Discovery Today

Asian and European leaders closed ranks on Saturday to try to bolster confidence among investors who fear that a global credit crunch has ushered in a deep and damaging worldwide recession.

The worst financial crisis in 80 years has forced countries to work together to find ways to help shore up a financial system crippled by banks fearful of lending to each other.

But with evidence mounting that Europe is already in recession, analysts worry that cooperation in shoring up banking systems could be threatened as governments begin to turn their attention to reviving domestic demand.

“We need to enhance cooperation between all countries, because only with cooperation can we create the strength to overcome hardships,” Chinese Premier Wen Jiabao said at the end of a two-day summit of 43 Asian and European leaders in Beijing.

Governments have pledged around $4 trillion to support banks and restart money markets to try to stem the crisis and have looked into introducing tougher financial rules to guard against any repeat.

Wen said countries needed to strike a balance between innovation and regulation and between savings and consumption.

“We need financial innovation, but we need financial oversight even more,” he said, adding that China’s priority was to spur domestic demand to ensure the country maintained fairly fast, steady growth.

GULF MEETING

In the Gulf, finance ministers and central bank governors said at a meeting to discuss coordinating policy that they would discuss directing more government funds into banks and regional stock markets, Al-Arabiya television reported.

Saudi Arabia, the United Arab Emirates and four other Gulf states have so far adopted separate responses to ease the pressures of the liquidity crunch on their banking sectors.

They would also look at possibly revising investment plans abroad, Al-Arabiya said, without giving a source.

Any significant redirection of Gulf investment to domestic markets could be a concern for banks and other firms in the West which have eyed the huge sums in the region’s state-run sovereign wealth funds as a potential source of capital while European and U.S. credit and share markets are seized up.

A senior Gulf official at the meeting said most were worried about the oil price.

Oil fell nearly $4 a barrel on Friday, dampened by fears of global recession and slowing fuel demand despite an OPEC agreement to cut output.

On Friday, private-sector activity in the euro zone’s economy contracted at the fastest pace in at least a decade and data showed Britain’s economy shrank 0.5 percent in the third quarter — a much worse performance than economists

A suspect in the shooting deaths of Jennifer Hudson’s mother and brother is in custody and is being questioned. The Oscar-winning actress’ nephew was not with the suspect. Court records show Balfour pleaded guilty in 1999 to attempted murder and vehicular hijacking. He also was convicted in a 1998 case of possession of a stolen motor.

Behavioral studies have shown that emotions play an important role in decision making. However, it was not known to what extent our negotiating skills depend on our emotions.

Columbia University scientists Andrew Stephen and Michel Tuan Pham decided to explore the interplay of emotion and reason in everyday deal-making. They designed a series of laboratory experiments to see if people who trust their feelings (and those who do not) handle themselves differently in the art of negotiation.

In this study, they used a classic negotiation game called the “ultimatum game.” In the ultimatum game, one person (the “proposer”) has a given amount of cash, which he is told to divide with a second person any way he likes. The catch is that the second person must either accept the offer or reject it entirely, no negotiation allowed. If he rejects it, both players walk away with nothing.

To test how emotions influence deal-making (or in some cases, deal-breaking!), the researchers manipulated how much participants trusted their feelings before they played a series of ultimatum games for real money. They asked some of the participants to think of two occasions in their past when trusting their feelings to make decisions resulted in good outcomes. People generally find it easy to think of two such occasions, giving participants greater confidence in trusting their own emotions while making decisions. Other participants were told to think of 10 occasions when trusting their feelings to make decisions resulted in poor outcomes—this made participants wary of trusting their feelings. Then all the participants played a computerized version of the ultimatum game, in the role of “proposer.”

The results, as reported in the October issue of the journal Psychological Science, a journal of the Association for Psychological Science, were intriguing. The participants who were more confident in following their emotions offered somewhat less money than the others. This is because they were more focused on the “gist” of the offer itself (and what felt good), rather than on estimating the other player’s possible reaction and calculating the probabilities of payoff. In short, the immediacy of the offer trumped the more complicated calculation.

When the researchers tried two other variations of the ultimatum game (one with more room for negotiation and one with less), they found similar results. When the participants were primed to trust their emotions, they saw the transaction as simpler and cleaner — rather than complex, abstract and cognitively demanding. The researchers believe that emotional negotiators actually have an easier time visualizing the offer itself: They picture themselves offering someone $20 from their $50 pot and it feels “okay.”

“We believe that when proposers rely on their feelings, the relative power implied by the rules of the game is central to their gist representation of the negotiation, and this representation shapes whether offers ‘feel right’ to them,” the authors stated.

Interestingly, the negotiators who were guided by their emotions did not fare worse than the others financially. Indeed, they ended up with at least as much, and often more, than their more calculating counterparts, suggesting that emotional decision making may not only be simpler, but may also be more lucrative.