and include the word

‘sleep’ when asked to reproduce the list. This is known as a ‘critical lure’. In the experiment

performed by Clore and Storbeck (2005), they found that people experiencing negative emotions

were less likely to fall for critical lures. This, they hypothesize, is because negative affect

triggers systematic item-specific processing that looks at specific attributes (local focus) rather

than drawing conclusions based on heuristics.

View: From the literature cited above, it can be said that positive affect due to its focus on

global factors, dependence on heuristics and increased bias, results into poor quality of

decisions and judgments.

If the arguments presented above are taken at face value, then organizations should be highly

mechanistic, adopt a tight command-and-control scheme of dictating tasks and giving little or no

autonomy to employees in achieving them. Organizations should then aim to create an

environment of negative affect wherein saturnine employees would make razor sharp decisions.

This scenario barely sounds practical or even advisable. Contrary to this, most progressive

organizations aim to make their workplaces cheerful and a pleasure to work in for their

employees. Organizations like 3M, Google have documented evidence of their success with their

employee friendly stance and highly positive work culture. The aim of the subsequent section is

to present a critique and develop a counter-view to the literature cited above regarding the role of

positive emotions in decision making.

Positive emotions – A Defense

A reason for the tirade against positive emotions is because psychology has traditionally focused

on ‘mental problems’ rather than ‘mental well-being’ of the human mind (Seligman &

Csikszentmihalyi, 2000 as cited in Fredrickson, 2004). Due to this, Fredrickson (2004) argues,

the topic of negative emotions has invited more research than positive emotions. While studies

are true to point out the higher use of heuristics and pre-existing frameworks in decision making

among positively affected individuals, there are certain advantages too. First and foremost,

positive affect makes decision making a simpler and faster process. In an experiment by Isen and

Daubman (1987), participants were given a rating task and a sorting task. It was found that happy

or positively affected individuals were able to solve problems faster than the control or

negatively affected groups. The reason for this is that positive affect increased the ability to

categorize and form patterns among objects to be rated and/or sorted. After figuring out the

existence of a pattern the task was solved in minutes. The experiment is important because not

only does positive affect increase the use of heuristics, it plays an important part in the formation

of heuristics. In most job interviews, work experience is given significant weightage as an

attribute. It can be argued that a larger amount of work experience actually signifies a larger

amount of heuristics in the mind of the experience holder. Due to these heuristics, it is highly

likely that the holder would understand business (and organizational problems) better and take

better decisions as the individual would be well-versed with handling such issues.

Some researchers argue that positive emotions actually enhance cognitive functioning. In a series

of gambling experiments by Trope and Neter (as cited in Aspinwall, 1998), the researchers found

that positive emotions tend to increase attention towards negative information. Isen and Nygren

(1988) in another series of gambling experiments, found that though the risk propensity of

participants experiencing positive affect was indeed high, they were much more cautious about

anticipated losses and turned averse when the stakes got high. In the literature cited above, it was

argued that individuals experiencing positive affect tend to maintain their state of happiness for

longer periods of time and hence, attempt at reducing their cognitive load using heuristics (Bless

et al., 1996; Forgas, 1998). While this holds true, it is equally arguable that such individuals are

more aware about the stakes and the estimated loss they might suffer if they lost the bet. Hence,

in order to maintain their state of happiness, individuals in positive affective state turn risk averse

when the stakes become higher (Isen et al., 1988). According to Isen (as cited in Aspinwall,

1998) negative information is avoided only when it has relatively low costs. If the negative

information is urgent or essential, positively affected individuals would expend the cognitive

efforts to parse this information. This is congruent to the view that positive affect enhances

global focus but as a result, it also enhances the level of awareness and lookout for other negative

cues in the information.

