Tag: Self-interest

Should We Assume Rationality?

Should We Assume Rationality?

Posted on by jabittan
The world is a complex place and people have to make a lot of decisions within that complexity. Whether we are deliberate about it or not, we create and manage systems and structures for navigating the complexity and framing the decisions we make. However, each of us operate from different perspectives. We make decisions that seem reasonable and rational from our individual point of view, but from the outside may seem irrational. The question is, should we assume rationality in ourselves and others? Should we think that we and other people are behaving irrationally when our choices seem to go against our own interests or should we assume that people have a good reason to do what they do?

 

This is a current debate and challenge in the world of economics and has been a long standing and historical debate in the world of politics. In his book Thinking Fast and Slow, Daniel Kahneman seems to take the stance that people are acting rationally, at least from their own point of view. He writes, “when we observe people acting in ways that seem odd, we should first examine the possibility that they have a good reason to do what they do.”

 

Rational decision-making involves understanding a lot of risk. It involves processing lots of data points, having full knowledge of our choices and the potential outcomes we might face, as well as thinking through the short and long-term consequences of our actions. Kahneman might argue, it would seem after reading his book, that truly rational thinking is beyond what our brains are ordinarily capable of managing. But to him, this doesn’t mean that people cannot still make rational choices and do what is in their best interests. When we see behaviors that seem odd, it is possible that the choices other people have made are still rational, but just require a different perspective.

 

The way people get to rationality, Thinking Fast and Slow suggests, is through heuristics that create shortcuts to decision-making and eliminate data that is more or less just noise. Markets can be thought of as heuristics in this way, allowing people to aggregate decisions and make choices with an invisible hand directing them toward rationality. So when we see people who seem to be acting obviously irrationally or opposed to their self-interest, we should ask whether they are making choices within an entirely different marketplace. What seems like odd behavior from the outside might be savvy signaling to a group we are not part of, might be a short term indulgence that will stand out to the remembering self in the long run, and might make sense if we can change the perspective through which we judge another person.

 

Kahneman shows that we can predict biases and patterns of thought in ourselves and others, but still, we don’t know exactly what heuristics and thinking structures are involved in other people’s decision-making. A charitable way to look at people is to assume their decisions are rational from where they stand and in line with the goals they hold, even if the choices they make do not appear to be rational to us from the outside.

 

Personally, I am on the side that doubts human rationality. While it is useful, empathetic, and humanizing to assume rationality, I think it can be a mistake, especially if we go too far in accepting the perspective of others as justification for their acts. I think that there are simply too many variables and too much information for us to truly make rational decisions or to fully understand the choices of others. My thinking is influenced by Kevin Simler and Robin Hanson who argue in The Elephant in the Brain, that we act on pure self-interest to a greater extent than we would ever admit, and we hide our self-interested behaviors and decisions from everyone, including ourselves.

 

At the same time, I do believe that we can set up systems, structures, and institutions that can help us make more rational decisions. Sunstein and Thaler, in Nudge, clearly show that markets can work and that people can be rational, but often need proper incentives and easy choice structures that encourage to encourage better choices. Gigerenzer in Risk Savvy ends up at a similar place, showing that we can get ahead of the brain’s heuristics and biases to produce rational thought. Creating the right frames, offering the right visual aids, and helping the brain focus on the relevant information can lead to rational thought, but nevertheless, as Kahneman shows, our thinking can still be hijacked and derailed, leading to choices that feel rational from the inside, but appear to violate what would be in our best interest when our decisions are stacked and combined over time. Ultimately, the greatest power in assuming rationality in others is that it helps us understand multiple perspectives, and might help us understand what nudges might help people change their behaviors and decisions to be more rational.
The Dominance of Loss Aversion - Joe Abittan

The Dominance of Loss Aversion

Posted on by jabittan
Loss aversion is a dominant force in many of our individual lives and in many of our societies. At this moment, I think it is one of the greatest barriers to change and growth that our entire world needs to overcome in order to move forward to address climate change, to create more equitable and cohesive societies, and to drive new innovations. Loss aversion has made us complacent, and we are feeling the cost of stagnation in our politics and in our general discontent, but at the same time we are paralyzed and unable to do anything about it. As Tyler Cowen wrote in The Complacent Class, “Americans are in fact working much harder than before to postpone change, or to avoid it altogether, and that is true whether we’re talking about corporate competition, changing residences or jobs, or building things. In an age when it is easier than ever before to dig in, the psychological resistance to change has become progressively stronger.”

