Irrational Economist_ Making Decisions in a Dangerous World - Erwann Michel-Kerjan [123]
Thinking clearly about the substance of policy decisions requires a knowledge of how to specify the full set of objectives, ask the right questions, identify useful information, balance the pros and cons of the proposed alternatives, and communicate about all of this. To do this well, one needs a thorough understanding of numerous concepts that have been well developed in the decision sciences, which here include aspects of economics, behavioral decision theory, and decision analysis. These concepts concern the elements of decisions, such as objectives, alternatives, uncertainty, and value tradeoffs; the way people process information and knowledge, such as anchoring, satisficing, and ambiguity; and features relevant to many policy decisions, such as compounding, cause-effect relationships, sunk costs, and the amplification of risks.
In a democratic society, citizens must think clearly about policy decisions in order to provide useful input to the policy-making process. Also, numerous technical, professional, and managerial personnel in government agencies and legislative bodies have responsibilities for the clear thinking that is required for policy decisions. The results of their thinking are passed on to agency heads and legislators to frame the policy decisions, to define alternative choices, and to provide information about the pros and cons of those choices.
This chapter describes some simple experiments and experiences with well-educated individuals that reveal a lack of understanding of critical decision sciences concepts and the subsequent impacts on policy decision making. These individuals either influence policy or have an education representative of those who do so. The concepts discussed are illustrative of numerous other concepts that are likely not known or well understood. Since the book is about making better decisions in a complex world, I will use examples of policy decisions in a risky environment.
ARTICULATING AND UNDERSTANDING VALUE JUDGMENTS
Values are absolutely essential to policy decisions. If we do not have any values relevant to a decision, then we should not care about it and of course we should not spend any time thinking about it.
Over the last few decades while consulting on numerous policy decisions, such as siting a nuclear waste repository or setting a national ambient air quality standard, I have noticed that individuals responsible for recommending choices or making decisions cannot articulate all of their relevant objectives. In a series of recent experiments with colleagues at the Duke Business School designed to investigate whether people can identify objectives for problems of importance to themselves, my colleagues and I found that individuals typically can identify only about half of their objectives and the ones they miss are as important to them as those they identify.1
In one study we asked doctoral students the following question: “Suppose you have identified five potential dissertation topics and now have to choose one of them; list all objectives that are relevant for your selection.” After they’d given their responses, we showed them a complete list from which they could check all the objectives that mattered to them. Comparing their original lists of objectives and those later checked, we found that a majority of the twenty-three participants missed many significant objectives. The missing objectives often included the following: “helps me build a coherent future research program,” “helps me balance my career and personal life,” and “addresses problems that are important.” All of the students who recognized these objectives only after viewing the master list subsequently indicated that they were relatively very important.