Trump Change and Psychology

The U.S. has changed. The stock market has jumped almost 6 percent since the November election. Consumer confidence has climbed, and J.K. Rowling is enjoying her first movie hit since the last Harry Potter romp in 2011. Donald Trump’s talk of tax cuts and deregulation has perked up “animal spirits,” to use Keynes’ term. There’s a psychological story here. A recent study by Freakonomics whiz Steven Levitt shows that when people affirmatively make a change, they tend to feel happier. He surveyed individuals who flipped 20,000 coins in order to make both important decisions like divorcing a spouse and less weighty decisions like changing hair color. Change your husband, change your hair, feel better.

The change story fits with the “Hawthorne Effect,” based on experiments at a Western Electric telecom factory in Hawthorne, Illinois in the 1930s. When sociologist Elton Mayo and his team tweaked working conditions, productivity rose. When they turned up the lights, more work got done. When they shortened the workday, more work got done. When they changed the rest break schedule, more work got done. And then when they dimmed the lights again, still more work got done. By the time researchers had finished finagling, productivity was higher than ever and absenteeism fell. Almost all tweaks helped.

This sounds preposterous (and the data is shaky). Ultimately, psychologists concluded that the actual shop-floor changes did not matter. So why did the employees work harder? Because they appreciated that someone was paying attention to their plight on the assembly line. Tweaking the shop floor shook up the tedium. If Donald Trump is sparking a resurgence in “animal spirits,” perhaps it is because he represents “huge” change and he is communicating the following message to Wall Street and Main Street: “I care about your return on investment.”

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