 

My argument in this post is that much of the complacency and stagnation that Cowen has written about stems from loss aversion. In Thinking Fast and Slow, Daniel Kahneman writes, “Loss aversion is a powerful conservative force that favors minimal changes from the status quo in the lives of both institutions and individuals.” Additional research in the book shows that the pain and fear of loss is generally at least two times greater for most people than the pleasure and excitement of gain. Before we make a bet, the payoff has to be at least twice what we could stand to lose. If we are offered $10 or a gamble for more money, we prefer the sure $10 over the gamble, until the payoff of the gamble far outweighs the possible loss of the guaranteed $10.

 

I believe this is at the heart of the trite saying that people become more “conservative” as they get older. The reality is that as people get older they acquire more wealth, are more likely to own a home, and secure their social standing. People are not “conservative” in some high-minded ideological sense of “conservativism,” they are self-interested and risk averse. They don’t want to risk losing their wealth, losing value on their home, or losing social status. To me, this more plausibly explains conservatism and complacency than do political ideology explanations or cultural decadence.

 

To me, Kahneman’s quote is supported by Cowen’s thoughts. Institutions are built and run by people. People within institutions, especially as the institutions have become well established, become risk averse. They don’t want to lose their job, their position as the office veteran who knows how to do everything, and their knowledge and authority in their field. As the potential for loss increases, people become increasingly likely to push back against change and risk, ensuring that we cannot lose what we have, but also forgoing changes that could greatly benefit all of us in the long run. Loss Aversion has come to dominate how we organize our societies, and how we relate to one another, at individual, social, and political levels in the United States.
Affect Heuristics

Affect Heuristics

Posted on by jabittan
I studied public policy at the University of Nevada, Reno, and one of the things I had to accept early on in my studies was that humans are not as rational as we like to believe. We tell ourselves that we are making objective and unbiased judgments about the world to reach the conclusions we find. We tell ourselves that we are listening to smart people who truly understand the issues, policies, and technicalities of policies and science, but studies of voting, of policy preference, and of individual knowledge show that this is not the case.

 

We are nearing November and in the United States we will be voting for president and other elected officials. Few of us will spend much time investigating the candidates on the ballot in a thorough and rigorous way. Few of us will seek out in-depth and nuanced information about the policies our political leaders support or about referendum questions on the ballot.  But many of us, perhaps the vast majority of us, will have strong views on policies ranging from tech company monopolies, to tariffs, and to public health measures. We will reach unshakable conclusions and find a few snippets of facts to support our views. But this doesn’t mean that we will truly understand any of the issues in a deep and complex manner.

 

Daniel Kahneman, in his book Thinking Fast and Slow helps us understand what is happening with our voting, and reveals what I didn’t want to believe, but what I was confronted with over and over through academic studies. He writes, “The dominance of conclusions over arguments is most pronounced where emotions are involved. The psychologist Paul Slovic has proposed an affect heuristic in which people let their likes and dislikes determine their beliefs about the world.”

 

Very few of us have a deep understating of economics, international relations, or public health, but we are good at recognizing what is in our immediate self-interest and who represents the identities that are core to who we are. We know that having someone who reflects our identities and praises those identities will help improve the social standing of our group, and ultimately improve our own social status. By recognizing who our leader is and what is in our individual self-interest to support, we can learn which policy beliefs we should adopt. We look to our leaders, learn what they believe and support, and follow their lead. We memorize a few basic facts, and use that as justification for the beliefs we hold, rather than admit that our beliefs simply follow our emotional desire to align with a leader that we believe will boost our social standing.

