Predictably Irrational

In his recent book Predictably Irrational, Dan Ariely challenges our assumptions about the rationality of our decision-making and delves into the behavioral economics underlying our poor choices. Perception and expectation, he argues, exert undue influence on important spheres of our lives.

The news this week is replete with examples of this phenomenon. First, we have the financial system bailout proposed by President Bush and Treasury Secretary Henry Paulson. Once again, deregulation of the financial services industry has created a free-for-all, allowing those on the inside to participate in the orgy of excess while the rest of us just got fucked. The cost of the morning-after pill the public is being asked to swallow? $700,000,000,000!

That’s a huge, and arbitrary, amount of money! I’m not sure from whose posterior that figure was pulled, but it certainly placed a high MSRP on the deal. From that point forward, the public debate centered on the “$700 billion bailout,” relying on the brilliant and effective price anchor set by Bush and Paulson. By raising the bar to such obscene levels most people “knew” the cost of the financial system’s salvation had been ordained as $700 billion. That price became our expectation, amplifying the public’s perception of alarm by its shear size and foreclosing the possibility that a smaller amount would be deemed adequate for the task at hand. Now that the bill is signed, do we really know what we’ve bought (on credit, no less)?

The second example regards the reviews of the performance of Sarah Palin in her first and only vice presidential debate. She has, we are told by the usual media outlets, exceeded all expectations. But how well Sarah Palin “performed” last night, especially in relation to the very low bar that represents our expectations, is really beside the point.

By way of example, let’s say you were seeking to recruit a java developer for a critical, high profile IT project. A woman applies whose only experience is working as a clerk at Best Buy. Your expectations going into the interview are low due to her resume, which shows little relevant background, a slew of typographical errors which betray an inattention to detail, and an objectives statement that refers to her desire to fulfill God’s wish to seek career advancement. When she arrives for the interview she is polished, professional, and stunningly beautiful, and greets you with a smile, a wink and a firm handshake. Clearly she is much more impressive than you expected; however, whenever you tried to probe her understanding of java, or computer programming generally, she refused to answer, returning instead to her ability to work under stressful conditions, as evidenced by the fact that she could see the competing Circuit City across the street if she craned her neck just so when having a cigarette by the dumpster behind her store. She shows you a picture of her 5 children, and assures you she is ready and willing to work 24/7 on this project. Maybe she even plays a flute solo to show you how well-rounded she is, or speaks a few phrases in Klingon to let you know she can kick it with the techno-geeks.

Do you hire her? Does her unexpectedly stellar performance somehow bridge the yawning gap between your need and her ability? Of course not. But we have been lured into a discourse about how well she did relative to our expecations. Expectations are irrelevant. This debate was as close as we come to an interview of candidates who will be first in the line of sucession for the presidency, and she failed. The expectations game is a distraction, as is the constant emphasis on style over substance.

Of more enduring interest than these two specific issues (although one or both may linger for quite a while) is how poorly we understand the way most people make decisions. In progressive politics, in promoting atheism or humanism, in advocating for the value of the scientific method and critical thought, it is not enough to be right on the facts. Expectations and perceptions play a crucial role. Those who sell luxury SUVs, poorly conceived bailout packages, religious mumbo jumbo, psychic readings and unqualified political candidates seem to understand this quite well.

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