A new life or an old life?

(featured image credits: Jenny Mealing CC BY and Dr KontogianniIVF)

One of the fundamentals of economics is also a fundamental of life. It involves cake and eating.

Most people know pretty well what actions are needed to make babies. But these technicalities are a necessary condition, rather than a sufficient one to actually produce a new life. For some couples with a desire to have children of their own, that first step is not a straightforward process.

About 1 in 7 couples may have difficulty conceiving. 16% of couples will fail to become pregnant naturally within a year if they have regular unprotected sex, and those who have unsuccessfully tried to do so for more than three years have only a ¼ chance of succeeding in the next year. Many such couples turn to in vitro fertilization (IVF).

Science to the rescue

Thankfully, for British women this intervention is available free of charge through the UK’s National Health Service. But IVF is not a done deal. The chance of a successful treatment falls rapidly with the age of the would-be mother, from 29% for women aged under 35, to just 2% for women over 44.

The age of the first pregnancy for women has been steadily rising (e.g. in the UK from about 26 years in 1974 to 30 years in 2015). This means that more women discover relatively late that they may need to resort to IVF, and hence the number of them seeking the treatment when they’re 35 or older is growing. The average age of a woman receiving IVF treatment in 2016 was 35.5, up one year since 2000.

louisebrown

40 years ago – the first of many

But recently the treatment has been refused to women over 34 in twelve areas of the UK (and is no longer offered to anyone in a further seven). Not surprisingly, this has been met with protestations. What is going on?

The NHS, the UK’s flagship (at least in the eyes of a sizeable part of the British population) health service, does not have unlimited resources, and funding has been under pressure for years. In one area’s own words, it has “taken into account the relative cost-effectiveness [of IVF] compared to other treatments that could be funded with the resources we have available.” In the UK, the cost of IVF is around £5,000 ($6,500) for one cycle. Of the 68,000 IVF treatment cycles in 2016, 41% were funded by the NHS – a total cost of about £139 million.

That looks like a sizeable amount, but if you compare it with the bill for cancer diagnosis and treatment, it is relatively small: the NHS spends about £8 billion ($10.5 billion) on this. Look at the individual patient expenditure, though, and the picture changes. A woman under 40 is entitled to up to three IVF cycles funded by the NHS. 29% of those under 35 will be lucky and become pregnant in the first cycle. Yet others won’t, and a woman under 35 will, on average, receive 2.2 IVF treatment cycles, with an overall probability of around 65% of getting pregnant.  The average number of cycles increases, and the probability of a successful pregnancy decreases as the age of the woman at the time of the treatment is higher, as the table shows.

IVFtable

The key number to look at is the he cost of producing an IVF-baby. This increases rapidly from just over £17,000 for women under 35 to £250,000 for women over 44. For women aged 38 or 39, the cost is already a little more than that of diagnosing and treating a cancer patient, which is £30,000.

The healthcare cake

This is the choice the people in the NHS face: should they spend £30,000 of their scarce resources to fund the treatment of a cancer patient or for producing a pregnancy in a woman aged 38 or 39? Should they prioritize the old life, or the new life?

They can only spend every pound once. They can, as the hackneyed phrase has it, either have their cake, or eat it – but not both.

Those stark trade-offs confronting health decision makers are not always apparent to the rest of us. We are only superficially aware of how healthcare is funded. Our tax and social security contributions are deducted automatically from our income, and we don’t really know what they actually buy. On the other hand, we are used to healthcare being available on demand – without ever having to make a trade-off between having a filling in our wisdom tooth, and having physiotherapy for our sprained ankle. We can have both. So it is not entirely surprising that we wonder why we can’t have IVF and cancer treatment.

Trade-offs – like this one – are a core concept in economics, but not just in economics. The economist Robert Frank argues that in the future Charles Darwin (rather than Adam Smith) may well be seen as the father of economics. Evolution itself is indeed characterized by trade-offs, notably between the benefit of a trait for the individual, and the benefit (or cost) of that same trait for a larger population. He gives the example of the antlers of the male elk. To secure a mate, a bull elk must dominate, and if necessary fight off, a bunch of rivals. The bigger his antlers, the bigger his advantage in stand-offs and combats – and the more likely he will be able to pass on his genes.

But keeping pushy suitors away from his is not male elks’ only concern. They must also be able to outrun wolves. And then the construction on their head, weighing nearly 20 kg, is rather inconvenient, making escaping a hungry pack much harder. So a better chance to procreate for the individual comes at the cost of an increased likelihood of being eaten by wolves – for all bull elks.

elks

“Mine is the biggest” (image: Murry Dalton CC BY)

Imagine the elks could agree to reduce the size of their antlers by 50%. The relative advantage of the toughest bulls would persist, but they would all be much better positioned to escape a wolf attack.

