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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.

images 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.

organ-donations-measurement-graph-500x322

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.

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4 Comments Post a comment
  1. Jan #

    You seriously need to read “Thinking, Fast and Slow” if you want to delve deeper into this subject and gain an understanding of the roots of behavioural economics as it has developed over the past few decades.

    I posted an article a a couple of months ago that goes as far as to completely bring much of “Western” psychological/economic research into question: essentially a graduate student travelled the world presenting various tribes with variants on game theory’s classic “prisoner’s dilemma” scenario. He expected to reaffirm trends and conclusions that have been confirmed repeatedly and generally accepted by scholars in the field, but the results were so contradictory and outlandish that it has started a movement in certain academic circles to reasses much of the research and conclusions that we have held to be universally true. The general demographic for many of these studies is white, university-educated, early 20’s-aged males. Hardly a representative sample.

    July 15, 2013
  2. Finally managed to get my hands on Kahneman’s book. Just finishing off “Positive Linking” by Paul Ormerod. Check it out, its about how our decisions are influenced by network effects. interesting stuff.

    Please send me a link to that article if you get a chance. Its just the kind of thing I’ve been looking for.

    Hope you are well Jan

    July 15, 2013
  3. Very interesting question. And a difficult one, in regards of the growing (fruitful, necessary and successful) role of technology in our societies: Science is the result of a “rational type” of thinking. Even if we tend to forget the role of intuitions, “feelings” about a projects and even dreams for scientific discoveries.

    Philosophy has different school of thoughts. For my part, while reading Niezstche, I found that his theory of the need for rationality emerging from fear is an interesting one. Can’t we also parallel it with the observed societal fact that the more insecurity there is, the more we need to rely on tangible, scientific, known things? The more economic insecurity, the more nationalistic feelings? The need for security is a human characteristic. Since we’ve discovered that we could understand some of it, we deducted all must be understandable.

    Nieztsche explains this major turnaround back to Antique Greece, where about -450, with Sophocles, the rational debate becomes more popular than the classic (and sublime) Tragedy, where Gods, Passions and the need of human transcendence were the core of the piece.
    With the new preferred form of rational debate, “Everything, to be beautiful, must be rational” (Socrates is also part of the movement), and therefore theater becomes a “cold artifice” (Nieztsche) rather than a wandering and elevating spectacle. It is interesting to see the following decline of the empire after this specific fact.

    To the philosopher, Socrates represented the archetype of an obsession for Truth, going even to the extreme of an Idealism. He associated morale and ethics with scientific knowledge, because only what was rational was good. Niezstche (and I rejoined him) believed that there was truth in intangible as well. Art, for instance. The hidden truth behind Art, Music, Poetry…
    And that the absolute need for understanding and monitoring everything, and in our modern societies, to believe that everything can me monitored, mastered and modeled, is a misconception that reveals a fear, an insecurity. (Of course, it also did produce efficiency, and as in everything, there’s no black and white type of thinking here, just ideas for thoughts).

    As you say, Dave, the part of irrational is huge in our societies, despite the little role that we seem to acknowledge. Its importance is still unclear, and, at the end of the day, I think that the reality is simply too complex for economical model, or human minds, to get our heads around it.

    And thank…”god!” 😉 Haha

    July 17, 2013
  4. Very interesting response. Thank you Debora 🙂

    I agree with your thinking, my only fear is that as we move forward into a world completely dominated by systematic, rational, model orientated information technologies, we will be forced to let go of alternative perspectives of the world because of our natural instinct to adapt to the surrounding environment.

    We are creating a new reality, one born entirely of human creation (which is fascinating in its own right) but at the same time, it like we are closing off the entrance to the reality from which we came.

    Maybe Nietzsche was right when he exclaimed that man is not an end, but rather a bridge, a natural step in the process of life. But then should we put all our efforts into building this bridge as quickly as possible, or should we hold back to question our direction before heading off on a route of no return? The wise choice would of course be the latter, but as you mentioned, the fruit that technology bears is so so sweet!

    July 17, 2013

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