The Impact of the Irrelevant on Decision-Making

Introduction (via Rob Frank @ NYT)

Even so, when people confront opportunities to improve their position, they’re generally quick to seize them. When energy prices rise sharply, for instance, consumers are quick to adjust their thermostats. So most economists are content with a slightly weaker assumption: that people respond in approximately rational ways to the information available to them.

But behavioral research now challenges even that more limited claim. For example, even patently false or irrelevant information often affects choices in significant ways.

Consider the people who set their watches a few minutes ahead, to prod themselves to arrive at appointments on time. When asked what time it is, they effortlessly perform the required subtraction before answering. So, in one sense, the false image on the watch face doesn’t fool them at all.

Interesting Excerpts (via Rob Frank @ NYT)

In short, even demonstrably false or irrelevant information can influence judgments, which in turn influence decisions. In such cases, Professors Tversky and Kahneman wrote in 1981, “the adoption of a decision frame is an ethically significant act.”

Policy makers have long recognized the potential danger of false statements by advertisers. But in the belief that most adults are suitably skeptical about promotional puffery, Congress has tried to prohibit only the most blatantly false or explicitly misleading claims.

More troubling are instances in which politicians employ patently false statements to shift the terms of important public debates. Decades before President George W. Bush tried to privatize Social Security, for example, Democratic presidential candidates regularly frightened Florida seniors with groundless accusations that their opponents would gut the program.

That’s why it’s important for the circle of critics to widen — and why we need to remember that framing a discussion appropriately is “an ethically significant act.”

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30. May 2010 by Miguel Barbosa
Categories: Behavioral Economics, Curated Readings | Leave a comment

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