Of course, elks don’t have that capacity. Most animals don’t even consider multiple simultaneous options, don’t weigh up immediate advantage with benefits in the longer term and so on. They just follow their instincts, fine-tuned over many generations to favour whatever option is optimum for the continued success of the species. Their very existence today is testament to this.

For us humans it is a bit different. Evolution has endowed us with the ability to evaluate costs and benefits of multiple competing options. We can reason about which is the better of a range of possibilities… and we can ponder the question whether we prefer to have our cake, or to eat it.

Unfortunately, that doesn’t give us a quick and easy shortcut to choosing between spending money on IVF treatment, and spending money on cancer treatment – between favouring a new life and favouring an old life. If we had to make that kind of decision in our personal life, it would be a tough call.

And yet so it is for the NHS (or any health insurer). It is not different from the hypothetical dilemma in which you would have a daughter struggling to conceive, and a spouse who is suspected to have cancer, and you have only £30,000 available. You would be able to help one or the other, but not both.

The call is no less tough for the people who need to allocate the scarce, limited resources available for the health of the nation. There are no easy answers.

It is good to remember this, before we start criticizing them for making the wrong choice.

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Our skin in their game

(featured image credit: Pilots of Swiss CC BY)

An economic term for the wrongs of the world

One Friday, a long time ago, I was fortunate enough to travel in the jump seat on the flight deck of a Boeing 737 from Brussels to London. It was a bright early Summer morning, and all through the flight I had a superb forward view through the cockpit windows – not least thanks to several gyrations in the stack over London (even in those days, the airspace was congested). But aside from the sights, one other thing has stuck in my memory.

Before we set off, I had seen the pilots go through a checklist, meticulously verifying that everything of vital importance in the plane was working as required. This is a critical procedure to ensure the safe operation of the aircraft, which is systematically executed before every single flight, without exception.

Aligned interests

One reason why the pilots adhere to this requirement so consistently is undoubtedly their training. But another one is that, quite literally, their life, along with that of their crew and passengers, may depend on it. They have ‘skin in the game’ – a phrase with uncertain origins, but popular in business and finance, certainly since Nassim Taleb used it as the title of his eponymous book.

It is an evocative way to express that a decision-maker will suffer the consequences of a poor decision. As far as the pilots who flew me that day, along with every pilot of every flight are concerned, there is no doubt that they have a direct motivation to ensure that their aircraft is safe.

We need to be careful, though, not to attach too much importance to this one facet of a relationship (as here between pilots and passengers, who engage them implicitly to transport them safely). On the one hand, we must not assume that someone who has skin in the game necessarily has objectives that align with our own. The tragedy of Germanwings 9525 in March 2015, when the co-pilot deliberately flew the plane en route from Barcelona to Düsseldorf into a mountain, killing all 150 people on board serves as a grim reminder. On the other hand, skin in the game is not the same as skill in the game, as a New Yorker cartoon illustrates.

But by and large, if someone you rely on has skin in your game, that is a good heuristic indicating that they are more likely to act in your interest. For example, there appears to be evidence that funds run by managers who themselves invest in the funds they manage, perform better overall. In any case, it is not hard to see how those who simply charge an annual percentage of the value of a client’s holding, irrespective of how it performed, have much less of an incentive to ensure the fund grows: if their client makes a loss, they gain less but they still gain.

Economics is often a good lens through which observe human behaviour, and not surprisingly it has a term for this kind of situation. If A conducts a transaction with B, and the choices this involves have a consequence for a third party C which is not involved in this transaction, we have a so-called externality. When a plane is late in taking off because of a problem on the ground, air traffic control may grant the pilot (A) the possibility to fly faster than normal to reduce the delay. However, B has a contract with the airline (B) which incorporates targets on fuel usage to keep running costs of the airline low. So the pilot declines the possibility and the plane arrives late – thus inconveniencing the passenger (C) who had no influence over the decision. The pilot (and the airline) may have skin in the passenger’s game where the safety of the plane is concerned, but they do not have much skin in other aspects of the passenger’s concerns. They prioritize their fuel cost over the convenience of the passenger, who suffers a negative externality.

Shameful externalities

Such externalities are quite common, and not only in conventional economic transactions. Environmental pollution is a prominent example, but there are many more, including roadworks and traffic congestion, smoking in the presence of others and smoking bans, and mowing the lawn or practising the violin.  In all cases the decisions made by one party are imposing a burden on another party that is not involved.

