Nudge

The same choice framed in different ways results in different decisions. For example, “If you have the operation you have a 90% chance of surviving 5 years” results in more people opting for procedures than when the framing is, “You have a 10% chance of passing away within 5 years.”

When asked to make an estimate, we start with a number we know and adjust up or down from there. For example, someone from Chicago may guess the population of Milwaukee by starting with that of Chicago (~3m) and adjusting down to, say 1m. Someone from Green Bay may adjust up from their population (100k) to, say, 300k.

In low-stakes decision making, many people will choose whatever option is presented to them. For example, a TV viewer who starts the evening watching NBC is likely to stay there despite the switching cost being only one button click.

In a group context, our decisions are influenced by those that others make. For example, in a meeting if the majority of people express a certain opinion, the remaining attendees have an increased likelihood of following suit.

People asked what they intend to do become more likely to act in accordance with their answers. For example, if people are asked whether they intend to eat certain foods, to diet, or to exercise, their answers to the questions will affect their behavior.

In the language of economics, the group is said to display behavior that is dynamically inconsistent. Initially people prefer A to B, but they later choose B over A. We can see dynamic inconsistency in many places. On Saturday morning people might say that they prefer exercising to watching television, but once the afternoon comes, they are on the couch at home watching the football game. How can such behavior be understood? Two factors must be introduced in order to understand the cashew phenomenon: temptation and mindlessness.

We can see here why many groups fall prey to what is known as collective conservatism: the tendency of groups to stick to established patterns even as new needs arise. Once a practice (like wearing ties) has become established, it is likely to be perpetuated, even if there is no particular basis for it.

Pluralistic ignorance causes groups to publicly appear to believe something that privately each person may not actually agree with. This is primarily because few to no group members are willing to share their views, leading each person to believe that they are in the minority. Perhaps the clearest example of this cognitive bias comes from Hans Christian Andersen’s fairy tale “The Emperor’s New Clothes”.

This is something the behavioural economist George Loewenstein calls the “hot- cold empathy gap”, a concept whose main insight is that even if people realize that they behave differently when aroused, they underestimate the strength of the effect. When in a cold state, we do not appreciate the extent to which our desires and our behaviour will be altered when we are “under the influence” of arousal.