Uncovering the forces shaping human behavior: a different perspective
Jul 2025
Enabling world-class research
Human behavior is shaped by a complex interplay of environmental factors and intrinsic personality traits, yet many questions remain unanswered. How do factors like family, culture, and socio-economic status shape our preferences and personality? And how do our cognitive limitations in the form of imperfect perception, attention and memory impact decision-making? These challenges lie at the heart of Ernst Fehr’s research. By addressing these questions, he aims to uncover deeper insights into the forces that guide human behavior and decisionmaking, with the potential to influence both theory and real-world practices.
Pressing challenges to address
- How does society shape people’s preferences and personality traits?
- How do cognitive limits such as imperfect perception, attention and memory affect human decision-making?
- How can we counteract misinformation and societal polarization?
How does society shape the individual?
If I were to highlight three major unresolved questions in my field, I would emphasize the following areas: The first, and perhaps most fundamental, concerns how people’s preferences and personality traits are shaped by the economic, social and political environment. These include environmental factors such as family background, education, socio-economic status, and cultural influences. This question is fundamental because we have very little knowledge of how the environment shapes individuals’ personality traits but these traits have deep effects on individuals’ behavior.
The second unresolved question relates to the cognitive limitations humans face. We know that people have limited memory, attention, and perception. But how exactly these limitations affect behavior is still not fully understood. Particularly, we are at the beginning of integrating these cognitive processes into economic models. This is an exciting field of research that could fundamentally expand our understanding of decisionmaking and behavior.
A third important challenge to address is how we can better understand and tackle the psychological, economic and political forces underlying societal polarization, misinformation and false beliefs. For example, how can we prevent the negation of facts in a society where populism and polarization are on the rise? This issue is politically relevant and highly important for the future of society, especially in the context of persistent misinformation and fake news. It is an area that needs more research and a deeper understanding of how we can ensure that facts remain recognized truths.
The impact of the environment on individuals’ personalities and preferences
The typical economic approach towards explaining behavior is based on the Constraints, Preferences, and Beliefs (CPB) approach. In this view, people are endowed with stable preferences that are a given property of the individual. In strategic environments, individuals also are assumed to have beliefs about the other “players” behavior and they face a set of feasible choice alternatives that is determined by the environmental constraints which are given by their wealth, the prevailing prices or the prevailing social norms.
An important assumption in the CPB approach is that individuals’ preferences are stable and independent from their beliefs AND from the environmental constraints they face. In this approach, preferences are a property of the individual, beliefs are a property of the equilibrium that is played in strategic environments, and the constraints are given by the institutional (i. e., legal and normative) setup and the prices the individuals face.
While the assumption that preferences are stable and just a property of the individual may well be justified in the short run, cultural, political and economic factors are likely to shape them in the long run. And it is not just individuals’ preferences that are likely to be shaped in the long run but other personality factors such as their agreeableness or conscientiousness may also be affected by the mentioned environmental factors. However, we know very, very little empirically about the extent and the mechanisms through which, e. g., cultural and economic forces shape the structure and contents of individuals’ personalities.
We have all we need to tackle this task. Over the past three decades, we have learned a lot about how to identify the causal impact of environmental changes. Likewise, we have learned how to measure preferences and personality traits. Thus, the door is wide open for an exciting research program that examines how society shapes the individual in the long run.
Cognitive economics: a new approach to understanding human behavior
A particularly exciting and relatively new area of behavioral economics is cognitive economics that explicitly examines and models imperfections in human perception, attention and memory. To be sure, pioneers such as Colin Camerer, who developed the theory of cognitive hierarchies, have already early on made important contributions to cognitive economics but more recently, the field has received an additional strong push by attempts to explicitly consider the impact of imperfect perception, attention and memory. One example of cognitive economics is provided by a recent study that explains the fact that people are risk averse even at very small stakes – a behavior that is at odds with the prevailing expected utility hypothesis. But if one accounts for the imperfections and the noisiness with which people perceive quantities, one can explain risk aversion at small financial stakes.
A different example comes from my own research, conducted together with my colleague Todd Hare, where we examine why people are more risk averse when they face financial gains compared to when they face financial losses. We hypothesize that gains and losses affect individuals’ attention towards sure alternatives (relative to risky options), and that this drives differential risk aversion under gains and losses. We show that this hypothesis is supported by the data and can be incorporated into psychological theories of behavior. These and other contributions of cognitive economics could have far-reaching implications for economic theory and policy, as it opens up new avenues for analyzing and predicting human behavior.
A deep curiosity about how people become who they are
What drives me in my research is a deep curiosity about how people become the individuals they are. This question has fascinated me since my student days in the 1970s. The fascination with the social and cognitive mechanisms that shape human behavior has also never left me. I am particularly motivated by the idea that, through understanding these mechanisms and their impact on decisions, we can shape society for the better. It’s not only intellectual excitement that drives me, but also the desire to use knowledge about human behavior to make a positive impact on society.