Once you start looking for externalities, you see them everywhere. Last weekend I read a heart-breaking blogpost by Andrew Morrish, a former head teacher who currently runs a trust comprising multiple publicly funded independent schools. It is worth reading it in its entirety but, writing with a lump in my throat, I will summarize it here:

Daisy is an 8-year old girl. It is her last day at school before the half term break. She has been in foster care with local foster parents for two years, but this afternoon, after school, she will be taken by a social worker, to a town 30 miles away. She will be taken away from the school with the teachers and support staff she got to know, and from the fragile chain of friends she has built up over the last two years. She will be all alone again, having to build a new chain of friends. And she does not know. She does not know that today is the last day she will see her friends, the teachers, and the staff, that she will not see them again once they leave as she stays on, waiting for the social worker to pick her up. She cannot say goodbye, because the move must remain confidential until she is taken away. She is 8 years old.

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A broken daisy chain (image: Amy Goodman CC BY)

This is happening to her because others, far away and long ago, have made certain choices. Daisy was not involved (how could she have been?), yet she will definitely suffer. When you suffer a negative externality because your neighbour mows his lawn while you want to enjoy the peace of your back garden, you have a voice. You can reason with him, negotiate with him, yell at him, even. You can stand up for yourself and seek redress. Daisy is alone with her negative externality.

There is nobody with skin in her game. Some procedure determines that this is what must happen to her now, and to countless other children at some point. The social worker is only following instructions, powerless, numb perhaps from the many times she has been confronted with similar distressing situations. All she can do is try her best to comfort Daisy.

These are the shameful externalities that are unworthy of a civilized society. What happens to Daisy is the consequence of trade-offs made by undoubtedly well-meaning experts, has been approved by undoubtedly well-meaning politicians, and is being executed by undoubtedly well-meaning social workers. And still, Daisy is abruptly taken away to a strange place where she will know nobody.

Being well-meaning is not enough. We all sometimes make trade-offs that may directly or indirectly affect other people down, sometimes way down, the line. It is easy to be well-meaning and think about the consequences of our choices to these people in the abstract. But they are real people, just like Daisy. We can choose to make different trade-offs, trade-offs that really take those others, whether they be close or distant in time and space, into account.

We owe it to them to put a little bit of our skin into their game.

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When the material meets the immaterial

(featured image credit: Mr Blue MauMau CC BY)

With incentives, things are not always what they seem

“Most of economics can be summarized in four words: ‘People respond to incentives.’ The rest is commentary,” Steven Landsburg writes on the very first page of The Armchair Economist (perhaps not without a hint of provocation).

He has a point. In fact, the observation stretches well beyond economics as we generally understand it: much of biology and even evolution can be explained on the basis of incentives and disincentives. It is because organisms tend to repeat behaviour that provides them with a benefit, and to avoid behaviour that is disadvantageous that they survive, prosper, procreate, evolve and persist.

But the term ‘commentary’ does a lot of the work in that quote. ‘Incentives’ are often – certainly implicitly – interpreted as material incentives, i.e. money, or the things that are typically bought with money. It is, in a sense, at the heart of the assumption of rationality: if we get more money by doing something, we’ll do more of it (work harder, for example), and if we get less (or need to pay) if we do certain things, we’ll do less of them (committing crime, say).

Immaterial drivers

In practice, we are often motivated or discouraged by other drivers than material (dis)incentives, of course, and that is certainly part of the commentary. A sense of duty may stimulate us to volunteer or donate to charity, friendship may make us help a friend move house, and guilt aversion, rather than the fear of punishment, may prevent us taking advantage of a colleague’s purse being unattended on her desk. We may buy products of a ‘trusted’ brand, one that we are ‘loyal’ too rather than buy a much cheaper, but otherwise mostly equivalent, alternative from a German discounter. All this is really comprised in Landsburg’s commentary.

late arrival

Damn, 25 minutes late again (image: Melissa Maples CC BY)

Yet it can be interesting to distinguish between material incentives and immaterial influences on our choices. A famous and often quoted example of the remarkable interaction between the two is found in a paper by the economists Uri Gneezy and Aldo Rustichini, A fine is a price. They performed a field study in 10 day-care centres, where on average about 6% of pickups were up to 30 minutes late. There was no cost to being late, so the 94% timely pickups were obviously not motivated by a material incentive. The authors then introduced a fine in some of the locations, and found that in those centres the number of late pickups did not diminish, but instead roughly doubled. One explanation is that any original guilt of being responsible for a carer to stay late was crowded out by the payment of a fine. For some of the parents this was clearly a superior deal.

