Financial decision-making and the normalization of deviance

Dilata Ranadive, University of Texas at El Paso

Abstract

Two perspectives have dominated the discourse on the causes of the financial crisis of 2008. The first attributes the financial crisis to intentionally malevolent behaviors, whereas the second attributes it to the natural market fluctuations. However, there is still a third, possible perspective. While the first two perspectives focus on the intention of the actors, the third perspective focuses on the response of the observers. This is what Vaughan (1996) refers to as “normalization of deviance”. In normalization of deviance actions or decisions that are initially regarded as aberrant or atypical are re-conceptualized and adopted as the new criterion. The aim of the present study was to examine the relationship between normalization of deviance, the dark triad and risk-taking behavior. The dependent variable was the amount of money invested. Participants were 171 students from the University of Texas at El Paso between the ages of 18 and 51 years. The data were analyzed using a repeated measures Multi-level Modeling framework. The first hypothesis stated that normalization of deviance would predict risk-taking such that the participants in the normalization of deviance condition would invest significantly greater amounts of money than those in the no-normalization of deviance condition. This hypothesis was not supported. The second hypothesis stated that there would be significant interaction between normalization of deviance and the Dark Triad. This hypothesis was not supported. Exploratory analysis revealed that prior loans was a significant predictor. Although the hypotheses were not supported, the current study contributed to the existing literature in three ways. Firstly, the study examined the construct of normalization of deviance in the new context of financial decisions. Second we developed a new paradigm to examine the construct. Lastly, a more robust statistical model was used to analyze the data.^

Subject Area

Economics|Finance|Psychology|Experimental psychology

Recommended Citation

Ranadive, Dilata, "Financial decision-making and the normalization of deviance" (2016). ETD Collection for University of Texas, El Paso. AAI10247945.
http://digitalcommons.utep.edu/dissertations/AAI10247945

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