 

It is this affect heuristic that drives much of our political decision making. It helps explain how we can support some policies which don’t seem to immediately benefit us, by looking at the larger group we want to be a part of and trying to increase the social standing of that group, even at a personal cost. The affect heuristic shows that we want a conclusion to be true, because we would benefit from it, and we use motivated reasoning to adopt beliefs that conveniently support our self-interest. There doesn’t need to be any truth to the beliefs, they just need to satisfy our emotional valance and give us a shortcut to making decisions on complex topics.
Help Them Build a Better Life

Help Them Build a Better Life

Posted on by jabittan
It is an unavoidable reality that we are more motivated by what is in our immediate self-interest than we would like to admit. This idea is at the heart of Kevin Simler and Robin Hanson’s book The Elephant in the Brain and can be seen everywhere if you open your eyes to recognize it. I’m currently doing a dive into reading about homelessness, and I’m working through Elliot Liebow’s book Tell Them Who I am. Liebow writes about American society’s belief that people will become dependent on aid if it is offered unconditionally. In a passage from his book where he reflects on the barriers that homeless women face in obtaining services and aid, and how those barriers can often become abuse, Liebow writes:

 

“One important source of abuse lies much deeper, in a widespread theory about human behavior that gets expressed in various forms: as public policy, as a theoretical statement about rehabilitation, or simply as common sense. Whatever the form, it boils down to something like this: We mustn’t make things too easy for them (mental patients in state hospitals, welfare clients, homeless people, the dependent poor generally). That just encourages their dependency”

 

What is incredible with the sentiment in the paragraph above is how well it seems to justify what is in the immediate self-interest of the people with the resources to help those in need. It excuses inaction, it justifies the withholding of aid, and it places people with material resources on a moral high ground over those who need help. Helping others, the idea posits, actually hurts them. If I give up some of my hard earned money to help another person, I don’t just lose money, that person loses motivation and loses part of their humanity as they become dependent on the state. They ultimately drag us all down if I give them unconditional financial aid. What is in my best interest (not sharing my money) just also happens to be the economic, moral, and personal best thing to do for another person in less fortunate circumstances.

 

This idea assumes that people have only one singular motivation for ever working, making money to have nice things. It ignores ideas of feeling respected and valued by others. It ignores the human desire to be engaged in meaningful pursuits. And it denies our needs as humans for love, recognition, and basic necessities before we can pull ourselves up by our boot straps.

 

Johann Hari’s book Chasing the Scream is an excellent example of how wrong this mindset is and of the horrors that people can face when the rest of society thinks this way and won’t offer them sufficient help to reach a better place in life. Regarding drug addicts and addiction, Hari quotes the ideas of a Portugese official, “addiction is an expression of despair, and the best way to deal with despair is to offer a better life, where the addict doesn’t feel the need to anesthetize herself anymore. Giving rewards, rather than making threats, is the path out. Congratulate them. Give them options. Help them build a life.”

 

Helping someone build a life requires a financial investment in the other person, a time and attention investment, and also requires that we recognize that we have a responsibility to others, and that we might even be part of the problem by not engaging with those in need. It is in our selfish interest to blame others for the plight of society or the failures of other people. From that standpoint punishment and outcasting is justified, but as Hari, Liebow, and the Portugese official suggest, real relationships and getting beyond fears of dependency are necessary if we are truly to help people reach better places and get beyond the evils we want to see eliminated from the world. We can’t go out of our way to find all the ways in which things that are in our self-interest are good for the rest of the world. We have to acknowledge the damages that our self-interests can cause, and find ways to be responsible to the whole, and help other people build their lives in meaningful ways.

