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ABSTRACT. Over the past decade, there has been increasing evidence describing investment and social interactions as direct determinants of traits that are assumed to evolve as a function of the experiences of agents, the stability and malleability of personality traits and preferences, the presence of behavioral tendencies for job training policy, and the importance of accurate predictions of risk preference. This paper aims to analyze and discuss psychological and neuroeconomic understanding of risk preference, the special nature of money in incentives, the causal impact of personality on outcomes, and the role of cognition in shaping personality.JEL Codes: H75; P36; D03Keywords: trait; personality, economic behavior; social interaction1. IntroductionIn this paper I am particularly interested in exploring the power of cognitive ability in predicting social and economic success, the role of investment in producing traits personality as an outcome of cognitive processes, the potential peril of paying too much, and behavioral antecedents to individuals' poor decision making. These findings highlight the importance of examining the role of context on the measurement of personality traits, the behavioral economics of education, the importance of personality traits in predicting socioeconomic outcomes, and effects of financial education interventions. My analysis complements the growing literature on self-learning about traits that evolve by fixed biological principles unrelated to the experiences of individuals, the failure of cognitive measures to predict certain outcomes, the relationship between behavioral science and public policy, and the effects of environment on personality change.2. The Behavioral Economics of EducationSocial preferences depend on agent's evaluations of a social condition or the intentions of other agents. An intuitive level of social preferences should be linked with empathy and outgoingness. Self-control, perseverance, and other aspects of conscientiousness are the major personality contributors to success in school and in life. Specific personality traits may moderate the effect of cognitive skills and resources on outcomes. Cognitive abilities exhibit dramatic mean-level change and strong rank-order stability from early childhood through adolescence. Dramatic rank-order or mean-level change in personality may be nearly impossible after early adulthood. People typically become more socially dominant (Bacalu, 2013), conscientious, and emotionally stable across the life course. After childhood, the greatest mean-level change in most personality traits takes place in young adulthood. As individuals move from childhood to adulthood, they have more control over their environments. The family studies of genetic influence measure only the effects of shared environments. Personality change in adulthood may be precipitated by major shifts in social roles. Cognitive ability can be affected by environmental factors. Both cognitive and personality skills affect adult outcomes, having various relative importance in explaining different outcomes. (Borghans et al., 2008)Taxpayer behavior cannot be explained solely by purely economic considerations. The interactive climate among all actors in a society is decisive for whether individual gain is maximized or cooperation takes place. Social norms are strong regulatives of behavior. Psychological factors undoubtedly affect tax behavior. Audits and penalties may be perceived by individuals as signaling a lack of trust. The interaction dynamics of government, tax authorities, tax accountants, and taxpayers are relevant to the compliance decisions of an individual taxpayer. Public goods financed from tax revenues benefit both the individual and the community. A social norm can be distinguished by the feature that it is process-oriented, unlike the outcome-orientation of individual rationality, and suggests that the nature of one's social interactions with others affects one's own compliance decision. …
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