Rationality and Emotion

in Decision Making

by Fred Phillips,
Stolen from Based on...
 Based on material from:
• How We Decide, by Jonah Lehrer

• Thinking Fast and Slow, by Danny

Kahneman

• Nudge, by Cass Sunstein and Richard

Thaler
History of ideas about DM
 Case 1: Baseball

We seem to make
Case 2: Defense
 William James
The
http://www.youtube.com/watch?v=1wup_K2WN0I
 “Before you implement a
decision, check whether your
calculation and your belly agree.
If they don’t, find out why.
Change the decision if necessary
until the two agree.” - George
Kozmetsky
 Exercise: Discuss a situation in
which you used - or tried to use,
or failed to use - both rational
and “gut” methods to arrive at an
important decision.
 Daniel Kahneman
• 2002 Nobel Laureate in Economics
• Like William James, believes we have 2
mental ‘systems’:
– System 1, for near-instinctual decisions;
– System 2, for higher logic.
• We make most decisions based on emotion,
but even the rational parts:
– Depend on our mood;
– Are often flawed,
– No matter how smart we are.
 Kahneman’s examples
• Seeing frequent advertising leads to
a more favorable opinion of the
product.
• We need simplicity, so we jump to
false (but consistent) conclusions.
• “People, including scientists, often
search for information that confirms
their own beliefs.”
 Conclusions from Kahneman
1. Before implementing, revisit a decision on
another day or another part of the day,
to correct for mood changes.
2. Devise your own ad hoc strategies: DK let
students’ answers to Q1 influence his
grading of Q2. Now he grades all Q1s
before going back to grade all students’
Q2s, etc.
 Exercise
• Consider choosing a restaurant to
take guests to dinner.
• What parts of the decision making
process are rational? What parts are
emotional?
• How would your answer change if it
were a very important decision, for
example, for your wedding or your
daughter’s wedding?
 When do we need the
rational side?
• Organizationally, or for policy
– To explain - or justify! - a decision
• Psychologically
– Loss aversion
– Random events
– Discounting
 Loss Aversion
• Doctors are asked to choose, in 2 trials:
– 1st trial: Alternative A is “60% chance of saving
patient.”
– 2nd trial: The same alternative is called “40%
chance patient dies.”
– More doctors choose alternative A in Trial 1
than in Trial 2, even tho choices are identical.
• We hate losing more than we want winning.
• People with brain lesions that inhibit
emotion do not display loss aversion
behavior. “Normal” people do, consistently.
 Random events
• The emotional brain looks for patterns.
• Casino games are random (except that e.g.
slot machines pay 10% to the house). That
is, no pattern.
• Thus, emotional brain does not want to stop
playing.
• People with brain lesions inhibiting rational
thought easily become addicted to
gambling.
Discounting over time, space, and
scope. The emotional brain...
• ... values short-term payoff more than we
value a greater long-term benefit.
• ... is more concerned with our own
neighborhood than with events in distant
countries.
• ... cares more for what happens to
individuals than to what happens to masses.
• Example: Genocide & starvation in South
Sudan vs. abuse of one child in Oprah
Winfrey’s school (2010).
 Metacognition and
“executive control”
• How can we balance the effects of
emotion vs. rationality?
• The answer is self-examination.
– We can be aware of our own emotions.
– Ask, “Why do I feel this way?”
• Thus, Kozmetsky and Kahneman gave
us good advice for evaluating our
decisions.
 The pre-frontal cortex is
home to rationality and to
creativity.
• Other parts of the brain can do only one
thing.
• But the PFC is versatile,
– “does whatever you program it to do.”
– has connections to all other parts of the brain.
• Beware of fMRI results, though
– Attempts to tie specific brain activity to
specific behaviors are not yet reliable.
What inhibits PFC function?
• Placebo effect
• Distraction
• Tiredness
• Susceptibility to logical fallacies
• Stress
 Signs of Stress
Headaches, Sleepless- Negativity, Feeling Loss of
etc. ness cynicism pressured, humor
over-
whelmed

Difficulty Obsessive Irritability Unwilling- Alcohol or

Concentrat- behavior ness to drug abuse
ing take leave
Disillusion- Risky behavior
ment
 Stress reducers

Eat well Exercise Rest

Sleep Relaxation Work-life

Activities Balance

You will make better decisions.

 Remember Lt. Cmdr. Riley’s
great emotional decision.
However,
• A veteran firefighter saved his own life by
setting a fire around himself before he was
engulfed by oncoming firestorm.
• An airline pilot saved passengers’ lives by
figuring out how to fly without hydraulics.
• Their strategies had never been tried before!!
• The strategies are now part of regular training.
• They were rational, creative strategies.
• How did these men do it?
 How did they do it?
• They felt fear.
• They understood fear would not save
them.
• They over-rode the fear and allowed
the creative mind to engage.
 The Lt. Cmdr. saved lives via
emotional decision. The
firefighter and the pilot, by
rational/creative decision. How
to tell when to use which mode?
• Experience
• Wisdom
• Speed in exhausting all possibilities
of one mode, realizing the only
possible answer is the other mode.
 The Lt. Cmdr. saved lives via
emotional decision. The
firefighter and the pilot, by
rational/creative decision. How
to tell when to • use which mode?
Observe
• Visualize
• Experience • Think
• Wisdom through
• Speed in exhausting all possibilities
of one mode, realizing the only
possible answer is the other mode.
 Over-rides
• Emotion can over-ride rationality.
• Rationality can over-ride emotion.
• This is “executive control.”
• Have you experienced this? In what
circumstances?
– GROUP DISCUSSION
 A difficult discussion exercise:
Using rationality under high stress
A person is facing rape, or is taken hostage.
The rapist is The terrorist/robber is In either case,
motivated by motivated by the victim’s
•Anger •Ideology options are:
•Power •Terror •Talk
•Sadism •Desperation •Shout
•Opportunity •Greed •Flee
•Mental imbalance •Fight
•Protest •Submit
How would you match options to situation?
Psychological biases prevent
us from acting in our
(objectively) best interests.

• Proving this won Kahneman the Nobel

Prize.
• We have discussed some of these
biases (loss aversion, etc.).
• It may be possible to “nudge” people
to better decisions by presenting
choices in different ways.
 “Nudge” is being tried in
many places, but efficacy
differs by culture.
• Denmark: Green footprints leading to
bins decrease littering; green prints
leading to stairs, people still use
escalator
• USA: Telling people how much
electricity their neighbors use
decreases energy consumption.
• This does not work in France.
“Nudge” has big implications
for policy
• Realistic policies that recognize how
people really behave
• Also big potential for unethical
manipulation of people.
• See economist.com/nudge12
• Have you nudged or been nudged?
DISCUSSION
 Now we need to get
quantitative!
• http://www.youtube.com/watch?v=vhTo
KaPwKE4
• http://www.youtube.com/watch?v=E3aE
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• http://www.youtube.com/watch?v=ZQ7u
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