Signaling Loyalty

Posted on by jabittan
Politics is an interesting world. We all have strong opinions about how the world should operate, but in general, most of us don’t have much deep knowledge about any particular issue. We might understand the arguments about charter schools, about abortions, or about taxes, but very few of us have really studied any of these areas in considerable depth. Anyone with a career in a specific industry understands that there is a public perception of the industry and the deeper and more complex inner workings of the actual industry. But when we think about political decisions regarding any given industry and topic, we suddenly adopt easy surface level answers that barely skim the surface of these deep and complex inner dynamics.

 

If we all have strong opinions about politics without having strong knowledge about any of it, then we must ask ourselves if politics is really about policy at all? Kevin Simler and Robin Hanson suggest that politics is generally about something other than policy. In The Elephant in the Brain they write, “Our hypothesis is that the political behavior of ordinary, individual citizens is often better explained as an attempt to signal loyalty to our side (whatever side that happens to be in a particular situation), rather than as a good-faith attempt to improve outcomes.” 

 

If the main driver of politics was doing good in the world and reaching good outcomes for society, then we would likely be a much more hands-off, technocratic society. Instead, we have elected a president who doesn’t seem to have a deep understanding of any major issues, but who does know how to stoke outrage and draw lines in the sand to differentiate each side. We generally look around and figure out which team we belong to based on our identity and self-interest, and separate into our camps with our distinct talking points. We don’t understand issues beyond these talking points, but we understand how they make our side look more virtuous.

 

I believe that people who are deeply religious are drawn toward the Republican Party which currently denies climate change partly because a society that has less emphasis on science is likely to be more favorable toward religious beliefs. The veracity of climate change and the complex science behind it is less important than simply being on a side that praises people for religious beliefs. Similarly, I believe that people with higher education degrees are more likely to align with the Democrat Party because, at the moment, it is a party that encourages scientific and technical thought. It is a party that socially rewards the appearance of critical thinking and praises people who have gone to school. Without needing to actually know anything specific, people with degrees who appear to think in a scientific method framework are elevated in the party where people with religious beliefs are disregarded. Both parties are operating in ways that signal who is valuable and who belongs on a particular side. Issues map onto these signals, but the issues and policies are not the main factors in choosing a side.

Three Factors That Push In Favor of Religious Belief

Posted on by jabittan
In The Elephant in the Brain by Kevin Simler and Robin Hanson, the idea that many of the ways we act and behave have little to do with our stated reason for our actions and behaviors is explored in great detail. The authors’ thesis is that our self-interest dominates many of our decisions. The authors suggest that our beliefs, our social behaviors, and our interactions in the world are reflective of our self-interest, even if we don’t admit it. One area the authors examine through this lens is religious belief.

 

Simler and Hanson identify three factors that tend to push people toward belief, even though the factors have little to do with evidence for or a belief in a deity. They write:

 

“1) People who believe they risk punishment for disobeying God are more likely to behave well, relative to nonbelievers. 2) It’s therefore in everyone’s interest to convince others that they believe in God and in the dangers of disobedience. 3) Finally, as we saw …, one of the best ways to convince others of one’s belief is to actually believe it. This is how it ends up being in our best interests to believe in a god that we may not have good evidence for.”

 

The argument the authors put forward is that people believe that people of faith will be better people. That they will be less likely to commit crimes, more likely to have high moral standards for themselves, and more likely to be an honest and trustworthy ally. In order to be seen as a person who is trustworthy and honest, it becomes in one’s best interest to display religious faith and to convince other people that our beliefs are sincere and that we truly are an honest, trustworthy, and moral ally. These social factors don’t actually have to be related to religious beliefs, but the beliefs can create a structure that allows us to demonstrate these qualities.

 

These factors then push us toward belief. It is hard to always convince people that you are authentic, but it is not hard to simply adopt a belief, even if there is a shaky foundation for the belief you adopt. This occurs today with political beliefs about specific governmental decisions and interventions. It happens with climate change denial, and with fad diets. We convince ourselves that we are doing something because it is correct, and we can then better defend our decision and better defend our actions which might be signaling something else about ourselves.

