862 vIII. EMERGING  ISSuES AND  NEW  DIRECTIONS
served constructs, both of which are difficult 
to measure.47 They demonstrate that careful -
ly separating true preferences from noise in 
observed decisions and in answers to survey 
questions about personality is essential in 
advancing this line of research. Allowing for 
heterogeneity among people, Jagelka (2018) 
showed that four factors related to cognitive 
ability and three of the Big Five personality 
skills explain up to 50% of the variation in 
preferences for risk and time and in indi -
viduals’ capacity to make consistent ratio -
nal choices. Variation among individuals in 
conscientiousness by itself explains 33% of 
heterogeneity in people’s impatience, and 
10% of the variation in their risk aversion. 
Furthermore, attitude toward risk is linked 
to both extraversion and to cognitive abil -
ity, while the latter also explains individual 
propensities to make mistakes (i.e., to pick 
options that they in fact do not prefer).48
Over the past decades, behavioral econo -
mists have documented numerous depar -
tures from decision making implied by stan -
dard preferences and rationality assumptions 
of neoclassical economic theory. Individuals 
with lower cognitive ability are more likely 
to make inconsistent choices (Choi et al., 
2014), do not seem to learn efficiently by 
updating their beliefs when presented with 
new evidence (El-Gamal & Grether, 2012), 
are overconfident with respect to their abso -
lute and relative performance (Chapman et 
al., 2018), and so on. The literature docu -
ments that people sometimes seem aware of 
these biases and are willing to pay to have 
their choices restrained so that they do not 
regret them later (Augenblick, Niederle, & 
Sprenger, 2015).49
The proliferation of documented patterns 
in deviations from rational decision mak -
ing has led to efforts to synthesize them in 
a general tractable model using behavioral 
summary statistics (Gabaix, 2014; Chetty, 
2015). Stango and Zinman (2019) measured 
17 behavioral biases linked to financial de -
cision making alongside standard economic 
preferences, cognitive skills, and noncogni -
tive skills. Most individuals in their sample 
displayed multiple behavioral biases, with 
the average person exhibiting 10 out of 17. 
They showed that biases are related to cog -
nitive skills but not to the Big Five. They are 
highly correlated with financial outcomes: A one standard deviation increase in their 
summary of bias parameters is associated 
with an approximately 30% decrease in sub -
jective and objective measures of an individ -
ual’s financial condition.
Dean and Ortoleva (2019) present evi -
dence that some of these biases are strongly 
correlated with each other, but represent 
multiple independent dimensions. These 
findings suggest that decisions are strongly 
influenced by a rich interplay of preferences, 
biases, and skills, as well as the other fac -
tors depicted in Figure 42.1. Economists and 
psychologists have begun to understand the 
drivers of heterogeneity in decisions using 
disparate techniques. Evidence is mounting 
that there is an overlap between the econo -
mists’ system of preferences and the psychol -
ogists’ system of personality. Interestingly, 
standard economic preference parameters 
are mainly related to noncognitive skills, 
while the ability to effectively implement 
those preferences in practice (the quality of 
decision making) is associated with cogni -
tive ability. Further study of a broader array 
of preferences and skills will yield a more 
complete mapping and ultimately a uni -
fied set of determinants of human behavior 
drawing from the strengths and insights of 
the two fields.
Are Noncognitive Skills Stable 
across  Situations?
Many have questioned whether there are 
stable noncognitive skills, that is, whether 
people exhibit the same noncognitive skills 
across different situations at a fixed point. 
Walter Mischel’s (1968) Personality and As -
sessment  gave rise to a heated “personality– 
situation” debate within psychology that 
pitted social psychologists who favored situ -
ational factors as primary determinants of 
behavior against personality psychologists 
who considered stable personality (noncog -
nitive) traits (skills) more consequential. 
Mischel argued that aspects of situations 
overshadow any effect of personality (non -
cognitive) traits (skills) on behavior. Ironi -
cally, Mischel himself later demonstrated 
the stability and predictive power of non -
cognitive skills over the life cycle (as mea -
sured by the performance of subjects in dem -
onstrating self-  control in early childhood) in 