Some employers looking for staff offer incentives to their employees, encouraging people from their social networks to apply for jobs. This approach is motivated by the belief that such candidates tend to fit better, are of higher quality, and stay longer. An important side effect is that the cost of recruiting in this way is lower too. Overall this appears to be a win-win-win arrangement. Aside from the benefits to the employer, the existing employee gets a cool bonus – which can be as high as a few thousands of dollars, euros or pounds – and the new recruit gets a great job.

Could a similar incentive work the other way around – i.e. if you’re looking for a job, would it make sense to incentivize the people in your network to introduce you to their own employers (or potential employers in their network)? At first sight, commentary-less incentives would seem to make it, at least in principle, a workable proposition. A quick word with HR, or with the recruiting manager of a suitable department on behalf of your friend is such a small effort, that even the smallest compensation would vastly outweigh it, even the chance of success is low. (And anyone lucky enough to have an employer with an employee referral scheme may even benefit twice.)

But when we also look at the commentary, a different picture might emerge. Referring a friend or an acquaintance to a prospective employer is in the first place a favour, inspired by immaterial, social motives rather than material ones.

Material dominance?

That does not necessarily mean an additional material incentive might not boost that motivation, especially in the area of employment. Most of us choose to work where we work, and do what we do, as a result of both kinds of motives. We always face a trade-off, even if we are not entirely conscious of it: often we could earn more, but that would mean doing a job that is not as pleasant or rewarding as our current one. Likewise, we can envisage more appealing work, but it would not pay as much as we earn now. And still, between two jobs that are similar in all other respects, most of us would choose the one that pays more.

bigbonus

A case of incentive (image: Maklay)

 

It is not obvious how that material element would translate to the favour of helping someone find a new job, though. Imagine the amount on offer is small but not insignificant, say £50 or $50 – a nice extra for the referrer. But compared to the referral bonuses employers pay it is pitiful. It would be like asking a friend to spend a weekend helping you move house in return for £50. There are things we would do for free as a favour, or at a proper market rate, but not for something in between. Yet even an incentive comparable to an employer’s bonus might backfire. Leaving aside whether it would make economic sense to pay a friend £2,000 if their referral led to your finding a new job, they might question your friendship: do you really believe they would need that kind of incentive for what is really a favour between friends?

Interestingly, even in conventional employee referral schemes the bonus on offer is probably not the principal motivator, Laszlo Bock, Google’s former Senior VP of People Operations, says. People refer their friends because they like working for their company, not because they’re after a bonus.

Steven Landsburg’s observation is a fine heuristic for understanding and influencing people’s behaviour. But when you wonder whether material incentives are the best way to make people respond, don’t forget to check the commentary.

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The value of a discount

(featured image credit: Miguel Tejada-Flores)

When money off is worth more than money alone

 

What is the last item you bought? Maybe a coffee, a pack of bin bags during your weekly shop, or a vacuum cleaner. What was it worth to you?

That is a question which is hard, if not impossible to answer. But one thing we can fairly safely assume is that its value in your eyes was at least the amount you paid for it. Otherwise you would simply not have bought it, would you?

When traders buy goods for a certain price, they are not interested in keeping these items. To them, the so-called surplus is entirely represented by the margin they expect to make when they come to resell the items. But end users like you and me are not intending to sell on our coffee, our bin bags or our vacuum cleaner at a profit. To us it is not the direct economic value, but other aspects of what we buy that represent our surplus.

What the price tells us

If – as is sometimes the case – we don’t buy the cheapest item in a particular category, there has to be some extra utility about the item we acquire that justifies the higher price. The enhanced enjoyment of a shot of flavoured syrup in your latte might outweigh the extra cost, for example. Maybe we’ve had a bad experience with a bin bag tearing, and the more expensive, branded variant has turned out to be a bit more robust. And perhaps the vacuum cleaner carried a best buy label from the consumer organization, which gives us some confidence that a higher price means that it performs better or will not break down one day after the warranty expires.

