December 19, 2016


Why is it so hard to overcome bias in decision-making? Becasue you're human (Shana Lebowitz, 11/25/16, Business Insider)

[Eldar Shafir, a professor of psychology at Princeton University,] went on:

"I can teach about the endowment effect, and yet, when I have something, I don't want to give it up. Am I resisting more than I should or not? Even when I know about the endowment effect, how do I gauge if my reaction is correct or not?"

That is to say, humans are not machines. Just because you're aware that you might be overvaluing the car you're trying to sell doesn't mean you know exactly how much you're overvaluing it, or what the price "should" be.

That said, knowing you're biased, there are some steps you can take to make better decisions. In a follow-up email, Shafir gave an example of police departments' policy of having lineups conducted by officers who don't know which of the men is the suspect. That's because, when the officer knows who the suspect is, the eyewitness is more likely to choose that person -- even though the officer is well-intentioned, Shafir said.

When making big decisions in your personal life, Shafir said you can do some exercises to test how robust your preference really is. For example, you can ask yourself: Would I do the same thing had the decision been offered to me in the summer rather than the winter? Again though, this exercise is hardly a panacea.

I asked Shafir if he found this -- the fact that no amount of knowledge can counteract our susceptibility to cognitive biases -- frustrating.

"Sometimes it's frustrating," he acknowledged. "Sometimes it's amusing. Just having insight into our fallibilities -- we're funny. And sometimes it makes life more interesting."

He added: "It sometimes makes you more modest because you realize that most of your decisions, most of your preferences are in some sense accidental. They could easily have been otherwise."

Posted by at December 19, 2016 6:23 AM