A draft NBER paper, very close to my own work:
What can economists learn from and contribute to personality psychology? What do we learn from personality psychology? Personality traits predict many behaviors – sometimes with the same or greater strength as conventional cognitive traits. Personality psychology considers a wider array of actions than are usually considered by economists and enlarges the economist’s way to describe and model the world. Personality traits are not set in stone. They change over the life cycle. They are a possible avenue for policy intervention.
Personality psychologists lack precise models. Economics provides a clear framework for recasting the field. Economics now plays an important role in clarifying the concepts and empirical content of psychology. More precise models reveal basic identification problems that plague measurement in psychology. At an empirical level, “cognitive” and “non-cognitive” traits are not easily separated.
Moreover, personality psychologists typically present correlations and not causal relationships. Many contemporaneously measured relationships suffer from the problem of reverse causality. Economists can apply their tools to define and estimate causal mechanisms. In addition, psychological measures have substantial measurement error. Econometric tools account for measurement error, and doing so makes a difference. Economists formulate and estimate mechanisms of investment – how traits can be changed for the better.
There are major challenges in integrating personality psychology and economics. Economists need to link the traits of psychology with the preferences, constraints and expectation mechanisms of economics. We need to develop rigorous methods for analyzing causal relationships in both fields. We also need to develop a common language and a common framework to promote interdisciplinary exchange.
There is a danger in assuming that basic questions of content and identification have been answered by psychologists at the level required for rigorous economic analysis. In explaining outcomes, how important is the person? How important is the situation? How important is their interaction? I address these issues in this paper.