Personal experiences of economic outcomes, from financial crises and pandemics to individual-level job losses, can have a longlasting impact and shape risk attitudes and behavior for years to come. Modern research on experience effects shows that individuals act as if past outcomes that they experienced were overly likely to occur again, even if they are fully informed about the actual likelihood. Modern brain science helps understand these processes. Evidence on neural plasticity reveals that personal experiences and learning alter the strength of neural connections and fine-tune the brain structure to those past experiences. Experience effects explain belief formation and decision-making in the context of inflation, home purchases, mortgage choices, and consumption expenditures.
is a Professor of Economics and Finance at the University of California, Berkeley. Her work focuses on Behavioral
Economics/Behavioral Finance, Corporate Finance, and Law and Economics. Please find more information about Prof. Ulrike Malmendier on her website.