Assessing the Rationality of Our Thinking and Decision Making

When my husband and I began homeschooling our children, I developed a simultaneous interest in frugality. That is, becoming frugal was an important lifestyle component of our homeschooling endeavor, because our decision required that we change our employment such that we now had to live within much more limited means than what we had become accustomed to. Therefore, my new reading genre included titles such as, The Complete Tightwad Gazette (1998), Backyard Homesteading (2011), Living More with Less (1980), and the More-with-Less Cookbook (1976). By far, my favorite titles were the More-with-Less titles. These books were produced by folks who followed the Mennonite faith, and they offered me a unique perspective of the world, and this intrigued me and encouraged me to learn even more.

Thus, I began sourcing Mennonite and Anabaptist material to read, and I looked for a Mennonite church to attend. I subscribed to The Mennonite magazine. Although there were no local Mennonite churches, I did find that College Mennonite Church in Goshen Indiana, posted their wonderful sermons online, which I could watch at my leisure. This led to increased interest in titles such as The Upside-Down Kingdom (2011), The Ragamuffin Gospel (1990), and The Powers that Be (1998). I also heard much talk about the concepts of thinking relationally, being authentic, and acting intentionally. At that time, those ideas confused me a great deal. I wondered how it was that I might be failing in those areas. I did not even understand what those notions were supposed to mean. What I know now is that these influences introduced me to alternate worldviews, and alternate ways of being.

What I began to discover is that much of what I had taken for granted was a way of thinking and a way of living that, perhaps, dominates mainstream U.S. culture, and even much of the Western World, but it was not the only way to understand reality.  Up to that point in my life, my ideas and actions had been shaped to a very large extent by a set of sometimes-faulty assumptions. These assumptions were based in what, professor of psychology and behavioral economics, Dan Ariely, named in his New York Times best seller, Predictably Irrational (2010), “standard economics”. According to Ariely, standard economics “assumes that we are rational – that we know all the pertinent information about our decisions, and that we can calculate the value of the different options we face, and that we are cognitively unhindered in weighing the ramifications of each potential choice (Ariely, 2010, p. 317.).” In other words, we only think that we think rationally, and because of this, we tend to believe that we make logical, rational, and sensible decisions. Plus, we believe that we make our decisions based on our own self-interest. Yet this is not necessarily so.

Ariely has articulated much of what I had been absorbing through learning alternate worldviews as he described what is known as behavioral economics. Behavioral economics brings psychology and economics together in order to explain how, although ‘irrational’ behavior is a part of being human, that irrationality has a degree of predictability. Ariely argues that forces such as relativity, social norms and emotions influence our behavior and our economic decisions in ways that do not necessarily benefit us. For that reason, if we wish to make ‘good’ decisions, we should understand how these forces work. When we do, we are then able to engage in thinking relationally, being more authentic, and acting with intention. Ariely’s book, Predictably Irrational (2010), described how we all sometimes tend to act irrational in very predictable ways.

In fact, rather than thinking objectively or rationally, we think and make decisions and act in relation to context. This context is by means of comparison, and we find it easier to compare similar items than items that are less alike. This is why we have difficulty, as it is said, ‘comparing apples to oranges’. We also think in terms of anchors (Ariely, 2010, p. 32.). What this means is that we may not know the ‘value’ of an item, unless we can think of it in relation to something that has a predetermined value, such a manufacturer’s suggested retail price (MSRP). Then, when we compare, for example, different toasters, with their many options, and their MSRP in addition to the sale price, we presume that we know when we are getting a good deal. We know a good deal in only relation to comparisons.

Yet, sometimes, marketers who understand our decision-making processes create ‘decoys’ to aid us with our comparisons. When decoys are used, they create an arbitrary coherence to our options, and thereby direct us to purchase the item or service that will generate for them a higher profit (Ariely, p.28.). In light of this knowledge, theories of supply and demand hold less authority. Again, what we view as a ‘good deal’ can only be understood in relation to other similar items and their prices. Therefore, understanding how and why we make such comparisons can help us to prevent the downfalls that sometimes accompany such decision-making processes.

Additionally, marketers use their knowledge of how we respond irrationally to offers for free items or services. A free offer is used many times as a sales pitch. This is the marketing method used when a cell-phone service offers a ‘free phone’ with a signed contract. Ariely states that, “zero is an emotional hot button – a source of irrational excitement” (Ariely, 2010, p. 55.). When given such opportunity, based on the emotions that arise with the prospect of ‘free’, many people do not consider the actual value of the product or service that is being offered. They simply select the option that is advertised as ‘free’, perhaps costing them more in the long run. It would seem logical and rational that the free option is the best option, and this is what is many times chosen. Yet, when comparing the actual costs, we find that free, ironically, many times, costs more.

