Eldar Shafir

Reason-based choice

This paper considers the role of reasons and arguments in the making of decisions. It is proposed that, when faced with the need to choose, decision makers often seek and construct reasons in order to resolve the conflict and justify their choice, to themselves and to others. Experiments that explore and manipulate the role of reasons are reviewed, and other decision studies are interpreted from this perspective. The role of reasons in decision making is considered as it relates to uncertainty, conflict, context effects, and normative decision rules.

Choice Under Conflict: The Dynamics of Deferred Decision

Choice often produces conflict. This notion, however, plays no role in classical decision theory, in which each alternative is assigned a value, and the decision maker selects from every choice set the option with the highest value. We contrast this principle of value maximization with the hypothesis that the option to delay choice or seek new alternatives is more likely to be selected when conflict is high than when it is low. This hypothesis is supported by several studies showing that the tendency to defer decision, search for new alternatives, or choose the default option can be increased when the offered set is enlarged or improved, contrary to the principle of value maximization.

Poverty Impedes Cognitive Function

Burden of Poverty Lacking money or time can lead one to make poorer decisions, possibly because poverty imposes a cognitive load that saps attention and reduces effort. Mani et al. (p. 976; see the Perspective by Vohs) gathered evidence from shoppers in a New Jersey mall and from farmers in Tamil Nadu, India. They found that considering a projected financial decision, such as how to pay for a car repair, affects peoples performance on unrelated spatial and reasoning tasks. Lower-income individuals performed poorly if the repairs were expensive but did fine if the cost was low, whereas higher-income individuals performed well in both conditions, as if the projected financial burden imposed no cognitive pressure. Similarly, the sugarcane farmers from Tamil Nadu performed these tasks better after harvest than before. Being poor is a state of mind. [Also see Perspective by Vohs] The poor often behave in less capable ways, which can further perpetuate poverty. We hypothesize that poverty directly impedes cognitive function and present two studies that test this hypothesis. First, we experimentally induced thoughts about finances and found that this reduces cognitive performance among poor but not in well-off participants. Second, we examined the cognitive function of farmers over the planting cycle. We found that the same farmer shows diminished cognitive performance before harvest, when poor, as compared with after harvest, when rich. This cannot be explained by differences in time available, nutrition, or work effort. Nor can it be explained with stress: Although farmers do show more stress before harvest, that does not account for diminished cognitive performance. Instead, it appears that poverty itself reduces cognitive capacity. We suggest that this is because poverty-related concerns consume mental resources, leaving less for other tasks. These data provide a previously unexamined perspective and help explain a spectrum of behaviors among the poor. We discuss some implications for poverty policy.

Thinking through uncertainty: Nonconsequential reasoning and choice ☆

When thinking under uncertainty, people often do not consider appropriately each of the relevant branches of a decision tree, as required by consequentialism. As a result they sometimes violate Savages sure-thing principle. In the Prisoners Dilemma game, for example, many subjects compete when they know that the opponent has competed and when they know that the opponent has cooperated, but cooperate when they do not know the opponents response. Newcombs Problem and Wasons selection task are also interpreted as manifestations of nonconsequential decision making and reasoning. The causes and implications of such behavior, and the notion of quasi-magical thinking, are discussed.

The Disjunction Effect in Choice Under Uncertainty

One of the basic axioms of the rational theory of decision under uncertainty is Savages (1954) sure-thing principle (STP) It states that if prospect x is preferred to y knowing that Event A occurred, and if x is preferred to y knowing that A did not occur, then x should be preferred to y even when it is not known whether A occurred We present examples in which the decision maker has good reasons for accepting x if A occurs, and different reasons for accepting x if A does not occur Not knowing whether or not A occurs, however, the decision maker may lack a clear reason for accepting x and may opt for another option We suggest that, in the presence of uncertainty, people are often reluctant to think through the implications of each outcome and, as a result, may violate STP This interpretation is supported by the observation that STP is satisfied when people are made aware of their preferences given each outcome

Choosing versus rejecting: Why some options are both better and worse than others

