Warwick Business School. OVERVIEW 1. THE FICTIONAL SELF 2. THE ILLUSION OF DEPTH 3. WHY BEHAVIOUR IS...

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The Fictional Self: Implications for Theories of Decision MakingNick Chater

Behavioural Science Group

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OVERVIEW

1. THE FICTIONAL SELF

2. THE ILLUSION OF DEPTH

3. WHY BEHAVIOUR IS (SOMEWHAT) COHERENT

4. IMPLICATIONS

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1. THE FICTIONAL SELF

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The claim

We infer our own inner life from our words and actions, just as we infer those of a third personA popular viewpoint in many areas of social

psychology and philosophy Corollary 1: We do not have any direct access to

“inner” beliefs, desires etc... Corollary 2: Indeed, there are no such beliefs

and desires (illusion of depth)

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Inferring our own beliefs 1 Festinger and Carlsmith, 1963

1. People do a boring task 2. Then paid $1 or $20 to persuade others to do it

○ People paid more find it more aversive; less likely to do it again, etc.

Why did I do this? “If I was only paid $1, it can’t have been too bad”

○ (Daryl Bem self-perception interpretation, not quite Festinger’s)

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Inferring our own beliefs 2 Reber & Schwarz 1999

“fluency” of reading (!) affects plausibility of a statement○ Osarno is a town in Chile○ Osarno is a town in Chile

But effect is cancelled when people have an alternative explanation (poor photocopier)

Alter and Oppenheimer 2006IPOs with ‘fluent’ names do substantially better

(though effect washes out) RDO vs KAR

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Inferring our own beliefs 3 (Schwarz et al)

Generate 3 reasons why... Happy with decision, like partner

○ 3 is easy; high ‘fluency’ infer strong commitment high self-report on happiness with decision, partner, etc.

Generate 6 reasons why...Happy with decision, like partner

○ 6 is hard; low ‘fluency’ infer weak commitment lower self-report on happiness with decision, partner, etc.

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Inferring our own emotions 1 Schachter and Singer (1962)

Epinephrine or placebo injections○ Raising (or not) arousal

informed (or not) about side-effectsPut with euphoric or angry ‘stooges’

Higher arousal participants are more euphoric/angry

When people can ‘explain away’ arousal, effect much reduced

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Inferring our own emotions 2 Dutton and Aron (1974)

Male/female interviewers ofmale bridge-crossers

low vs high bridgeInterviewers give phone number“further explanation” of studyMore calls to female interviewersfor high bridge

Arousal (caused by high bridge) misattributed as caused by attractiveness

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Inferring our own preferences 1 Johansson, Hall et al.,

Science False feedback on

choicesnot noticedrationalization givenlater preferences

changedAnd it works with jam

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Inferring our own preferences 2

Can people stably determine preferences between pains and money?

Or do they have little idea what is a “reasonable” trade-off?

BDM auction with small electric shocks

Vlaev, Seymour, Dolan & Chater, Psych Science, 2009

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You receive 40p

You will receive a shock

Select price to avoid 15 further shocks

0p 20p 40p

Market price is determined randomly

0p

20p

10p30p

You offered 14p

Market price was 4p

Sale authorisedSale price = 4p

time

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Pain magnitudes were presented in pairs in three blocks of ten trials

Two “endowment” conditions£0.40 per trial£0.80 per trial

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0

5

10

15

20

25

30

35

Low-Medium Medium-High Low-High

Pri

ce O

ffe

red

Context Condition

Endowment = 40 pence

HighMediumLow

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0

10

20

30

40

50

60

70

Low-Medium Medium-High Low-High

Pri

ce O

ffe

red

Context Condition

Endowment = 80 pence

HighMediumLow

• People double their offers, when they have double the money...• Value of pain changes by x2 within minutes!

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In a slogan:

We are fictional characters of our own creation

i.e., the body isn’t fictional; but the ‘character’ is!

Daily life (and decision making) is a bit like improvisational acting ○ “What would X do now?”

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2. THE ILLUSION OF DEPTH

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Where does a rocket take off?

Triangulation will solve it; and the more measurements, the more error can be reduced

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Where does a rainbow touch down?

Triangulation won’t work... And the problem is not eliminating noise!

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Rainbows, like beliefs and values have the illusion of depth

But different ‘bearings’ don’t convergeBecause they are improvised on the flyNot products of stable, (if somewhat hidden,

motives)

Different methods of elicitation will yield irrenconcilable “bearings”

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Reason-based choice (Shafir et al)

Expensive, but exciting holidayvs.

Cheap, but dull holiday

Bali Bournmouth

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Which holiday would you choose?

Bali Bournmouth

Reason: “It’s exciting!”

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Which holiday would you reject?

Bali Bournmouth

Reason: “It’s too expensive!”

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3. WHY BEHAVIOUR IS (SOMEWHAT) COHERENT

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But behaviour is by no means wholly incoherent Rationality constraints Rules (moral or other) Herding and self-

herding (what do I/we normally do?)

Hierarchies of goals Prices (multiplicative

additive)

What does my character do next?

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Rationality constraints

£1 + £1 + £1 + £1 is not really preferred to £20 - £15 (despite prospect theory)

We don’t always break a diet when passing the fridge (despite temporal discounting)

We don’t actually fall for Dutch books

Rational choice theory helps capture qualitative patterns of reasoning that govern the ‘stories’ we create about ourselves (or others)

Rationality constraints on “story generation” are a (partial and local) stabilizing force

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Prices

Decision by arguments (cf Loomes): Comfortable vs uncomfortable seatingCost £X vs £Y strength of ‘argument’ driven by ratio

X:Y○ Duration tends to be forgotten about

How much would you pay for 1 h of sitting (more) comfortably?

Or 4h 50m of sitting (more) comfortably?

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EVERYTHING IS RELATIVE...

2nd class: £164.10Business: £325.10

Second: £108.30First: £229.90

How much would you pay for 1 h of sitting (more) comfortably?

Or 4h 50m of sitting (more) comfortably?

London to Edinburgh, return

In each case, double the basic price: comparison in action

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By being able to ‘unbundle’ enforces additivity (and thus more stability) Bundled -> multiplicative

House size and locationCar quality + stereo systemDoubling of all wine prices

in a restaurantTaking a percentage of sale

in auctions, house sales, mergers

Same good: but will happily pay wildly different amounts

UnbundledComputer hardware +

softwareUnlicensed restaurant;

bring your own drinksThe supermarket, rather

than the restaurant.

Same good, same price (but not via same utility)

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4. IMPLICATIONS

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IMPLICATION 1: THE POWER OF THE STATUS QUO

Current house prices soon seem ‘normal’ Wage increases rapidly ‘fade out’ as contributors to happiness; And

even lottery wins Tax and other cost changes have much less long-term impact on

behaviour than is typically expected Levels of risk are viewed relatively: sub-prime lending, complex

instruments etc judged against each other

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IMPLICATION 2: THE POWER OF THE HERD

No absolute anchors Comparison against other’s beliefs and behaviors Risk-takers will be relatively risk seeking, w.r.t., peer group

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IMPLICATION 3UNANCHORED PRICES

“value” “price”

PEOPLE KNOW THE PRICE OF EVERYTHING, BUT THE VALUE OF NOTHING

• People can’t “know” their values

• So they must partly infer them from market prices

• Allowing feedback loops between values and prices

• The origin of booms and crashes?