Objective numeracy exacerbates framing effects from decision-making under political risk

Abstract

While Prospect Theory helps to explain decision-making under risk, studies often base frames on hypothetical events and fail to acknowledge that many individuals lack the ability and motivation to engage in complex thinking. We use an original survey of US adults (N = 2813) to test Prospect Theory in the context of the May 2023 debt ceiling negotiations in the US Congress and assess whether objective numeracy moderates framing effects. We hypothesize and find evidence to suggest that most respondents are risk-averse to potential gains and risk-accepting to potential losses; however, high numerates are more risk-averse and risk-accepting to gains and losses, respectively, than low numerates. We also find that need for cognition interacts with numeracy to moderate framing effects for prospective losses, such that higher need for cognition attenuates risk-acceptance among low numerates and exacerbates risk-acceptance among high numerates. Our results are robust to a range of other covariates and in models accounting for the interaction between political knowledge and need for cognition, indicating joint moderating effects from two knowledge domains similarly conditioned by the desire to engage in effortful thinking. Our findings demonstrate that those who can understand and use objective information may remain subjectively persuaded by certain policy frames.