Are Economists’ Preferences Psychologists’ Personality Traits? A Structural Approach

Abstract

I propose a method for mapping psychological personality traits to economic preferences. I use factor analysis to extract information on individuals’ cognitive ability and personality and embed it within a random preference model to estimate distributions of risk and time preferences and parameters related to choice inconsistency. I explain up to 60% of variation in average risk and time preferences and individuals’ capacity to make consistent choices using factors related to cognitive ability and three of the Big Five personality traits. Differences in preferred outcomes are related to personality, whereas mistakes in decisions are related to cognitive skill.