The economic term utility, however, suggests a utilitarian approach that is not always accurate. Perhaps we just believe that the branded bin bags are better, because they are more expensive (this is known as the price-quality heuristic). The economist Oswald Knauth, in an article published as long ago as 1949, describes a retailer who, after a few weeks of lacklustre sales of stockings priced at $1.00 per pair, decided to raise the price by 14% – to an “enormous response”. The explanation was that a higher price was strongly suggestive of better quality

stella-artois.jpg

Thankfully it is really expensive! (via YouTube)

This is an approach that is associated with, in particular, German brands of cars and white goods (I am sure you can think of the brand names). But none of them have used this heuristic as blatantly as the Belgian lager, Stella Artois. In its home country, this beer is as ordinary as it gets. In the UK, however, it was advertised, for 25 years until 2007, as “reassuringly expensive” (for example in this TV spot).

If we buy highly-priced goods because they are more expensive (and we think this makes them qualitatively superior), is there a similar phenomenon with discounted goods?

Valuable bargains

Some people are attracted by bargains, but perhaps they are being misled. Merle van den Akker is a PhD student in behavioural science at Warwick university, who writes fine posts about money on her blog. She tweeted something interesting recently: “If something cost $1,000, and it is on sale for $750, and then you decide to buy it, you did not save $250. You spent $750.”

At first sight it’s hard to argue with her conclusion. It exposes the popular advertising invitation “The more you spend, the more you save”, about which Randall Munroe (author of the popular XKCD comic) once wrote that it would be difficult to be more wrong. If you check your bank balance after the transaction that is described, you will easily verify that it contains $750 less than before, and not $250 more.

And yet… This depends on your point of reference. You do indeed have less money in your bank account, but you also possess an item that, before, cost $1,000.  Provided it is, to you, worth more than $750, it is undeniably a good deal. If it is worth more than $1,000 to you, you are $250 better off having bought it at a discount, and even if you would have paid no more than say $900, you’re still $150 up.

There is nothing particularly mysterious about it: if you are willing to pay X for something, and it is on offer with a discount of Y, then your advantage is Y. Merle’s warning seems of little relevance here. But as so often, the story is not quite over yet.

jacket

Worth its price for the discount alone! (via Atomretro)

Perhaps there exists such a thing as the mirror image of the price-quality heuristic, let’s call it the discount-bargain heuristic. Do people buy something simply because it is cheaper, in the same way that they prefer something precisely because it is more expensive? The answer appears to be yes. A paper by Mark Armstrong and Yongmin Chen, economists at respectively the universities of Oxford and Colorado at Boulder, proposes two reasons why a rational consumer may be more willing to buy an item at a price when that is presented as a discount, than when it is simply offered at the (same) low price. One is that the higher (now discounted) price is, as we saw before, strongly suggestive of better quality. The other is that the discount suggests that the price is unusually low, so that there is no point looking for lower prices still.

There is a third reason that could be considered, though. Some people derive specific enjoyment from the purchase of a bargain. I can say this with certainty, because I am such a person.

The rational me does of course verify that I would have bought this jacket at its current price in any case – sale or not. As long I do that, and I am careful not to focus exclusively on the discounted price, buying something because it is a bargain is a perfectly rational thing to do. The knowledge that it cost me 40% less than the ticket price in the sale gives me pleasure every time I wear the jacket. That enjoyment is higher, much higher than that of the actual money I ‘saved’.

That can be the real value of a discount.

 

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Coloured reality

(image via Youtube/PBS)

Is reality, as we see it, anywhere near the mark?

Have a look around you, listen (and feel free to use your other senses too). That should give you a good sense of the reality of your current environment, shouldn’t it? Yet the picture we get of that reality is inevitably limited by what our senses can detect. Our eyes can only ‘see’ light with wavelengths between infrared and ultraviolet, and our ears can only ‘hear’ sounds with a frequency between roughly 30 Hz and 19,000 Hz (this range reduces dramatically as we get older).

These limits are peculiar to us: bees have no receptors for the colour red, but they have one for ultraviolet (as shown in the banner picture); dogs can detect sounds with a frequency more than an octave higher than the highest-pitched sounds we can hear. But they too have limits to their perception. Whatever reality anyone observes, it’s only a fraction of what is really out there.

Perilous perceptions

Our senses are not the only limit on how we construct reality. We do the same at a higher, cognitive level, combining existing beliefs with our perception. The polling organization Ipsos conducts an annual survey in dozens of countries, gauging people’s perception of a range of societal matters, and compare it with the actual facts. I mentioned this project in an earlier essay, but since then Bobby Duffy (until September 2018 the Global Director of the Ipsos Social Research Institute) has bundled several years of insights in a new book, The Perils of Perception.