Another popular proposition is that individuals experiencing negative affect make better

decisions because of local focus and detailed attention to the information being presented to them

(Huntsinger, Clore, & Bar-Anan, 2010). In an experiment to predict the impact of affective

disposition on managerial tasks, the researchers found that none of the proposed views in favor

of negative affect were upheld (Staw, Sutton, & Pelled, 1994). The data was collected from

MBA students experiencing negative and positive emotions and their performance was measured

on various management simulation exercises requiring decision making on diverse

organizational and business aspects. As compared to the group experiencing positive affect, the

negatively affected group fared poorly in utilizing and decoding information as well as forming

any linkages required for problem solving and making the right decisions. The positively

affected group displayed higher rate of success and more accurate information processing in all

simulation exercises (Staw et al., 1994). This proves that there exists a severe disconnect

between laboratory derived results and practical situations.

Illusion of control and task persistence

A common critique related to false recall and memorization attached with positive affect is that it

gives a false ‘illusion of control’. Due to a reliance on heuristics and a predisposition that the

knowledge pertaining to the situation is already known, the individual tends to overestimate his

or her control over the situation (Schwarz, 2000). A counter view is that though happy

individuals do overestimate their control over the situation, it increases their confidence in the

decisions they take and increases their persistence to complete the task (Staw et al., 1994).

Secondly, due to higher levels of confidence, such individuals are more likely to take upon

challenging and uncertain tasks. A study by Seligman and Schulman (as cited in Staw et al.,

1994) on 103 life insurance agents on their dispositional optimism found that positively oriented

insurance agents were able to sell twice the number of policies as compared to negatively

oriented insurance agents. Both categories of agents had to take decisions regarding the nature of

clients to be pursued and face repeatedly encounter rejection or failure from clients. Yet, it turns

out that positively affected individuals made more accurate decisions as evident from their sales

figures. A possible reason for this is that positive affect results into a higher sense of control

wherein the individual makes him/herself responsible for success of failure. Depending upon the

result, s/he keeps modifying the strategy until the goal is reached (high task persistence).

Broaden and Build theory of emotions

The Broaden-and-build theory of positive emotions was proposed by Fredrickson (2004) who

proposed that positive emotions increase a person’s awareness of surroundings and helps the

person build internal (mental) resources that augment cognitive ability. According to Fredrickson

(2004), positive emotions broaden people’s momentary thought–action repertoires and build

their enduring personal resources. The concept thought-action repertoire is similar to formation

of heuristics. Positive affect motivates people to take up new challenges, explore new ideas and

try out new things. They do such things in order to heighten their sense of pleasure and happiness

(Fredrickson, 2004; Staw et al., 1994). During such mental excursions, they accumulate

knowledge about different scenarios and situations. During times of adversity, when an actual

difficult situation comes in front of them, the information gathered during the heightened

positive affective state is put to use (like a heuristic) in order to solve the problem. This

phenomenon is seen across various species. Acts like chasing, running, jumping and catapulting

are common in humans and animals. But in times of distress, for example that of avoiding a

predator, these playful activities are re-enacted in order to escape and survive (Fredrickson,

2004). While avoiding a predator is a negative affective state, an animal (or person) is able to act

and make quick decisions that assist in making an escape only because of the knowledge attained

during positive affective states. The thoughts formed during playful activities result into sincere

actions during dire situations and a collection of such knowledge structures is termed as a

‘thought-action repertoire’.

Scope of attention

The increased awareness of surroundings as suggested by the ‘broaden and build’ theory is

indicative of the increased scope of attention that results from positive affective states.

According to Isen (1988), positive affect produces a broad, flexible and diverse cognitive

organization which enables a person to integrate diverse material, thus enhancing the decision

making process by considering the impact of multiple variables. A study by Losada (as cited in

Fredrickson, 2004) gives concrete evidence of this proposition. Losada studied 60 management

teams in 1 hour meetings to develop organizational strategy. Trained raters coded the response of

the audience to the speaker as ‘positive’ or ‘negative’ depending upon whether the speaker was

appreciated or rebuked in the meeting. Later, Losada used this identify performance on three

parameters: profitability, customer satisfaction and evaluation by peers. A non-linear equation

model was developed to capture the interaction patterns between the different levels of team

performance. Losada found that positive feelings were significantly related to (i) broader

behavioral repertoires (ii) greater flexibility and resilience to adversity and (iii) optimal

functioning or flourishing.

