Category: Kahneman – Thinking Fast and Slow

Personally and Politically Disturbed by the Homeless

Personally and Politically Disturbed by the Homeless

Posted on by jabittan
On the first page of the preface of The Homeless, Christopher Jencks writes about the responses that many Americans had to the rise of homelessness in American cities in the 1970s. He writes, “The spread of homelessness disturbed affluent Americans for both personal and political reasons. At a personal level, the faces of the homeless often suggest depths of despair that we would rather not imagine, much less confront in the flesh. … At a political level, the spread of homelessness suggests that something has gone fundamentally wrong with America’s economic or social institutions.”
I think the two books which most accurately describe the way that I understand our political and social worlds are Thinking Fast and Slow by Daniel Kahneman and The Elephant in the Brain by Kevin Simler and Robin Hanson. Kahneman suggests that our brains are far more susceptible to cognitive errors than we would like to believe. Much of our decision-making isn’t really so much decision-making as it is excuse making, finding ways to give us agency over decisions that were more or less automatic. Additionally, Kahneman shows that we very frequently, and very predictably, make certain cognitive errors that lead us to inaccurate conclusions about the world. Simler and Hansen show that we often deliberately mislead ourselves, choosing to intentionally buy into our minds’ cognitive errors. By deliberately lying to ourselves and choosing to view ourselves and our beliefs through a false objectivity, we can better lie to others, enhancing the way we signal to the world and making ourselves appear more authentic. [Note: some recent evidence has put some findings from Kahneman in doubt, but I think his general argument around cognitive errors still holds.]
Jencks published his book long before Thinking Fast and Slow and The Elephant in the Brain were published, but I think his observation hints at the findings that Kahneman, Simler, and Hanson would all write about in the coming decades. People wanted to hold onto beliefs they possibly knew or suspected to be false. They were disturbed by a reality that did not match the imagined reality in which they wanted to believe. They embraced cognitive errors and adopted beliefs and conclusions based on those cognitive errors. They deceived themselves about reality to better appear to believe the myths they embraced, and in the end they developed a political system where they could signal their virtue by strongly adhering to the initial cognitive errors that sparked the whole process.
Jencks’ quote shows why homelessness is such a tough issue for many of us to face. When we see large number of people failing and ending up homeless it suggests that there is something more than individual shortcomings at work. It suggests that somewhere within society and our social structures are points of failure. It suggests that our institutions, from which we may benefit as individuals, are not serving everyone. This goes against our beliefs which reinforce our self-interest, and is hard to accept. It is much easier to simply fall back on cognitive illusions and errors and to blame those who have failed. We truly believe that homelessness is the problem of individuals because we are deceiving ourselves, and because it serves our self-interest to do so. When we see homeless, we see a reality we want to ignore and pretend does not exist because we fear it and we fear that we may be responsible for it in some way. We fear that homelessness will necessitate a change in the social structures and institutions that have helped us get to where we are and that changes may make things harder for us or somehow diminishing our social status. This is why we are so disturbed by homeless, why we prefer not to think about it, and why we develop policies based on the assumption that people who end up homeless are deeply flawed individuals and are responsible for their own situation. It is also likely why we have not done enough to help the homeless, why it is becoming a bigger issue in American cities, and why we have been so bad at addressing the real causes of homelessness in America. There is definitely some truth to the argument that homelessness is the result of flawed individuals, which is why it is such a strong argument, but we should accept that there are some flawed causal thoughts at play and that it is often in our self-interest to dismiss the homeless as individual failures.
Epistemic Optimists & Pessimists - Joe Abittan