In most cases when we get things wrong, like the percentage of teenage girls that become pregnant, or the proportion of Muslims in the population, we overestimate reality rather than underestimate it. One of the main reasons, Duffy says, is that we have an in-built bias for negative information. And of course, the media feed us plenty of that – a case of selection bias on their part (they report mostly bad news), and of the saliency effect on ours (we see this bad news as representative).

non-pregnant teenager

An unlikely headline in the media – (image: Ipsos via Twitter)

We see bad stuff more easily, and we remember it better. This is not so extraordinary from an evolutionary perspective – in face of limited data, we are more likely to survive if we are pessimistic and cautious than if we dismiss what worries us. Bobby Duffy calls this emotional innumeracy: we may try to be accurate in our estimates, but if we are concerned about something, we will project this and inflate the corresponding number. This is not a one-way process: our overestimate can feed our worry, just as much as our worry can cause us to overestimate the numbers. For this reason, overestimations are a good indicator of what worries a population. Add other cognitive tendencies like confirmation bias (we have more eye for that which supports what we already believe) and motivated reasoning (we seek to explain things based on what we believe), and you’d almost be surprised we can function at all with such a distorted world view.

Yet it is not just in our opinions and beliefs about our wider society that we get things badly wrong. Sometimes it can affect us directly, for example when we disagree with a certain behavioural norm, and mistakenly assume it is common among our peers. This phenomenon, known as pluralistic ignorance, captures how we adjust our behaviour in accordance with that misperceived reality. In a 1993 paper, Deborah Prentice and Dale Miller, two psychologists at Princeton University, described how students believe their peers drink more alcohol than they themselves do (and than they consider healthy). They found that male students then tended to not only adjust their attitude towards this perceived norm and become more tolerant, but also adjust their behaviour and drink more and more as the year progresses.

The behaviour can be detrimental in the other direction, too. A recent paper by Steven Buzinski (a psychologist at the university of North Carolina at Chapel Hill) and colleagues explores perception of the amount of time spent studying. Students were, on average, found to underestimate how much their peers studied for an upcoming exam. Interestingly, it was the students who overestimated the effort of their colleagues who went on to underperform on the exam. The authors speculate this is because, instead of being encouraged to study more, they suffered from anxiety and self-doubt as they felt deeply unprepared.

And even when we hypothesize about alternative realities, we seem to be subject to biases.

We often imagine counterfactuals to compare our current situation, past actions or future possibilities with alternatives. A quick search across my earlier posts suggest I have invited readers to “imagine” something more than 80 (!) times. But do we treat these imagined realities the same as the actual reality? Jens Andreas Terum, a psychologist at the Arctic University of Norway (the name alone makes me want to go there) investigated this question as part of his PhD Thesis.

Terum found the subjects in his studies treated counterfactuals with considerable bias in comparison with how they handled actual facts. Alternative realities were almost always imagined as opposite to actual realities, and extremely so (i.e. if in a scenario, things went well in reality, the imagined counterfactual was not a bit better or a bit worse, but very badly indeed). They also evaluated the consequences of a negative event (e.g. arriving late at a job interview) as worse when it was presented as a counterfactual, than as an actual event.

You might imagine (!) that this tendency helps us by bringing to the fore the dire consequences of ill-considered future actions. But this was not the case: the emotional intensity felt with counterfactuals was lower than with actual events. We see the outcome as worse, but we care less about it. This aligns with what he found in another study: near-accidents (where the counterfactual is of course a bad accident) were far less likely to inspire more caution in future than actual accidents. All this seems to fit with the idea that, even in imagined realities, we tend to be self-serving, first and foremost seeking to justify or absolve our actual behaviour.

Larger than you think

Perhaps the most graphic illustration of how distorted our reality is, is the way we map the world. Looking at the familiar picture below, would you say Europe is larger or smaller than Africa?

mercatorprojection

Living in a distorted world. Image: Wikimedia CC BY

The area of Africa is just over 30 million km2, that of Europe 10 million km2 – not quite what the map suggests: so Europe fits three times into Africa. The Gall-Peters projection does a much better job of showing relative sizes, but we hang on to the inaccurate, heavily distorted Mercator projection. Perhaps the reason is that it exaggerates the importance of Europe and North-America? You might very well think that, but of course I could not possibly comment…

We may not be able to swap the ubiquitous distorted world maps, but can we do something about our own misperceptions? Easier said than done, but we could try, for example, in our personal sphere, not to make too many untested assumptions about the norms others hold and apply. We could also bear in mind that imagined realities are, if anything, even more biased than our perception of the actual reality. With respect to our perception of the world at large, Bobby Duffy’s advice is to actively unfilter our world, to be critical and check facts – especially facts that chime with our values and those presented by members of our ingroup. We can counterbalance our natural pessimism by cultivating a basic assumption that things are not getting worse, but getting better (Max Roser’s work, and that of the late, great Hans Rosling – continued by his son Ola and daughter-in-law Anna – are an excellent antidote for excessive negativism).