Furthermore, our decision-making processes are situated within and affected by the context of both social norms and market rules. For example, Ariely demonstrated this occurrence in the context of the offering of free candy as opposed to the offering of cheap candy. Through scientific experiments, he found that with an offer for free candy, college students self-regulated by taking only one or two pieces, and leaving enough for all to share, but if the candy offered was cheap (instead of free), people felt quite decent while ‘stocking up’, so to speak, and taking more than their fair share (Ariely, 2010, pp. 111-112). Therefore, it was demonstrated that when we are acting within social norms, we tend to limit or self-moderate our behavior, thinking of others’ wants and needs in the process. Yet, in contrast, when we act within the context of market rules, we generally feel quite comfortable justifying our behavior even if it is extreme and less socially just.

Furthermore, the acts of volunteering and reciprocity of gift giving fall under the realm of social norms, not market rules. Yet, it is important to know that if any notion of monetary value is inserted in such a social transaction, it will immediately change the relationship from one that is concerned with communal good to become one that is governed by individualistic market rules where self-interest is prized (Airely, 2010, pp. 75-102.). Therefore, it is important to understand that social norms indicate that when volunteering or gift giving, we should think of others, but if we add any notions of money those transactions market rules take over, which indicate that we should then act in our own self-interest. Consequently, understanding how the forces of social norms vs. market rules work can help us recognize how they can be used either for our benefit or else against us.

As already noted, emotions may influence decision-making, steering us away from our predetermined rational choices. To examine this idea further, Ariely conducted studies concerning the effects of sexual arousal on college men’s decision-making. He concluded that how a person thinks they will act when aroused and how they actually do act when aroused are different (Ariely, 2010, pp. 119-135.).  He surmised that other emotional situations such as anger, frustration, and hunger might potentially trigger similar effects. Thus, understanding that we may, in fact, act differently than what we presume we might, can help us to choose to avoid situations that might result in undesired outcomes, or else we might devise strategies to better protect ourselves.

An additional manifestation of irrational lack of self-control presents itself in human tendency to procrastinate. Sometimes we do not work as hard as we might in order to achieve future goals because of lack of what psychologist B.F. Skinner named “schedules of reinforcement” (c.b. Ariely, 2010, p. 159.). What this means is that if we do not provide ourselves with positive reinforcements along the path toward a larger future goal, we might not follow through on our original commitment. Instead, we may opt for more immediate rewards, that are, perhaps less rational.

Further irrationality presents itself in how we tend to think about our possessions. We regard our own possessions to be of higher value than what others estimate them to be. Ariel surmised that this might be because of the amount of work that goes into acquiring them (Ariely, 2010, p. 175.). This bias, known as the positivity bias, predisposes us to value anything related to ourselves in a very high regard (Ariely, 2010, p. 182). Therefore, it is clear that we irrationally regard our own possessions as having a higher value, and the same time regard other’s comparable possessions as having less value.

We also sometimes have an irrational tendency to keep all of our options open. This is perhaps because we are afraid of losing what we already have. Yet, if we keep all options open, too many choices may create problems, such as those of indecision or of us getting caught up in chasing “worthless choices” (Airely, 2010, p. 192.).  For that reason, the decision to keep as many options open as possible may result in the irrational choice of not attending to our priorities.

Surprisingly, how we perceive reality can, at times, distort the truth. Ariely stated that “previously held assumptions”, such as stereotypes, “can cloud our point of view” (Ariely, 2010, p. 201.). For example, we may have certain political beliefs and wish to maintain them. Therefore, we might tend to focus on information that confirms our beliefs, while at the same time disregard information that disconfirms our beliefs. In this way, our previously held assumptions are confirmed in the way that we either allow or disallow information to filter in. The result of such filtering, named cognitive dissonance, is an irrational distortion of the truth.

Another factor that tends to distort the truth is the price of an item or service. When something costs comparatively more, we tend to regard it as being of higher quality. Peoples’ preference for high-priced pain medications, for example, ‘knowing’ that they work better (even if they are a placebo) is an indication of the power of price to influence our perceptions (Ariely, 2010, pp. 231-232.). Yet, if we apply this sort of reasoning to healthcare, for example, ‘affordable healthcare’ such as generic medications, may then become less effective. Consequently, our tendency to reason that price is an indicator of quality is less than rational.