In spite of the popularity of the view that positive affect hampers effective decision making,

there are researches that refute the said claim. Staw (1994) suggests that happy individuals don’t

process complete information only if it’s not specific or detrimental in nature. Miu (2008) found

that negative affect significantly impaired decision making in the long run. The researchers used

the Iowa Gambling Task (IGT) to determine the relationship between ‘Trait anxiety’ (TA) and

decision making. TA refers to attention, memory and interpretation differences among

individuals to information (specifically averse or negative information). They found that anxiety

caused severe lapses in decision making by impairing the ability to select relevant cues for

making decisions from the presented information. Though the participants possessed a local

focus and attention to specific information, high anxiety led them to focus onto easily

understandable information rather than complex information necessary to make correct

decisions. Also, negative affect resulted into increased anticipatory stress which made

individuals more prone towards making erroneous judgments (Miu et al., 2008).

Counter View: From the literature cited above, it cannot be conclusively said that positive

affect results into poor decision making or judgment. On the contrary, positive affect broadens

the scope of attention which is helpful in consolidating more information and making

informed judgments considering diverse variables.

Conclusion

The arguments presented above are indicative of the raging debate over the nature and

implication of positive emotions on decision making and judgment. While critiques argue that

positive emotions extensively rely on heuristics in decision making which leads to bias,

proponents argue that positive emotional experiences help consolidate diverse information which

eventually leads to the development of better heuristics and refined decision making. The

argument is that heuristics are ‘tricks of the trade’ – a systematic development of patterns that

assist an individual in making decisions even in adverse situations. Negative emotions may result

into increased attention to detail, but processing details and reaching to conclusions are learned

during positive affective experiences. On the other hand, it is equally true that highly positive

feelings like enthusiasm, joy may result into carelessness due to avoidance of critical details in

order to maintain the positive affective experience.

Another view forwarded by researchers is that positive affective experience will not interfere

with decision making in cases where the task bears no implications on the person him/herself.

Loewenstein (2003) makes a valid point in this regard. He illustrates this by evaluating the

process of solving a mathematical problem. Loewenstein suggests that a mathematical task like

solving a problem cannot illicit any emotions in itself but the persisting state of positive affective

experience would motivate the individual to find creative ways of solving the problem. Negative

affective experience, on the other hand, may lead to anxiety and nervousness impairing the

individual’s ability to solve the problem and reach to a solution.

An underestimated aspect of the debate is the ‘affective orientation’ of the individual (Booth‐Butterfield & Booth‐Butterfield, 1990). Emotions are highly intimate experiences which differ

from individual to individual. Not all individuals possess the same spectrum and breadth of

emotions. Some individuals are highly vulnerable to positive or negative emotions and may

exhibit a greater tendency to process information in a biased fashion. On the other hand, certain

individuals are inherently effective at regulating their emotions and are more capable in making

objective judgments. This susceptibility/insusceptibility to emotions is termed as the ‘affective

orientation’ of the individual and has a significant impact on his or her cognitive processes

(Booth‐Butterfield & Booth‐Butterfield, 1990).

It can be inferred from the views stated in the paper that positive emotions are helpful in making

decisions involving creativity and complex thinking. The highly competitive environment

persisting in organizations today requires such thinking and justifies the organizations’ aspiration

in creating happier workplaces. It would be interesting to see whether the success of

organizations like Google and 3M can be significantly linked to their being happier workplaces.

It can be concluded that emotions are a complex matter and research is far from decoding the

finer aspects of the subject. The paper attempted to present two different views on the subject

from the perspective of cognitive thinking and decision making ability. The question as to how

emotions augment or impair decision making doesn’t have clear cut answers. However, the

awareness about these aspects may give valuable insights into the human mind and whether it

can be taught the art of decision making.

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