That will leave us more than enough pessimism to help us survive… if all goes well of course.

Posted in Behavioural economics, Cognitive biases and fallacies, Emotions, Psychology, Society | Tagged | Leave a comment

Technicalities and voluntary morals

(credit: Elliot Brown CC BY)

Is what is technically right also morally right?

Maybe I should have studied law instead of engineering. One day when I was eight, my best friend and I were chatting in class when we shouldn’t, and the teacher gave us each 200 lines to write by the next day (a common punishment at the time). Writing lines was, of course, not how we had been imagining our leisure time after school.

So during the rest of the school day we forged a plan. What were the facts? We each still had our pocket money for the week (10 BEF, about £1.70 or €1.5 in today’s money). My friend had a big brother – I guess he must have been 17 or so at the time. We reckoned that he could write a lot faster than we could. What if we asked him to write the lines in return for our pocket money?

We did, and he did. The next morning, as we both handed in our lines, our teacher evidently spotted immediately that we had not written them ourselves. That was OK: we had never intended to pretend otherwise. “However,” I said, “you only told us to hand in 200 lines. You did not say that we had to write them.” I cannot recall the exact reaction of the teacher, but I do remember that this technicality did the trick: ‘our’ lines were accepted.

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I was reminded of this anecdote last week when a judge ruled that David Beckham would not be convicted of speeding thanks to a legal technicality. On 23 January of this year, the former footballer had been caught driving at 59 mph (95 km/h) on a London road with a limit of 40 mph (64 km/h). The Road Traffic Offenders Act 1988, section 1(c)(ii) states that “a person shall not be convicted of an offence […] unless […] within fourteen days of the commission of the offence a notice of the intended prosecution was […] served on him [or on the registered keeper]”.  It appears the notice was sent on 2 February, but not received by the keeper until 7 February, one day outside the fourteen-day limit.

This caused some commotion in the media and on social media. A spokesman for Brake, a road safety charity, said Beckham is “shirking his responsibility” as a role model – a statement carried by numerous papers and news sites. The Daily Mirror even quoted his lawyer (known as Mr Loophole) as saying Beckham should have been convicted from a “moral standpoint”. The comments on Twitter, for example to this BBC tweet, are generally of a similar nature.

Moral legality…

This affair, though relatively trivial compared with some other issues that the UK faces at the moment, highlights two important aspects of human behaviour: a legal and a moral one. First, there is the question of these so-called technicalities.

Is the law being applied fairly by the judge for the sake of just one day? Should Beckham not, within the spirit of the law, have accepted his punishment? When his lawyer was confronted with this question in the BBC Radio 4 current affairs programme Today on 28 September, he pointed at the letter of the law which makes the 14-day term very clear, “for good reasons”.

Let us imagine there was no such limit: anyone could be prosecuted for an offence, months or even years after it allegedly took place. As an outsider, we may wonder what the big deal would be – if you did do it, then you deserve punishment, no? Yet trying to prove your innocence would be increasingly difficult, the farther in the past the alleged offence took place. I once received a notice for speeding in a town 50km away from my place of work, on a day that I had been in the office. Neither I, nor my car could possibly have been at the time and place stated. As the date of the alleged offence was just a week earlier, I could easily ask my boss for a formal statement that I had been at work – which he produced, and that settled the matter. It would, however, have been a lot more difficult to do this months or years after the event.

So it seems pretty reasonable for the legislator to require the prosecution to be prompt in notifying an alleged offender of their intention to prosecute. Allowing two calendar weeks for the administrative process and the sending by post seems reasonable too: there’s no conceivable reason why it should take longer. (A legitimate question might be why it took 10 days to send Beckham’s notice.)

This clause is no less part of the law as the actual offence of exceeding the speed limit: while the spirit of the law is that you should not speed, it is also that if you have been speeding you should be notified within a given time period. The judge’s decision seems therefore entirely defensible.

…or legal morality

But there is a second aspect worth bearing in mind, beyond the legal perspective.

Should Mr Beckham have accepted the punishment on moral grounds ‘as a good citizen’ in any case? We all know (and he apparently does not dispute the fact) that he was speeding.

