Unlocking Prosperity: Why Behavioural Sciences Matter in Investment Migration

Sibylla Verdi and Davide Petroni explore the profound impact of trust, immigration, and behavioural insights on economic prosperity.

The field of Behavioural Sciences has made significant progress over the years and has offered important insights into our understanding of human behaviour. This discipline focuses on the scientific study of human behaviour, emotions, and cognitive processes, providing valuable insights into how people make decisions, interact with each other, and adapt to their surrounding environment. One of the most evident successes of behavioural sciences has been their impact on public policies, economics, law, and many other fields. For example, behavioural economics has led to a better understanding of how people make strategic decisions and has suggested ways to improve the effectiveness of public policies in areas such as savings, health, mobility, investments, and social security. Furthermore, research in the field of social psychology has contributed to a better understanding of group dynamics, discrimination, prejudice, and strategies for promoting diversity and inclusion.

All these factors come into play when thinking about our ever-increasing globalised economy and the need for an expansion of investment migration. Behavioural sciences can provide solutions to the many questions of how to communicate and create benefits for the individual, the host country, and wider society in an increasingly interconnected world.

Nobel Prize-Winning Contributions

These Behavioural Science contributions have been honoured through several Nobel Prizes awarded to researchers who have investigated and applied behavioural insights, including psychologists Daniel Kahneman and Amos Tversky, as well as economists Robert Shiller and Richard Thaler. One of the most appreciated features of behavioural sciences is the ability to offer research paradigms that are elegant and simple, yet capable of shedding light on aspects of human nature that explain complex economic and social phenomena. One of the most ambitious challenges is to understand the mechanisms that contribute to the material and emotional well-being of individuals and communities. In summary, understanding the socio-cognitive processes underlying the prosperity of individuals and countries.

This ambitious goal is addressed by a research paradigm that was devised and then formalised in the middle of the last century by Merrill M. Flood and Melvin Dresher of the US Rand Corporation research centre to investigate a phenomenon that mirrors collective prosperity: the risk of nuclear catastrophe.

Referred to (not so brilliantly) as the “Prisoner’s Dilemma,” it has become one of the classic paradigms of game theory, fundamental in modelling and understanding an enormous variety of behavioural phenomena in multiple disciplines, from economics to politics, ethics to engineering, and even theories of both biological and cultural evolution of the human species.

Game Rules

Let us therefore briefly and very plainly illustrate this game. You are placed standing in front of a stranger with your hands behind your back. You are now told that the goal for each of you is to obtain the maximum gain for yourself individually (in keeping with the fundamental individualism of human nature). The task for both consists of deciding whether to display the right hand to the other with an open palm or closed palm. Both players must engage in this action in a simultaneous fashion. The possible economic outcomes for this scenario are four. If you both show your open hand, you will each get $1,000. If you show an open hand and the other shows a closed hand, you will lose $2,000 and the other gains $2,000. Conversely, if you show a closed hand and the other shows an open hand, you gain $2,000 and the other loses $2,000. Finally, if you both show a closed hand, you both lose $1,000. The game can be repeated for as many rounds as you wish.

Paradox of Cooperation and Rational Choice

This elementary game captures a fascinating paradox that lies at the heart of creating or destroying social and economic value determined by the often implicit and instinctive choices of human beings. Indeed, the most enlightened decision would evidently be that of mutual cooperation: both individuals choosing to show an open hand, and both getting $1,000. However, rationally, choosing to play with an open hand is less advantageous (at best, you only earn $1,000, at worst, you lose $2,000) then playing with a closed hand (at best, you earn $2,000, at worst, you lose only $1,000), with the consolation that the other loses the same amount too.

The implications of this paradox for the well-being of individuals, businesses and communities are vast and impactful: environmental damage, terrorism and warfare, financial crises, wasteful public spending, nationalism, ethnocentrism, and defensive conservatism pitted against social innovations and migration processes.

We saw this game play out at our first annual workshop series held in December 2023 in Vienna, Austria. The workshop series was created to help support executives involved in all aspects of investment migration get a better sense of how to navigate a rapidly changing migration landscape and to create sustainable change and growth in their businesses and organisations. The event saw a successful turnout, with participants not only engaging in a lively round of the ‘prisoner’s dilemma’ tournament, full of unexpected twists and turns during the three-hour simulation, but also benefiting from theoretical insights into human behaviour and its potential applications in private, public, and non-governmental organisations during the subsequent debrief sessions. This led to spirited discussions involving real case studies, and plans for the next steps were developed.

The Role of Interpersonal Trust

Participants learned in our simple game that playing with an “open hand” implies the risk of suffering losses, being exploited by others, experiencing frustrations, and incurring economic and emotional costs. But playing with an “open hand” is also the most evolved and enlightened way to create stable personal and social prosperity and well-being. To be inclined to play with an “open hand,” it is necessary to cultivate one of the most generative and challenging mental attitudes: interpersonal trust. To trust, one must develop two propensities: one to see in the other resources and opportunities, not just problems and dangers, and the other to tolerate vulnerability to the risk of potentially being “preyed upon” by others. This risk, as demonstrated by the studies of Daniel Kahneman, is particularly painful for the average human mind, which is evolutionarily programmed to be more loss-averse than gain-oriented: the motivation to avoid pain is at least twice as powerful as the motivation to seek pleasure and gain!

Immigration as a Key to Prosperity

Statistics on socioeconomic indicators of prosperity in different countries clearly demonstrate that cultures in which the attitudes that fuel interpersonal trust are cultivated are the countries that record the highest levels of quality of life and the highest propensity for openness to skilled and value-enhancing immigration. A nation that adopts a trusting approach to healthy and sustainable migration demonstrates its willingness to collaborate and welcome those seeking opportunities. Furthermore, due to social reciprocity mechanisms, if a country shows openness and pre-established trust towards immigrants: for example, second passport seekers, it can inspire similar behaviour from them, leading to collaboration and mutual prosperity.

A successful example of this approach is Canada’s immigration policies based on meritocracy. Canada has managed to harness trust and attract talent and investments from around the world, creating a prosperous and multiculturally rich society.

In conclusion, behavioural sciences, through the Prisoner’s Dilemma and the study of the most effective approaches to play this game, teach us that trust and strategic cooperation are key resources for fostering prosperity. Opening doors to immigration with a well-managed, forward- thinking, inspiring, and proactive policy can not only enrich a nation culturally but also significantly contribute to its economic growth and social well-being. The prosperity of a country is the result of multiple factors, but trust and high- quality immigration can be key elements to unlock its full potential. Openness towards constructive and flexible immigration will become even more critical to countries in the near future as Gen Z and millennials will no doubt seek opportunities for virtual citizenship or flexible multi country citizenship and new experiences where they hope to engage in socially responsible investment in the new host country.

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