I am senior lecturer in behavioural economics. The focus of my research is on the motives of investors and entrepreneurs to think “beyond the money” towards the social impact of their investments/enterprises, even if the societal impact is at the expense of their personal financial returns/profits.

My aim is to both understand these motives, and to think about how we can encourage more of this ‘world-changing’ behaviour across society. I employ social preference theory, in which people are not narrowly self-interested, but act with a sense of altruism, fairness, empathy or warm-glow when they think of others.

I work with a colleague in our psychology department to test these motives. For example, see this paper.

And here is a theory piece of mine where investors may think beyond the money to act with empathy and fairness.

More recently, I am beginning to examine Christian investing, which has parallels with social impact investing. Ask Me Anything!

Proof: https://www.flickr.com/photos/uniofbath/53322794929/in/dateposted/

Comments: 44 • Responses: 8  • Date: 

Rfalcon1322 karma

Hi Richard, I have a minor in economics from the university I attended (about 20 years ago), and in an Environmental Economics class I was once chastised by the professor for suggesting that I think there would be people who would be doing things like buying electric/hybrid vehicle, solar panels, etc. before it made financial sense for them to do so. That they would almost be choosing to spend their money in a charitable way to do what they was helping the planet, society, etc.

Do you think more economists are recognizing that some people with means to do so are spending their resources in more social ways, and that maybe they need to view this beyond just a pure economic lens (similar to what you are doing)? Or is there still a lot siloing between departments?

RichardFairchild12 karma

Hi Rfalcon13,

That is really interesting that 20 years ago, your Professor in an Environmental Economics class was of that view... for a long time, the prevailing view in economics was that of rational self-interest, maximising a very narrow payoff function.

More recently, behavioural economists are recognising these 'social preferences': the desire to think beyond the money, acting with fairness, empathy, ethicality, andf thinking of others... However, in my experience, I still come across the 'very rational' economics school, which says that people only act in self-interest. In fact, I recall a debate where a behavioural economist was saying: if people are so self-interested, why is there a lot of charitable giving? The "rational economist" answered, "well, they are getting satisfaction from giving to charity... include that in their utility function, and they are still maximising their own utility... it is still selfish!!" So, if you have utility for being ethical, and thinking of others, society etc... the rational economist's view was that is still selfish! And that is the fascination of an area like economics... the debates rage on!

rusty_handlebars16 karma

This sounds similar to my old CEO’s mission to be a conscious capitalist. He was a great guy but seemed divorced from the reality that him having 350 million dollars meant many others had a less. Have you come across this in your research?

RichardFairchild7 karma

Thank you for such a good point.... yes: I have come across this in my research: Business leaders saying that they are doing great things for society, but not really (lip service), and living in great comfort with lots of personal wealth!

And a couple that I research with, who run a social investment consultancy... we have tested their motives... one of them is really interested intrinsically in doing great things for society, the environment etc... whereas the other one is running it to make money... a huge difference in attitude!

RichardFairchild5 karma

Thank you all for your wonderful questions and comments today! I have really enjoyed talking to you all.. your questions have really got me thinking further about my research, and I hope that I answered all of your questions satisfactorily.

Bye for now... see you soon! :-)

HomeWork23453 karma

Hello, Richard! Your work is very interesting! I will tell you, as a future scientist, this work will be of great benefit to you and other people in the future. My question is, is there any formula or method that could make it clear the behavior of investors for a particular stock? Thank you in advance!

RichardFairchild3 karma

Hi! Many thanks for your kind and encouraging comments! That is a very good question.

I think this is what my co-researchers and I are aiming towards... to quantify investor behaviour to be able to look at their motives to think beyond the financial returns. In the behavioural economics theories, we can develop payoff functions that include both their financial and their social impact motives. If we can then translate that to real world investors (where there would be a mix of investor types with different levels of social impact motivations), then we can both predict their investment behaviour, and aim to motivate more societal and impactful behaviour (maybe through nudge).. This would be a wonderful outcome of our research!

942man1 karma

If you’re the one who wants to understand things why are you holding an AMA?

RichardFairchild6 karma

Hi 942man,

That is a fair enough question! In research, we never know all of the answers, and we are in a line of enquiry of trying to understand things. In my particular area, I am both researching the motives and incentives for investors, entrepreneurs and businesses to think beyond the money and invest (maybe at lower financial return) for societal good, and looking at ways that we can drive more societal behaviour. In addition to looking at the behavioural economics theories behind all of this, I am working with psychologists, and investment, entrepreneurial and business practitioners, to understand and motivate this. So, for example, one area that we are looking at: why people might be motivated to invest or act in business to think beyond the money, relates to an academic area that is grandly referred to as intrinsic or extrinsic motivation... this simply refers to social behaviour that is driven by the market/regulation etc (doing it because it looks good, captures customers and investors, the law says you have to)... this can lead to 'fake' behaviour/green- and impact-washing etc... Intrinsic motivation means that you do it because it is in your inherent conscience to be ethical, caring for society etc.. a huge difference in motives. We are testing for this... and interestingly found a mix of motives even among social investors... Then, understanding this mix, we can look at policies to change behaviour, nudge etc... Hope that answers your question?

Annual-Mud-9871 karma

Hi Richard, this sounds like some really valuable and interesting work. Could you explain a bit about Christian investing? What kinds of goals do Christian investors want to achieve compared to social impact investors?

RichardFairchild-1 karma

Hi there

That is a very good question... having recently found my faith and going to church, this is an area that I am just beginning to research. There are many parallels between social impact investing and Christian investing... thinking beyond the money, wanting to invest to make a difference to communities, society and the planet... avoiding investing in 'sin' stocks... I think that the aspect of Christian investing that is fascinating me is using biblical principles to make the investment decision... grappling with the Bible-driven message not to make money your goal, but recognising that it is fine to use the 'talents' that you have.. investing is fine, but not to be driven by it as a goal, and making sure that it is used for good societal purposes... I am still learning on this new area of research (Christian investing) for me!

CuriousRedPandaBear1 karma

Hi - thanks for sharing your work. How did you get interested in this area of study? Do you think investing is a good thing?

RichardFairchild1 karma

Hi there,

My background is financial economics/behavioural economics. In standard economics, the assumption is that everybody is very self-interested, just out to make money for themselves... For a long time, I have been dis-satisfied with this view of investors, entrepreneurs and businesses... then my research took me into behavioural economics (adding human psychology into the mix..), and an area that really fascinates me is social preference theory, that looks at how humans can be quite unselfish, acting with fairness, trust, empathy, community and societal feelings. Taking this into the investment field, we can look at the motives of social impact investors, social entrepreneurs, social businesses to think beyond the bottom line money and to act for others. Once I discovered this area of research, it opened up a much more satisfying line of research for me... one of a 'nicer' brand of economics!

RichardFairchild1 karma

... Just realised... I missed your question on "Is investing a good thing?"... Yes, I think it is, if conducted with the right motives... to help others and yourself... after all, investing for the future for your family is a wonderful thing to do. And of course, investing helps to develop businesses, and that can only be good for the economy and for society.