Accepting our irrationality
Throughout recent history rationality has been praised like a sort of superpower. We are taught that rational thinking is the best way to solve problems and make critical decisions. In the bigger scheme of things it also helps on an economic level, due to the fact that if people are being rational decision makers, then it becomes easier for economists to predict trends using their mathematical models.
But are people as rational as most economists would like to believe? Probably not, and as I will explain to you, it is a far bigger problem than just a lack of education.
One of the most effective examples that can be used to show our irrationality is the graphic of the two tables on the right of your screen. From a strictly visual point of view, it seems the left table is longer than the right one. But once you measure them, you will find that they are exactly the same length.
This to me is mesmerizing in itself, but the real realization is that once you have measured both tables and know for sure that they are the same size, your perception of them doesn’t change from your original view. It is impossible for you to perceive them to be what they actually are, the same length. We thus cannot see the truth, even if we know that it’s right there in front of us.
There are many other visual illusions that show off flaws in our perception (I’ll post links below). What is even more disturbing is that over 50% of our brain is involved with vision. We have adapted and evolved vision to be the dominant sense we use to understand the world. And so if we are making such obvious visual mistakes, it is likely that we are making mistakes in other ways that maybe aren’t as apparent.
A famous example of irrational decision making was an experiment done by Daniel Ariely relating to organ donation in Europe. What happened was that people from countries within Europe were asked on some sort of licencing documentation whether they would like to donate their organs when they die.
As you can see from the graphic on the right, there were two distinct groups. The reason for the massive difference in choice was due to a simple difference in the way the question was asked to the two different groups. The group of countries with a low donation rate were asked “Please tick the box if you would like to donate your organs when you die” while the group with the high donation rate were simply asked “Please tick the box if you would not like to donate your organs when you die.”
This small difference in question structure had an enormous influence on the respondent’s decision, yet you would think with something as personal as organ donation the decision would surely be more rational or at least inelastic to such a seemingly insignificant external influence.
It was concluded that this decision making flaw resulted from a fear of complexity. People having to make the decision about organ donation simply could not find it within themselves to make a good decision and so they decided to go with what seemed to be the best answer based on the document. Thus thousands of these educated, “rational” Europeans did not make a self-interested, rational decision, rather they made a decision based on a single, simple external influence.
What is going on!?
Psychological and behavioural economic research is slowly helping us to realize that we are not as rational as initially thought. We are starting to recognize our cognitive limitations and that we are more prone to delusion and a warped reality than we would like to believe.
This problem raises some interesting questions about standard economics, which for the most part takes man to be rational, self-interested and with the goal of maximizing utility. This is incredibly oversimplified due to the facts standard economics doesn’t consider that a large amount of our decisions are affected by social influences and a lack of rationality. There are a variety of feedback loops that economics just doesn’t want to make room for. And to be honest, even if they tried I think the level of mathematics required would be too complex for them to be put into an effective model.
Therefore with all this in mind I arrive at a question, a question with a solution that admittedly lies beyond my rational comprehension..
How should governments, policy makers, economists, etc deal with the fact that there are known cognitive flaws (and possibly unknown ones) that cause us to interpret and act irrationally?
Should governments just educate and develop people to be as rational as possible and just accept that there will always be room for error, or should they adapt policy and institutions to better suit our most prevalent cognitive flaws? Food for thought.
- A Test to Measure How Rational You Really Are (3quarksdaily.com)
- Book Review: The Upside of Irrationality (ozziepaezdecisions.com)