The role of the UBS center: fostering a world-class intellectual community
The UBS Center has played a key role in making the Department of Economics at the University of Zurich a leading center for behavioral and cultural economics. It has enabled us to attract world-class researchers who, with their innovative ideas and expertise, contribute to pushing the boundaries of economic research. The center provides a platform for the exchange between academics and the broader public, allowing scientific insights to be applied not only in theory but also in practice.
Human behavior is shaped by a complex interplay of environmental factors and intrinsic personality traits, yet many questions remain unanswered. How do factors like family, culture, and socio-economic status shape our preferences and personality? And how do our cognitive limitations in the form of imperfect perception, attention and memory impact decision-making? These challenges lie at the heart of Ernst Fehr’s research. By addressing these questions, he aims to uncover deeper insights into the forces that guide human behavior and decisionmaking, with the potential to influence both theory and real-world practices.
Pressing challenges to address
- How does society shape people’s preferences and personality traits?
- How do cognitive limits such as imperfect perception, attention and memory affect human decision-making?
- How can we counteract misinformation and societal polarization?
How does society shape the individual?
If I were to highlight three major unresolved questions in my field, I would emphasize the following areas: The first, and perhaps most fundamental, concerns how people’s preferences and personality traits are shaped by the economic, social and political environment. These include environmental factors such as family background, education, socio-economic status, and cultural influences. This question is fundamental because we have very little knowledge of how the environment shapes individuals’ personality traits but these traits have deep effects on individuals’ behavior.
The second unresolved question relates to the cognitive limitations humans face. We know that people have limited memory, attention, and perception. But how exactly these limitations affect behavior is still not fully understood. Particularly, we are at the beginning of integrating these cognitive processes into economic models. This is an exciting field of research that could fundamentally expand our understanding of decisionmaking and behavior.
Ernst Fehr is Professor of Economics at the UZH Department of Economics, University of Zurich, and affiliated professor at the UBS Center.
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It is crucial that we understand how economic and cultural environments influence people’s preferences and personality development.
Economic challenges of our time
From rising inequality and global trade tensions to climate change and the impact of artificial intelligence on labor markets – economists today are grappling with fundamental questions that will shape our collective future. In this special edition of the Public Paper series, all affiliated professors of the UBS Center share their perspectives on these challenges. Their contributions highlight how cutting-edge research conducted at the Department of Economics at the University of Zurich can help us better understand – and potentially solve – some of the most urgent issues of our time.
It is precisely this ambition that defines the UBS Center for Economics in Society. Since its founding, the Center has served as a platform for dialogue between academia, business, and policymakers and as a catalyst for excellence in economic research. That vision goes back to Kaspar Villiger. As the founding Chairman of the Foundation Council, he played a pivotal role in establishing and shaping the UBS Center.
With this fifteenth edition of the Public Paper series, we honor Kaspar Villiger’s extraordinary contributions and legacy. By strengthening research capacity at the University of Zurich and fostering public dialogue around key societal questions, his vision continues to inspire the Center’s mission: bridging knowledge and society to build a better future.
From rising inequality and global trade tensions to climate change and the impact of artificial intelligence on labor markets – economists today are grappling with fundamental questions that will shape our collective future. In this special edition of the Public Paper series, all affiliated professors of the UBS Center share their perspectives on these challenges. Their contributions highlight how cutting-edge research conducted at the Department of Economics at the University of Zurich can help us better understand – and potentially solve – some of the most urgent issues of our time.
It is precisely this ambition that defines the UBS Center for Economics in Society. Since its founding, the Center has served as a platform for dialogue between academia, business, and policymakers and as a catalyst for excellence in economic research. That vision goes back to Kaspar Villiger. As the founding Chairman of the Foundation Council, he played a pivotal role in establishing and shaping the UBS Center.
Ernst Fehr on Google Scholarbrowse
Behavioral foundations of corporate culture
Author
Professor of Economics, Director at the UBS Center
Ernst Fehr received his doctorate from the University of Vienna in 1986. His work has shown how social motives shape the cooperation, negotiations and coordination among actors and how this affects the functioning of incentives, markets and organisations. His work identifies important conditions under which cooperation flourishes and breaks down. The work on the psychological foundations of incentives informs us about the merits and the limits of financial incentives for the compensation of employees. In other work he has shown the importance of corporate culture for the performance of firms. In more recent work he shows how social motives affect how people vote on issues related to the redistribution of incomes and how differences in people’s intrinsic patience is related to wealth inequality. His work has found large resonance inside and outside academia with more than 100’000 Google Scholar citations and his work has been mentioned many times in international and national newspapers.
Professor of Economics, Director at the UBS Center
Ernst Fehr received his doctorate from the University of Vienna in 1986. His work has shown how social motives shape the cooperation, negotiations and coordination among actors and how this affects the functioning of incentives, markets and organisations. His work identifies important conditions under which cooperation flourishes and breaks down. The work on the psychological foundations of incentives informs us about the merits and the limits of financial incentives for the compensation of employees. In other work he has shown the importance of corporate culture for the performance of firms. In more recent work he shows how social motives affect how people vote on issues related to the redistribution of incomes and how differences in people’s intrinsic patience is related to wealth inequality. His work has found large resonance inside and outside academia with more than 100’000 Google Scholar citations and his work has been mentioned many times in international and national newspapers.