Economists and policy makers are coming to the realization that rationality, in its multiple forms, doesn’t always explain why people make the decisions that they do. By rationality, I mean both the assumption of “economic man” (a utilitarian cost/benefit analyzer) and the emphasis on education and knowledge as the privileged means of shaping behavior.
Let’s take three recent headlines: “Why Sadness Increases Spending,” “Craving the High That Risky Trading Can Bring” and “Teenage Risks, and How to Avoid Them.” All point to the role of emotion in decision making (any surprise here?).
The first article states, “A research team [of Cynthia Cryder, Jennifer Lerner, and colleagues] finds that people feeling sad and self-focused spend more money to acquire the same commodities than those in a neutral emotional state.”
The second provides an Aristotelian summary: “The findings, while preliminary, suggest — perhaps unsurprisingly — that traders who let their emotions get the best of them tend to fare poorly in the markets. But traders who rely on logic alone don’t do that well either. The most successful ones use their emotions to their advantage without letting the feelings overwhelm them.”
The third tells us, “Scientific studies have shown that adolescents are very well aware of their vulnerability and that they actually overestimate their risk of suffering negative effects from activities like drinking and unprotected sex… ‘It now becomes clearer why traditional intervention programs fail to help many teenagers,’ Dr. Valerie Reyna and Dr. Frank Farley wrote. ‘Although the programs stress the importance of accurate risk perception, young people already feel vulnerable and overestimate their risks.’ In Dr. Reyna’s view, inundating teenagers with factual risk information could backfire, leading them to realize that behaviors like unprotected sex are less risky than they thought. Using an analytical approach of weighing risks versus benefits is ‘a slippery slope that all too often results in teens’ thinking that the benefits outweigh the risks,’ she said.”
This type of research provides small steps forward vis-à-vis traditional Western assumptions about decision making and rationality. But my question is, Why don’t they go further? Why do they simply seem to affirm our common sense view of the world?
