An accidental behavioural economist in lockdown — Part II: Mental Economics
A surprisingly large part of our economic activity takes place between our ears
Undistracted by the triggers and prompts of intriguing human behaviour that a break in south-west England has provided in past years during the spring, the thoughts of this accidental behavioural economist wandered towards what happens in the mind — others’, and indeed his own. For there too, economic principles are found. One instance is the situation where the benefit balancing a cost is immaterial — not money, but thoughts.
This was very apparent in an item in the evening BBC news that caught my attention last week. Experts are seeing a significant jump in the number of so-called young carers as a result of the coronavirus crisis. These are children — the age of some of them can be written with just one digit — who take on caring responsibilities for relatives who are affected, physically or mentally, by the lockdown, or by the effects of the virus itself.
Rewards in the mind
It portrayed two young carers. Finlay, aged 12, has become the primary carer for his disabled mum (his dad died when he was two) now his grandmother, who would normally help out, could no longer do so since the lockdown. So Finlay gets up at six, does the washing and cleans the kitchen. Later on, he cooks the meals for their little household. “Technically, my whole life has changed,” he says when the reporter remarks that COVID has messed up things a bit.
15-year old Danielle looks after her three siblings, Millie aged 5, who has epilepsy, Imogen, who is 6, and Ryan (12) who has autism, ADHD, and Tourette’s, to relieve her mum while her dad works long days. Sometimes things do get on top of her: when her brother kicks off, “he does make me question, how long is this going to go on for? It could be months, and that leaves me scared for not only my mental health, but everyone’s in the family.”
But these two awesome young people (and their 700,000 peers across England) show remarkable resilience. Finlay says, “It’s like hardwired into me, so I don’t find it a burden or anything.” Danielle gives tips to others in the same situation through a local Whatsapp support group: “Do not stress about the things you can’t control — you can’t control lockdown, you can’t control COVID-19.”
Why are they making such a huge sacrifice? “It is one of the most rewarding things you can do as a young person, genuinely, I wouldn’t have it any other way,” says Danielle. “I don’t feel tired of being a young carer because it’s who I am. However annoying she is and how much I have to do for her, I have to remember she’s my mum,” is how Finlay sees it.
The power of intrinsic motivation and reward is quite something — not to be underestimated.
Thinking of effort and ownership
Being locked down does strange things to people. An acquaintance of mine (who shall remain nameless) has embarked on a herculean task: tidying up 20 years’ worth of cut out, torn out and photocopied recipes. If, like me, you’re a jazz cook who prefers to improvise on a basic groove, you will likely find this a baffling proposition. But here too, the trade-off is in the mind, in how we, each in our own personal way, perceive things.
As she made painfully slow progress, I pondered the various reasons why we might acquire things in the first place, and why we then become so possessive of (if not possessed by) them. Mindful of my observation in Part I that, to really understand people, we had better flip our perspective, I found it remarkably easy to identify ways in which I act in a very similar way. I keep on bookmarking interesting finds on the web and saving PDF files of scientific papers, for example. If I am being generous, I may have gone back and looked at perhaps 5% of the accumulated items. (There is a good reason why I am not mentioning my CDs and books.) But let’s stick to being buried in piles of recipes.
My suspicion is that it starts with a mixture of wishful thinking (“one day this will definitely be useful”), and avoidance (imagine once having seen something that looked vaguely useful but not enough to keep it, and sometime later — sometimes a very long time later — finding you should’ve kept it; better safe than sorry). The immediate cost of keeping just one more recipe, hastily stuffed into a cardboard folder, is negligible, and the benefit of knowing we’re adding to our external body of knowledge is as pleasant as it is salient. But we avoid thinking of the future cost we keep on adding to (the effort it will take to tidy it up increases with each new item) — a naturalistic case of hyperbolic discounting.
I also spotted a blend of sunk cost fallacy, the endowment effect, and the IKEA effect. A rational person realizing that (a) they’re not going to be able to cook even a paltry few percent of the collection of recipes in their remaining years, and (b) they’ve actually got a wide range of very nice dishes for ordinary and extraordinary occasions, and that they therefore really have no need for thousands more ideas, such a person would at once dump the lot in the recycling bin.
We are, however, not entirely rational. The past effort we’ve put into building the collection should not be a factor in hanging on to it, let alone continuing to add to it. But just like large public or private projects are sometimes wrongly continued because of the money and effort (the sunk cost) they have already absorbed, so we continue collecting. Just like an IKEA bookshelf, the stacks of recipe folders acquire value through our effort, and in fact simply because we own them.
These same effects are at play in the process of tidying up, too. Naturally, we cannot decide whether to keep a recipe or to throw it away without reading it. But the very act of reading it means we invest further in it, so binning it becomes harder still.
Here, at least, I could offer some solace. By reframing the purpose of reading the recipe as a decision point ( keep, throw away, not sure yet), it is no longer an investment, so we don’t grow more attached to it. Setting tough realistic targets upfront for each pile (“maximum 10% in the keep pile”) also helps. When in doubt (or when the “keep” pile remains too tall), flip the situation: what if the wind swept the recipe away — how much time and effort would we be willing to spend recovering it? This counteracts the endowment effect.
I am happy to report modest success: the collection has apparently shrunk by “a significant” (but otherwise unquantified) proportion. It seems that also the power of the sunk cost fallacy, the endowment effect and the IKEA effect is something to be reckoned with…
Sometimes thoughts and beliefs themselves play an active part in economic trade-offs, as a new twig that has recently appeared on the big family tree of modern economics, suggests. One of the reasons the field of cognitive economics emerged is that conventional economic theory does not handle the idea very well how mental states can have utility — the abstract term in economics referring to the relative preference we have for different options. We can enjoy (or dislike) a particular thought (say, anticipating a holiday, or an imminent visit to the dentist) just as much as a cold drink when we’re parched, or the loss of our wallet.
A few weeks ago, I was instructed by my better half to put up a photograph depicting our two grandsons. It now hangs opposite my favourite spot in the settee, so that every time I sit down to relax after a hard day’s accidental behavioural economicking, the first thing that catches my eye is this picture.
The pleasure it keeps giving me, weeks later, has taken me by surprise. It is not the obvious sense of achievement of having accomplished the task without inflicting permanent damage to the wall, the photograph or myself. That wore off pretty quickly. Instead, it is the recurring joy of the thoughts the photo triggers every time I see it. As I sit reading, it is always there, in the corner of my eye. And especially during lockdown, not having seen the little dudes for nearly three months, it is giving me profound happiness and indeed much economic utility (yes, I could easily associate considerable monetary value to it).
What is in our mind can be a weighty source of utility indeed, and hence be a powerful influence on our behaviour and decisions.
[The annual conference of the Cognitive Economics Society takes place online on 9–10 July 2020 and is free to attend.]
(This is Part II of a 2-part post. Part I is here.)
Originally published at http://koenfucius.wordpress.com on June 19, 2020.
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