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Abstract
Individuals have a penchant for action, often for good reasons. But action bias arises if that penchant is carried over to areas where those reasons do not apply, hence is nonrational. Action bias is explored theoretically, and then empirically, using data from surveys of hypothetical environmental decisions. Quite apart from agency considerations, individuals like to affect outcomes when gains are reaped. Given the ability to help one of two sites, we find that decision makers choose to foster improvement rather than prevent deterioration, despite framing that makes it arbitrary which site is improved, which preserved. Strong action bias-individuals choosing to reap gains even though they must impose losses-is also observed. These concepts are related to loss aversion, status quo bias, omission bias for losses, and bright-line behavior.
Key words: action bias, behavioral economics, loss aversion, status quo bias
JEL Classification: Q2, D78, D81
Action is the great business of mankind. John Locke
People like to take actions that have a positive impact.1 When one is acting solely for oneself, the more positive the impact, the greater the utility. When one is acting as an agent for others, the more positive the impact, the greater the reward. These are solid, rational reasons why individuals may have a penchant for action.2
But the penchant for action may be a product of nonrational behavior, in which case we label it action bias (AB). Decision makers who weight the direct effects of choices above side effects, or who redeploy resources to produce a positive impact in the "action" realm while slighting losses in the realm from which they are taken, display action bias. One potential source of AB is that nature may have equipped us with a desire to do something, a desire that is usually beneficial but sometimes clouds decision making. Recognition of adrenaline charges and fight or flight responses, perhaps even the fact that humans get readily bored and hence seek stimulation through new activities, suggest such possibilities. A second potential source is that individuals develop general tendencies toward action as a decision heuristic, but also carry the penchant over to inappropriate circumstances.
We explore how the quest to take action can sometimes skew peoples' decisions in the context of environmental choices. For example, we...