A Simple Quid Pro Quo

Posted on by jabittan
Have you ever thought about how we treat people who are sick? We have an entire economic system (trillions of dollars in the US) set up around treating people who are sick. When we have family members who are ill we often take time off work, help make sure their pillows are comfortable, and make them hot tea or soup. We will put ourselves at risk of catching whatever illness they have, or if it is not contagious, we will sacrifice large parts of our lives to be there in support. I’m not suggesting that caring for the ill is a bad thing, but it is curious that humans would develop a drive to help those who are sick at great personal risk and cost to oneself.

 

In The Elephant in the Brain authors Kevin Simler and Robin Hanson suggest that helping those who are sick is actually less about helping the sick person, and more about making sure we will have someone to help us if we are in a similar situation in the future. There is a quid pro quo taking place where we make a sacrifice so that others will sacrifice for us if we get sick.

 

The authors write, “in part, it’s a simple quid pro quo: I’ll help you this time if you’ll help me when the tables are turned. But providing support is also an advertisment to third parties: See how I help my friends where they’re down? If you’re my friend, I’ll do the same for you. In this way, the conspicuous care shown in our medical behaviors is similar to the conspicuous care shown in charity; by helping people in need, we demonstrate our value as an ally.”

 

We all want people to see us as nice, generous, caring individuals. To make sure people see us that way, we seize upon opportunities to demonstrate those qualities in the real world, even if there is a cost to us. The authors would argue that it is precisely when there is a cost to us that we are most likely to be charitable or to help those who are ill, at least if there is a sufficient audience. It often feels like we are just doing something nice for another person out of the goodness of our heart, but often there is another layer at play that is more self-interested than we would want others to see. We hide that part of ourselves and make an effort to not see that part of ourselves in who we are, or in the people we care about. That part of ourselves is the elephant in the brain which is dictating a lot of our interactions with the world, even though we won’t acknowledge it.

A Final Thought on Charity

Posted on by jabittan
One of Robin Hanson and Kevin Simler’s closing thoughts in their chapter about charity in The Elephant in the Brain reads, “The forms of charity that are most effective at helping others aren’t the most effective at helping donors signal their good traits. And when push comes to shove, donors will often choose to help themselves.”

 

We human beings are not that great at being altruistic. We are social creatures, and we know that what we do is always being judged by our social tribe in a complex context. It is not just about what we do, but who we are, what kind of people we want to associate with, how we choose to use our time and resources, and what we try to do in the world. Charity, and any altruistic behavior we engage in, fits into this larger narrative about the person we are or try to be.

 

We cannot separate our charitable behavior from our individual self-interest or from the larger context of our live. As a result, charity is something that we use as a signaling mechanism. It is often about helping others, but it is just as often about telling people something about ourselves. This is where Simler and Hanson’s quote comes from.

 

We can use our charity to primarily do good in the world, or we can get the benefits of doing good while primarily showing people how generous we are. We can use our money and extra time to do something meaningful for others that also benefits us with social rewards and accolades, however, the personal benefit from charitable behaviors can be so great that it can take over and become the driving force behind our decisions.

 

This certainly doesn’t happen for everyone and doesn’t apply in every situation, but for a bulk of our charitable behaviors it is a factor at play. It is important to recognize so that we understand what is pushing us to make our donations, and to reshape those pressures so that we use our charitability in the best way to really make the world a better place. We should also acknowledge it so that we can encourage others to do something generous and to help others receive a positive social reward, but only if their charity is also the most effective that it can be.

Generous Leadership

Posted on by jabittan

We tend to select leaders who see the world in a positive sum. We like leaders who can look ahead and project a way to create a rising tide that will lift all boats. We want leaders with empowering visions of the future and shared prosperity for all. We don’t want greedy leaders who are cunning, ruthless, and don’t care to share their bounty with the rest of us.