A previously unobserved pattern of choice behavior is predicted and corroborated. In line with the principle of compatibility, according to which the weighting of inputs is enhanced by their compatibility with output, the positive and negative dimensions of options (their pros and cons) are expected to loom larger when one is choosing and when one is rejecting, respectively. Subjects are presented with pairs of options, one of which—theenriched option—has more positive as well as more negative dimensions than does the other,impoverished, option. Because positive dimensions are weighted more heavily in choosing than in rejecting, and negative dimensions are weighted more heavily in rejecting than in choosing, the enriched option tends to be chosen and rejected relatively more often than the impoverished option. These findings are extended to nonbinary decision problems, and their implications for the rational theory of choice and for everyday decisions are discussed.

Some Consequences of Having Too Little

Poor Choices Two categories of reasons for why poor people make economically unsound choices, such as obtaining a payday loan at an extraordinarily high rate of interest, reflect, first, the environment: Poor people are more likely to be living in poor neighborhoods with higher rates of crime and lower rates of social services. Second, they reflect the individual: People are poor in part because of their own psychological dispositions toward impatience and impulsiveness. For both cases, obtaining causal evidence in controlled experiments has been challenging. Shah et al. (p. 682; see the Perpective by Zwane) propose a third category of reasons whereby being poor exerts a bias on cognitive processes and provide evidence for it in laboratory experiments performed in scenarios of scarcity. Being poor means that resources such as time and money are scarce, and this changes how people who are poor behave. Poor individuals often engage in behaviors, such as excessive borrowing, that reinforce the conditions of poverty. Some explanations for these behaviors focus on personality traits of the poor. Others emphasize environmental factors such as housing or financial access. We instead consider how certain behaviors stem simply from having less. We suggest that scarcity changes how people allocate attention: It leads them to engage more deeply in some problems while neglecting others. Across several experiments, we show that scarcity leads to attentional shifts that can help to explain behaviors such as overborrowing. We discuss how this mechanism might also explain other puzzles of poverty.

Behavioral Economics and Marketing in Aid of Decision Making Among the Poor

This article considers several aspects of the economic decision making of the poor from the perspective of behavioral economics, and it focuses on potential contributions from marketing. Among other things, the authors consider some relevant facets of the social and institutional environments in which the poor interact, and they review some behavioral patterns that are likely to arise in these contexts. A behaviorally more informed perspective can help make sense of what might otherwise be considered “puzzles” in the economic comportment of the poor. A behavioral analysis suggests that substantial welfare changes could result from relatively minor policy interventions, and insightful marketing may provide much needed help in the design of such interventions.

On the pursuit and misuse of useless information

Decision makers often pursue noninstrumental information--information that appears relevant but, if simply available, would have no impact on choice. Once they pursue such information, people then use it to make their decision. Consequently, the pursuit of information that would have had no impact on choice leads people to make choices they would not otherwise have made. The pursuit of noninstrumental information is documented and its effects on ensuing decisions are explored in a variety of social, consumer, and strategic situations. The causes and implications of this pattern are discussed.

The interaction between reasoning and decision making: an introduction

Reasoning and decision making are high-level cognitive skills that have been under intensive investigation by psychologists and philosophers, among others, for the last thirty years. But, methods and theories have developed separately in the two fields so that distinct traditions have grown with little to say to one another. The aim of this special issue of Cognition is to encourage and help workers in these two traditions to understand one another’s research and to reflect and enhance some recent signs of “crosstalk” between them. It seemed to us high time to consider the growing interactions between reasoning and decision making for at least three reasons. First, the two abilities are often interwoven in real life, at least according to the common-sense view epitomized in the maxim at the head of this introduction. Second, their study has led to striking parallels in the conclusions that investigators have reached and to the recent signs of crosstalk. Third, the two fields have important lessons for each other. We will explore each of these reasons before we introduce the papers in this special issue. We begin with a sketch of the everyday assumptions that relate reasoning and decision making - a background that we will defend, though it is sometimes disparaged by philosophers as “folk psychology”.