Irrational Economist_ Making Decisions in a Dangerous World - Erwann Michel-Kerjan [32]
FIGURE 6.2 Profile of a Decision’s Quality
Source: Copyright 2008, Decision Education Foundation. All rights reserved.
FIGURE 6.3 DEF Approach
At some point the rational model encounters the problem of aggregation, namely how to put the pieces together again. Here we need to judge periodically how far to improve any one link before knowing the costs and benefits of this effort. The challenge is to balance wasted effort due to incremental myopia against waste stemming from overshooting on any one link. This meta-decision, about how best to approach the original decision, is itself complex and uncertain. It calls on feeling and intuition that transcend the rational model.
IN CLOSING: A SPORTS ANALOGY
How do we move forward at DEF and elsewhere in improving decision making in the real world? The prescriptive side of decision making can be approached in at least three distinct ways. Using a sports analogy, we can improve our tennis or golf game by (1) studying how the game ideally should be played, (2) focusing on our own characteristic weaknesses, and (3) changing the environment in which we play or practice to counter our natural biases. Let’s examine each.
Classical rationality follows approach 1 in that we teach people how a decision should ideally be made. In the context of a golf lesson, this means spending considerable time on achieving the textbook ideal in terms of grip, stance, and swing. And in more advanced golf classes it means understanding the physiology of our body, the physics of the club swing, and the ball’s trajectory as well as its behavior on the green (i.e., reading the grain or slope).
Approach 2 would go much lighter on the general theory at first and focus much more on common as well as idiosyncratic mistakes of beginners (see Russo and Schoemaker, 2002). The golf coach might say, forget all the theory and just hit a hundred balls so that we can see where your greatest weaknesses lie. For some this might suggest focusing on improving their stance; for others, on improving their grip; and for yet others, on keeping their head still or having their weight shift sooner during the swing. The key distinction is that approach 2 starts with careful behavioral observations, not general normative theory, as well as with strong tailoring to a the specific person (rather than assuming that one size fits all).
Lastly, there is the approach of changing the environment through decision architecting, as emphasized by Richard Thaler and Cass Sunstein in their book Nudge. Once we know that people are prone to certain biases, we might change the decision environment such that it counters these tendencies. In golf, we might discourage beginning players from tacking difficult courses or teeing off the black tees, so that they don’t overreach and develop bad habits. For adolescents, we might disable the radio in the first year of driving, add a video recorder in the back of the car, or install a tamper-proof black box that records engine speeds and unusual brake pressures. In high school cafeterias, food managers might place the salads and other healthy foods within easier reach than the desserts. There are many creative ways to change the decision environment to mitigate the adverse effects of our common decision biases.
To really improve decision making in the real world, all three approaches need to be pursued and integrated as much as possible.
RECOMMENDED READING
Gigerenzer, Gerd (2002). Adaptive Thinking: Rationality in the Real World (Evolution and Cognition Series). Oxford: Oxford University Press.
Keelin, Tom, Paul J.H. Schoemaker, and Carl Spetzler (2008).