Hormonal contraceptives and economic behaviour

In the canonical model of neoclassical economics, decision-makers' preferences are assumed to be fixed. Now, anyone with a passing acquaintance with the real world would recognise that assumption as false - people change their minds when offered essentially the same choice at different points in time, and not just because their tastes change. That raises a valid question: what sorts of things determine (and therefore can change) our preferences? Are preferences socially constructed, or are there biological mechanisms at play? Or both?

I'm not going to attempt to answer those questions today, but I am going to briefly highlight this recent article (open access) by Eva Ranehill (University of Gothenburg) and co-authors, published in the journal Management Science. They studied the effects of hormonal contraceptives on economic decisions. The rationale is simple:

...OCs [oral contraceptives] have potent hormonal effects, and recent research suggests that OC intake may influence female economic decision making through their hormonal impact... Combined OCs suppress levels of endogenous testosterone, estrogen, and progesterone, and artificially mimic high estrogen and progesterone levels through varying doses of synthetic ethinylestradiol or estradiol and progestins... A growing body of economic studies has found these hormones, which are either present in OCs, or interact with OC intake, to be related to important economic preferences and behaviors such as financial risk taking, competitive bidding, willingness to compete, as well as social preferences...

So, here is a potential biological determinant of preferences - hormones. Ranehill et al. conducted a randomised controlled trial. Of the 340 women in the study, some were randomly selected to receive oral contraceptives (the treatment group), while others received a placebo (the control group). After three months, the women participated in some economics experiments. Specifically, the experiments were designed to measure the women's altruism, financial risk taking, and willingness to compete. They found that:

...no significant effects of OCs on economic decision making related to altruism, financial risk taking, and willingness to compete. Measured hormonal levels changed in the expected direction, which supports that participants were compliant to study treatment. However, these changes did not result in any significant effects on economic preferences in our three primary outcome measures.

They also find no effects of the phase of the menstrual cycle on decision-making either. So, despite some earlier studies having found hormonal effects on decision-making, this randomised controlled trial finds none. Of course, we'd want to see some replication of this in other (and potentially larger) studies before we draw too strong a conclusion. And of course, the study was limited to those three measures of preferences (altruism, financial risk taking, and willingness to compete). However, file this study on the side of evidence in favour of social determinants of preferences.

[HT: Marginal Revolution, back in 2017]