Epistemic Optimists & Pessimists

Posted on by jabittan
A little while back I did a mini dive into cognitive psychology and behavioral economics by reading Thinking Fast and Slow by Daniel Kahneman, Nudge by Sunstein and Thaler, Risk Savvy by Gerd Gigerenzer, Vices of the Mind by Quassim Cassam, and The Book of Why by Judea Pearl. Each of these authors asked questions about the ways we think and tried to explain why our thinking so often seems go awry. Recognizing that it is a useful but insufficient dichotomy, each of these authors can be thought of as either an epistemic optimist or an epistemic pessimist.
In Vices of the Mind Cassam gives us the definitions for epistemic optimists and pessimists. He writes, “Optimism is the view that self-improvement is possible, and that there is often (though not always) something we can do about our epistemic vices, including many of our implicit biases.” The optimists, Cassam argues, believes that we can learn about our mind, our biases, and how our thinking works to make better decisions and improve our beliefs to foster knowledge. Cassam continues, “Pessimism is much more sceptical about the prospects of self-improvement or, at any rate, of lasting self-improvement. … For pessimists, the focus of inquiry shouldn’t be on overcoming our epistemic vices but  on outsmarting them, that is, finding ways to work around them so as to reduce their ill effects.” With Cassam’s framework, I think it is possible to look at the ways each author and researcher presents information in their books and to think of them as either optimists or pessimists.
Daniel Kahneman in Thinking Fast and Slow wants to be an optimist, but ultimately is a pessimist. He writes throughout the book how his own knowledge about biases, cognitive illusions, and thinking errors hardly help him in his own life. He states that what he really hopes his book accomplishes is improved water-cooler talk and better understanding of how the brain works, not necessarily better decision-making for those who read his book. Similarly, Sunstein and Thaler are pessimists. They clearly believe that we can outsmart our epistemic vices, but not by our own actions but rather by outside nudges that smarter people and responsible choice architects have designed for us. Neither Kahneman nor the Chicago economics pair believe we really have any ability to control and change our thinking independently.
Gigerenzer and Pearl are both optimists. While Gigerenzer believes that nudges can be helpful and encourages the development of aids to outsmart our epistemic vices, he also clearly believes that we can overcome them on our own simply through gaining experience and through practice. For Gigerenzer, achieving epistemic virtuosity is possible, even if it isn’t something you explicitly work toward. Pearl focuses how human beings are able to interpret and understand causal structures in the real world, and breaks from the fashionable viewpoint of most academics in saying that humans are actually very good and understanding, interpreting, and measuring causality. He is an epistemic optimist because he believes, and argues in his book, that we can improve our thinking, improve the ways we approach questions of causality, and improve our knowledge without having to rely on fancy tricks to outsmart epistemic vices. Both authors believe that growth and improved thinking is possible.
Cassam is harder to place, but I think he still is best thought of as an epistemic optimist. He believes that we are blameworthy for our epistemic vices and that they are indeed reprehensible. He also believes that we can improve our thinking and reach a more epistemically virtuous way of thinking if we are deliberate about addressing our epistemic vices. I don’t think that Cassam believes we have to outsmart our epistemic vices, only that we need to be able to recognize them and understand how to get beyond them, and I believe that he would argue that we can do so.
Ultimately, I think that we should learn from Kahneman, Sunstein, and Thaler and be more thoughtful of our nudges as we look for ways to overcome the limitations of our minds. However, I do believe that learning about epistemic vices and taking steps to improve our thinking can help us grow and become more epistemically virtuous. Simple experience, as I think Gigerenzer would argue, will help us improve naturally, and deliberate and calibrated thought, as Pearl might argue, can help us clearly see real and accurate causal structures in the world. I agree with Cassam that we are at least revision responsible for our epistemic vices, and that we can take steps to get beyond them, improving our thinking and becoming epistemically virtuous. In the end, I don’t think humanity is a helpless pool of irrationality and that we can only improve our thinking and decision-making through nudges. I think we can and over time will improve our statistical thinking, decision-making, and limit cognitive errors and biases as individuals and as societies (then again, maybe its just the morning coffee talking).

An Illusion of Security, Stability, and Control

Posted on by jabittan
The online world is a very interesting place. While we frequently say that we have concerns about privacy, about how our data is being used, and about what information is publicly available to us, very few people delete their social media accounts or take real action when a data breach occurs. We have been moving more and more of our life online, and we have been more accepting of devices connected to the internet that can either be hacked or be used to tacitly spy on us than we would expect given the amount of time we spend expressing concern for our privacy.

 

A quick line from Tyler Cowen’s book The Complacent Class may explain the contradiction. “A lot of our contentment or even enthrallment with online practices may be based on an illusion of security, stability, and control.”

 

I just read Daniel Kahneman’s book Thinking Fast and Slow and in it he writes about a common logical fallacy, the substitution principle. When we are asked difficult questions, we often substitute a simpler question that we can answer. However, we rarely realize that we do this. Cowen’s insight suggests that we are using this substitution fallacy when we are evaluating online practices.

 

Instead of thinking deeply and critically about our privacy, safety, and the security of our personal or financial information in a given context, we substitute. We ask ourselves, does this website intuitively feel legitimate and well put together? If the answer is yes, we are more likely to enter our personal information, allow our online movements to be tracked, enter our preferences, and save our credit card number.

 

If matching technology works well, if our order is fulfilled, and if we are provided with more content that we can continue to enjoy, we will again substitute. Instead of asking whether our data is safe or whether the value we receive exceeds the risk of having our information available, we will ask if we are satisfied with what was provided to us and if we liked the look and feel of what we received. We can pretend to answer the hard questions with illusory answers to easier questions.