As I have discovered over the years, much of how I previously understood reality was less than logical or rational.  It was based in faulty assumptions that have perpetuated over time as they are supported in standard economic theory. These assumptions include the notion that people are rational thinkers and that they choose rationally, acting in their own self-interest. Yet, if we look to the economy and markets, even businesses and their marketers understand that humans do not always think and act in rational ways.

Marketers use persuasion techniques that influence our decision-making processes. They manipulate, by use of decoys, anchors, and pricing techniques, for example. In this way, they influence how we respond to social norms in addition to how we respond to market rules. They play on our strong emotions, our tendency to procrastinate, our preconceived notions, and our tendency to overvalue what we associate with ourselves. They also understand how we have difficulty decreasing our options, and use that to their benefit. Marketers know that we use comparisons to determine value, and they use sometimes-deceptive pricing techniques in their comparisons in order to manipulate our behavior to their benefit. Over time, and through experience and learning, we realize that deceptive techniques are being used against us. This erodes our trust and our own honesty in our dealings with others. Then the cycle of dishonesty and lack of trust grows and perpetuates.

Honesty and trust are crucial components of relationships, both socially and economically. When business practices act in ways that result in degraded trust, a societal cycle of distrust results. Social norms of lying and cheating further reinforce the notion that we should act in our own self-interest in a competitive contest of ‘getting ahead’ of one another. The result is that over time we think of ourselves more and more as being ‘independent’ and we become increasingly isolated from one another, escalating notions of ‘us against them’ social divides. Ariely, in the final chapters of his book, provided some practical ideas concerning what he believes can be done to rebuild honesty, trust and relationships. For example, he lamented the loss of professional oaths when he wrote, “The oath – spoken and often written – was a reminder to practitioners to regulate their own behavior, and it also provided a set of rules that had to be followed in fulfilling the duties of their profession” (Airely, 2010, p. 285.). Oaths served to hold professionals accountable to their actions.

This is one example, but there are many steps that each of us can take to make strong, trusting, and healthy relationships. The first of these would be to recognize that we exist within relationships, and therefore, we must think relationally. This means we must think of how our decisions and actions affect one another, and resist the temptation to think and act in the interest of getting ahead. Secondly, when we do begin to think relationally, we then naturally follow with intentional actions that build community through reciprocating acts of generous and vulnerable honesty. These combine to create authenticity and trust between people and the systems and institutions they create. As it was said in that Mennonite sermon I heard years ago, be authentic, think relationally, and act intentionally.

To summarize, curiosity and life experience has led me on a path of discovery.  This discovery has been one of living life in a way that is quite different than many of my neighbors’ lifestyles. Some may look to my way of living as rather eccentric, with my more-with-less customs that include backyard homesteading and a somewhat tightwad frugality. Yet, the upside-down gospel that I follow frees me to become more authentic.  This authenticity is realized in decisions and actions that are made in recognition to and avoidance of, whenever possible, certain false assumptions and persuasive powers. Behavioral economics explains these false assumptions and persuasive powers as the dynamics of rather predictable irrational human behavior within context of western capitalistic society.

The main tenet of behavioral economics states that we are not always the objective and rational decision-makers that we wish to believe we are.  Instead, our decisions are affected by our emotions, our tendency to procrastinate, and many cognitive biases. Additionally, we make relational and comparative decisions within the context of limited information, while simultaneously acting within a society governed by both social norms and economic and market rules. Furthermore, when our economic system reinforces notions that we should desire to compete for limited resources, rather dishonest persuasive techniques result as a means to ‘get ahead’. The result is a breakdown in the social contract and quality of life for all. We may reverse this trend by thinking relationally and acting intentionally, thereby becoming more honest and authentic both with ourselves and with others. This would result in improved wellbeing through building relationships where the focus can then be located in community wellbeing and the social good.

References:

Ariely, D. (2010). Predictably irrational: The hidden forces that shape our decisions. New York. Harper Perennial.

Dacyczyn, A. (1998). The complete tightwad gazette. Villard Books.

Kraybill, D. and Sine, T. (2003). The upside-down kingdom. Herald Press.

Longacre, D. (1976). More-with-less cookbook: Suggestions by Mennonites on how to eat better and consume less of the world’s limited food resources. Herald Press.

Longacre, D. (1980). Living more with less. Herald Press.

Manning, B. (1990). The ragamuffin gospel. Multnomah.

Toht, D. (2011). Backyard homesteading: A Back-to-basics guide to self-sufficiency. Creative Homeowner.

Wink, W. (1998). The powers that be: Theology for a new millennium. New York: Doubleday.

© Nancy Babbitt and Just Desserts Blog, 2013-2014. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Nancy Babbitt and Just Desserts Blog with appropriate and specific direction to the original content.

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