394. Rationality and heuristics
How could one still maintain, as economic theory did, that people make
rational decisions? Already long ago (in
the work of Herbert Simon), theory took bounded rationality into account, but
only in a limited sense. The idea was that the capacity for rational thought is
limited, and should be used where priority is highest.
A distinction was made between substantive and procedural rationality.
Procedurally, it is rational not to evaluate everything in a substantively
rational mode. That makes sense and still applies. One encounters it again in
Kahneman’s distinction between ‘system 1 and system 2’. The first is based on
unreflected routines where one acts without conscious deliberation, while the
second entails conscious, critical reflection.
Without routines, life would not be practically viable. Imagine that in
walking, or driving a car, one must reflect on it. Then one would not have
attention to where one needs to go, and why, and to talk with another passenger.
But there is more, as understood in more recent ‘behavioural economics’,
which has adopted insights from social psychology, in the form of decision
‘heuristics’, shortcuts for fast decisions, which are procedurally but not
substantively rational. Here is a survey of some of them.
The heuristic of ‘availability’ is that people pay
attention to what is ‘available’, in the sense of forcing attention, being emotionally
laden, as a threat or opportunity. That can go wrong, in an excess of impulse, neglecting
less salient but still important issues, but it helps in setting the agenda for
scarce attention. Also, the danger of routines is that they are also practised where
they do not apply, and then emotion of danger or opportunity is needed to
catapult one into critical awareness.
Another well-known heuristic is that of ‘loss aversion’:
a perspective of loss (‘loss frame’) weighs more heavily than that of gain
(’gain frame’). One goes to greater extremes of conduct to keep what one stands
to lose than to gain what one does not yet have. In evolution, that contributed
to adaptiveness: loss leads sooner to death or harm than gain does. This has a
stabilising effect on relationships: the one who wants to break the
relationship does it to gain, the other stands to lose, and will go to extremes
to prevent it.
Another heuristic is to raise incidents tot the level
of laws: ‘You always with your …..’, while it happened only once or twice. That
is unreasonable, but can have survival value to respond in time to threats.
A fourth heuristic is that of ‘escalation of
commitment’: the more loss one has incurred in a certain position, the more one
commits to it, since ‘otherwise the losses would have been in vain’. That is not rational: the past is water under
the bridge and cannot be changed; one should look only at possible further
losses in the future. That heuristic also works in favour of the continuation
of a negative relationship. A classic example is that of George Bush, for whom
it was difficult to withdraw from Irak, because then all the American deaths
‘would have been in vain’. It would also amount to an admission of having made
a mistake, in entering. A new president, Obama was needed for withdrawal, and
then he made the same mistake of increasing the commitment in Afghanistan.
A fifth heuristic is that of engaging only upon
incremental deviations from existing policy, even if the initial position does
not make sense, and a radical turnaround is needed.
A sixth is ‘cognitive dissonance’, where after a
choice one only has attention for information that confirms that it was a good
choice, not to what denies that. In a difficult to end relationship one only
wants to hear the good things of the partner, and when one has broken the relationship
only the bad things.
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