 

In the end, we land in a place where the companies and organizations operating on the internet have little incentive to improve their systems, to innovate in ways that create disruptive changes, or to pursue big leaps forward. We are already content and we are not actually asking the hard questions which may push innovation forward. This contentment builds stagnation and prevents us from seeing the risks that exist behind the curtain. We live in our illusion that we control our information online, that we know how the internet works, and that things are stable and will continue to work, even if the outside world is chaotic. This could be a recipe for a long-term disaster that we won’t see coming because we believe we are safely in control when we are not.

A Fresh Take on Public Asset Management

Posted on by jabittan
An area that I did not understand very well, since I have no real experience with city government, from Bruce Katz and Jeremy Nowak’s book The New Localism has to do with the management of publicly owned assets. According to Katz and Nowak, public infrastructure, public land, and locally owned buildings and spaces are underutilized and the value of these assets is poorly managed. Part of the reason for this is that much of government is split and segmented. One agency has control over a piece of land, and another agency has ownership of another near by asset. This fragmentation makes it hard for the city government to consider unified programs or projects that would utilize both of the nearby assets in a uniform manner.

 

Another issue the authors discuss with public asset management is elected political officials holding veto power over the use of public assets. Daniel Kahneman in his book Thinking Fast and Slow describes our risk avoidance tendencies, and I think these tendencies can easily be viewed in our elected officials and their veto power. Elected officials, like everyone else, is more worried about potential losses than they are excited about potential gains from the use or sale of assets. What is worse with elected officials however is that they ware worried about the loss of an electoral base, and the loss of a job from decisions regarding the use of public assets.

 

The authors write, “The removal of the political class from public asset management has a salutary effect on democracy by transitioning politicians from asset gatekeepers to consumer and citizen advocates on behalf of public asset productivity and quality.”

 

Instead of having elected officials be the ones in control of public assets, the authors suggest transferring ownership to quasi-governmental organizations that blend public, private, and civic actors. The authors envision new forms of port authorities or development organizations that would control public assets with a focus on maximizing public benefit. Elected officials would then be responsible for helping develop innovative uses for public assets rather than being responsible for the failure of projects and programs that use public assets. This is the essence of the point  that the authors make in removing the political class from public asset management. A rational organization that controls such assets can defragment them, and put them to better and more productive uses.

Cities Suffer From Loss Aversion

Posted on by jabittan
“Many U.S. cities are, in essence, a fact-free zone when it comes to public assets. They have little knowledge of the assets they own and the market value of those assets, either under current or altered zoning regimes. Ironically, U.S. cities know what they owe (such as pension liabilities) but not what they own. Rectifying that disconnect is the first step toward sane and sensible public finance,” write Bruce Katz and Jeremy Nowak in their book The New Localism.

 

Katz and Nowak highlight the ways that local and regional governments in cities and metropolitan areas are establishing new networks to develop innovative solutions to global problems that have vexed state and national governments since the early 2000’s. Cities are reinventing ideas of governance and finding ways to adjust to the challenges they face in a way that larger governments seem to be unable to do. One area that is holding most city governments back, however, is financing.

 

Local government financing does well when the economy is strong and when people are moving to the area to create and fill jobs. However, when the economy is weak and people are moving away, local governments cannot keep up. Cycles of strong and weak economies have lead to the situation that Katz and Nowak described in the quote I used to open this post. Cities focus on their liabilities and worry about the costs and expenses that pile up and become major obstacles whenever the economy turns south. The authors argue that these pressures can become a singular focus for local government officials, preventing them from thinking clearly about the opportunities they face while limiting their creativity to adjust to new economic conditions and develop innovative solutions.

 

I don’t find it too surprising that city governments are more worried about what they owe than what they own. I am currently reading Daniel Kahneman’s book Thinking Fast and Slow and his descriptions about the way people respond to potential losses seems to be right in line with the behavior that Katz and Nowak describe for our city governments. We feel a loss of $100 as equal in terms of pain as we feel joy from a gain of $200. That means our losses are twice as painful as a gain is joyous. Mayors, city managers, and elected officials have their jobs on the line and can be held responsible for economic forces that are far beyond their control. This is likely a big part of what leads to this risk aversion among our local governments, and why so many of them are focused on what they owe and what could go wrong in a downturn. The narrow focus that this creates for governments, however, is likely to exacerbate any economic shocks that they do experience. By failing to plan and think big, city governments are failing to get the most out of the assets they do have, and are failing to build a buffer of protection for themselves and their residents if an economic shock occurs.

 

The solution that Katz and Nowak provide is a structure of new networked governance, where governments are able to provide the authority and base funding for projects and ideas, but private organizations can manage public assets and capitalize on charitable and foundation giving for more risky projects. This opens an avenue for bold movement that risk averse elected officials and public agencies could not approach. It allows cities to maximize their assets, rather than forget about them altogether.