Tag Archives: biases

When governments lead us astray

Lotteries are also known as “stupidity tax”; a nod to their improbable odds. In India, lotteries are often run by state governments – its an easy way to cover for their budget deficits. What these governments don’t realize is that they are fueling an addiction.

But what are the reasons behind this addiction? In the article, I talk about the behavioral science of lotteries.

Lotteries generate many ‘near misses’ thus making people believe that she is a winner even when she has lost, thus inducing a a dopamine fueled craving. I also talk about the incorrect application of ‘regression to the mean’ mental model, and how governments make it easy for someone to rationalize their lottery addiction.

Read more on livemint site here.

Status Quo on Brexit

The world is eagerly waiting with bated breath for the Brexit referendum results. Battle lines are drawn, last campaigns have ended, politicians have made their pitch (David Cameron, Jeremy Corbyn on the “Remain” faction versus Boris Johnson on the “Leave” faction), world leaders have weighed in on the subject (Obama saying “I hope you will stay”) but the contest is still too close to call. This is proving more nail-biting than Euro 2016 football matches.

Brexit PollsThe poll of polls on the issue from ‘What UK Thinks’ show a 50-50 split between the “Remain” and “Leave” factions. The Economist puts it at 44% for the “Remain” and at 43% for the “Leave” factions with 11% undecided – it was 14% yesterday.

Which way the referendum will swing will depend a lot on these 11-14% undecided voters. What would the undecided voter do? One of the key factors will be a well studied bias – the status quo bias, the preference for the current state of affairs. Prospect Theory explains status quo bias as a result of people’s tendency to overweight losses from a change in the status quo when compared to the gains thus leading them not to prefer a change at all. To complicate matters for people already uncertain about the vote, the issue at hand is mightily complex; it has economic, political, and even racial impact. Uncertainty breeds status quo.

The easiest option for undecided voters is the one that allows them to go on with their lives with the least amount of disruption – not having to make the decision at all. On the other hand, if the undecideds do vote, these votes are likely to be for the “Remain” faction – the status quo option. So all that the “Remain” campaigners should do is to encourage the undecideds to vote and they should have it!

One thing is sure, framing of the Brexit question will not play a part in the decision because of wise moves by the Electoral Commission. We have already covered that aspect in our earlier blog – To B or not to B, that is the question.

Are we better off living in California?

Final-Winter-Forecast

 

It’s a question my wife & I have been debating since we moved to Chicago in January.

Of course, the weather is the primary trigger. Talking to our friends doesn’t help either. Folks living in bay area continue to boast about the near 70 F temperatures. Each call typically starts with a mention of the cold temperatures in Chicago. And at the end of each call, we dream of living in a warmer place.

But when we start talking about happiness, there is an interesting pattern to most conversations. Whether it is the high cost of living or the lack of public transport, it seems the favorable weather conditions in California are balanced out by other factors. So in terms of overall life satisfaction, we are not very far off from our friends. In fact, we are probably as satisfied.

This raises the question: will we be more satisfied if we move?

Turns out, the question has been researched already. In this paper, Kahneman and Schkade refer to a research they conducted with students in Midwestern and Southern California universities. Students were asked to give a satisfaction rating to life overall as well as to certain aspects of life. Each student provided a satisfaction score for themselves or someone similar to themselves in both the regions. The data was analyzed for both self and other conditions.

Both groups of students rated that the Californians are likely to be more satisfied than Midwesterners. Satisfaction with climate tend to account for this high score. However, their own overall life satisfaction score was almost the same. And it gets even more interesting. Climate-related aspects were rated as more important for someone living in another region than for someone in one’s own region. In essence, a midwesterner believed that climate has a small part to play for her own life satisfaction but a larger part for someone living in California. Similarly, a Californian believed that the relatively warmer climate has a smaller significance for her life satisfaction but much higher significance (likely negative) for someone living in the midwest area.

How do we explain this discrepancy? The scientists believe that this is largely due to the effect of Focusing Illusion. When a judgement of a category (life satisfaction in Midwest vs California) is made by focusing on a subset of that category (life satisfaction due to climate conditions), we tend to overweigh the subset’s relative value to any other subset. In other words, we tend to ignore other aspects of life satisfaction such as job, travel, housing etc and end up deciding based on one single parameter. This is exactly what the students did and this is probably what my wife and I are doing.

In our case, we are conveniently ignoring the geographic location of Chicago that makes it far easier to travel within United States as compared to California. Something that can be very important for our consulting jobs.

Clearly, we should do a better job in evaluating this decision. Will this awareness of Focusing illusion help us do that? I don’t think so. I will probably rationalize my preference for California to the fact that I grew up in a tropical climate and still pursue the ambition to move. After all, this susceptibility to our evolutionary biases is what makes us human. 

 

Of football fouls and fluency

Imagine a circle pushing a square. If you imagined the circle on the left attempting to move the square on the right, then, like most of us, you’re probably fallible to the left-to-right motion perceptual-motor bias. Fluency, or a sense of ease, affects judgements and hence the decisions we take. We’ve all felt that slight discomfort with some of the choices we are considering while making a decision. Consider the perceptual-motor bias concerning movement from left to right. We are more comfortable with motion towards the right than towards the left. Goals scored from the left-to-right in football, for example, are rated as more beautiful than the goals scored from right-to-left.

Developing this natural preference probably arises on account of our language being left to right dominant. The way we read, write and conceptualize time and events in space are all from left-to-right. Accordingly, movement towards the right feels natural, whereas there is a sense of unease when it comes to leftward motion. Sports fans, imagine the implication! A clever study by Kranjec et al. (2010) suggests that this bias might be strongly at play, excuse the pun, when football referees call fouls.

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