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(image credit: Motihada)

More power to the imagination

In praise of an underrated and underused mental instrument in decision-making

There is more to economics than the economy. Much of human interaction is a form of trading: we give something up, and we get something in return. Every time we do such a thing, a trade-off is being made. When we are making such trade-offs consciously, we can usually justify our choice based on using reason to evaluate the gains and the sacrifices, even if we have to work with limited information, and if we cannot possibly compute all the possible consequences.

Not enough reasoning

A striking example can be found in a study by Shaun Larcom, a Cambridge economist, and colleagues, that looked at the travel patterns of London commuters. They found that a two-day strike on the underground system caused around 5% of travellers to adopt a different route, and to stick with it. One possible explanation for the inefficiency of the original journey the authors give is the fact that the London Tube map often provides an inaccurate picture of distances: the effect was stronger where the distortion is more extreme. Commuters ‘choose’ a route based on the map, and then maintain what they’ve always done; they do not calculate the optimum route. Being forced to try an alternative helped some of them discover a better choice.

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Not all decisions require a burning platform (photo: via Wikipedia)

Misusing our System 1?

But we are pretty good at mobilizing our System 1 even when the issue facing us is not one of sheer survival. If we want to avoid, or ensure, something at all cost, we are acting as if it is a matter of life and death. We engage the visceral mechanisms that serve us well when we experience an intense threat to our life, or to the lives of our loved ones — when there is in fact no such threat.

1, 2 and 3

In order to make good decisions, we need to be able to consider future states of the world. Our System 1 may produce a quick and dirty evaluation of a future state, and our System 2 may give us a more considered assessment — but they both require something to work with. This is what Leigh Caldwell, a cognitive-behavioural economist, has labelled System 3. There is both neurological and psychological evidence of the existence of such a third, distinct mental process.

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Imagining a quicker commute is not that easy

Accidental behavioural economist in search of wisdom. Uses insights from (behavioural) economics in organization development. On Twitter as @koenfucius

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