In The Elephant in the Brain, Kevin Simler and Robin Hanson tie ideas of generosity and charity to leadership. Being charitable, giving away of lot of money, and investing a lot of time into something, shows that a person is willing to put others first, is willing to sacrifice something of their own for the good of society, and genuinely cares about other people and not just themselves. The authors write,

“This helps explain why generosity is so important for those who aspire to leadership. No one want leaders who play zero-sum, competitive games with the rest of society. If their wins are our losses, why should we support them? Instead we want leaders with a pro-social orientation, people who will look out for us because we’re all in it together.” 

Leadership is challenging because people don’t want to follow someone who is acting in their own self-interest. For all of us, it is a challenge to get beyond our own desires and to think about what is needed beyond our immediate concerns. To be a leader requires thinking beyond ourselves and having other people in mind when we decide what we are going to do, how we will use our resources, and generally how we will orientate our lives. We can’t be a leader if we are setting out to just be more than or better than others. People will see through us and our leadership will never take off.

Five Factors To Consider Regarding Our Donation Behavior

Posted on by jabittan
In The Elephant in the Brain, Kevin simler and Robin Hanson ask just how much of our behavior is influenced by our self-interest. As an explanation for why we do what we do, simply saying that we did something because we gained some material good, gained more social status, or received some type of pleasurable outcome is generally accepted, but ignored. It is clear that we have self-interest in doing things that we benefit from, but in many ways, we like to ignore self-interest and we prefer to explain our behaviors with more complex rationalizations for why we do what we do. This motivated reasoning, however, creates models that account for many factors without acknowledging the main factor that we would all rather ignore, the elephant in the room (brain), our self-interest.

 

Simler and Hanson investigate charitable donations in the framework of self-interest and consider the warm glow feeling that we get when we make charitable donations, help the person on the street, and generally do good things for others. They look beyond simply “we do things because it makes us feel good” and ask questions to get to a deeper level understanding of human behavior:

 

“The much more interesting and important question is why it feels good when we donate to charity. Digging beneath the shallow psychological motive (pursuing happiness), what deeper incentives are we responding to?

 

To figure this out, we’re going to examine five factors that influence our charitable behavior:
  1. Visibility. We give more when we’re being watched.
  2. Peer pressure. Our giving responds strongly to social influences.
  3. Proximity. We prefer to help people locally rather than globally.
  4. Relatability. We give more when the people we help are identifiable (via faces and/or stories) and give less in response to numbers and facts.
  5. Mating Motive. We’re more generous when primed with a mating motive.
This list is far from comprehensive, but taken together, these factors help explain why we donate so inefficiently, and also why we feel that warm glow when we donate.”

 

I have been writing a lot recently about charitable giving. Part of the reason why is because I see great potential in the resources at the disposal of the average American. We have a lot of wealth relative to the rest of the world, a lot of time relative to previous generations, and a lot of information available to us. However, rather than using our wealth, our time, and the information available to us to maximize our lives, make the world a better place, and solve pressing problems, most people waste their resources. I have continually been thinking about what I consider The Stupid Economy where we feel pressured to buy things we don’t really want to keep up with and impress people we don’t really care much about, and use our resources in pointless and meaningless ways.

 

Our world today has incredibly bright people working at meaningless jobs. We use a lot of our human potential, our creative energy and brain power, and our money to get people to drink sugary water. We invest massive amounts of attention in celebrity news and we celebrate technological inventions like iPhones without applying our hunger for technological improvement to other problems that could potentially save more lives or do more to protect the planet from human caused problems – like trash in our oceans.

 

I want to encourage society to move in a direction that is more considerate and careful with our resource use. I want to be part of something that builds toward a society that has a smart economy, where instead of complaining about the diminishing purchasing power of our society while simultaneously buying $100 jeans we celebrate the resources we have and put them toward real use to create sustainable development. If we are going to set out to do good in the world, we have to understand what Simler and Hanson describe in the quote above. We have to understand how our rationality is derailed, and we need to understand why it is important to be truly effective when we try to do good with what we have.