There is a good societal argument to be made here. If you are caught speeding (or committing another offence), you are indisputably morally in the wrong. Legal technicalities do not change the moral significance of what you did. Even if the law, both in letter and in spirit, exonerates you, that moral transgression is not undone, and accepting the corresponding punishment would be the right thing to do to.

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Enforcers of the law, AND of morals? (image: Dave Connor CC BY)

But wait. I said “if you are caught”. Should our morals depend on getting caught?

If not, then it follows that the moral obligation to accept punishment arises as soon as we ourselves know we have committed an offence. No need for a law enforcer to catch us in the act. Whenever we exceed the speed limit, drive through an amber or red light, park illegally, or indeed get behind the wheel after drinking more alcohol than we should have, we should voluntarily pay the fine, request the points to be added to our driving licence, or hand it in for a voluntary suspension.

But it is not sure whether many, or even any people would be willing to commit to such unconditional, voluntary, rather than legal morality. Nevertheless, one of the fundamental tenets of a fair legal system is that everyone should be equal in the face of the law (this principle is enshrined in the Universal Declaration of Human Rights).

Perhaps we should adopt a similar view with regard to moral obligations, and only demand that others fulfil them if we are committed to do so, unconditionally, ourselves. Because we are consistent people, of course – are we not?

 

Posted in Behavioural economics, Ethics, Law, Morality, Psychology, Society | Tagged , , | Leave a comment

Choosing and using identities

(featured image credit: Jenny Scott CC BY)

Identity is strong, and can trip us up in two ways.

Who are you? That’s a pretty existential question. It is quite hard to come up with a quick and concise answer – our identity is arguably as unique as our fingerprints, and much more complex to describe. Personality and physical presence are undoubtedly part of it. These are aspects we can only control to a very limited extent: we can exercise to keep ourselves trim and fit, but we cannot alter our height or – at least not without considerable surgical activity – the shape of our face, or our shoe size.

A meta-analysis of 207 studies has found evidence that it is possible to considerably change some features of one’s personality (with the help of a therapist), but by and large, without a significant intervention our personality traits change very little over our lifetime. We cannot choose our innate gender – the fact that some people undergo substantial discomfort to change their biological sex should suffice as evidence – and we cannot choose our innate sexual preferences.

Build your own identity

There are, however, many elements of our identity over which we do have control, directly or indirectly. We can choose our friends, our various social circles, and our professional network. We can choose the type of car we drive, the kind of clothes we wear, the music we listen to, the newspaper we read, the TV shows we watch.

Not every facet of our life qualifies as a part of our identity – few people would identify as a porridge eater. Others can be remarkably relevant to how we see ourselves: last summer’s soccer world cup stirred up many a dormant nationalist feeling, for example. And we construct identities for others in the same way: people who don’t drive a BMW or an SUV may think that those who do have a particular identity.

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A BMW SUV – two identities for the price of one. (image: Luc CC BY)

It is not surprising that we feel close to people with whom we share important elements of our identity, perhaps the most with our family, as the old proverb blood is thicker than water exemplifies. But that doesn’t mean we always automatically side with our nearest relatives. This is something that Paul Gosar, an American Republican congressman seeking re-election in November experienced first-hand. Six of his nine siblings feature in a political advert… supporting his Democrat opponent, and denouncing the politics of their brother.

The power of the party line

This is quite extraordinary, but it neatly illustrates the power of political identity. A recent paper by Jay van Bavel and André Pereira, two psychologists at New York University, proposes an identity-based model that helps explain how people come to place party loyalty over issues of policy, and indeed over the truth.

Just last week, British Prime Minister Theresa May attended the EU summit in Salzburg hoping to plug her so-called Chequers plan and get the support from her 27 fellow leaders. It didn’t go to plan. Mrs May was told, in no uncertain terms, that her plan was unworkable. With less than two weeks to go to the annual Conservative party conference, she returned home in a less than triumphant mood. In a televised speech to the nation, she demanded that “the EU must respect the UK in the Brexit talks”. Donald Tusk, the president of the European Council, had earlier posted a picture online in which he offers Mrs May a petit four, with the caption “Sorry, no cherries” (an allusion to the refusal of the EU to allow the UK to ‘cherry-pick’ parts of its trade rulebook). For their part, the EU pointed out that they had repeatedly stated that the Chequers plan was not acceptable (the Independent helpfully lists “All the times the EU has said ‘no’ to Theresa May’s Chequers Brexit plan”).

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“You can have your cake and eat it, but no cherries” (via Instagram)

The reactions in the media and on social media were predictable. From the pro-Brexit side came angry cries of ‘insult’ and ‘humiliation’, from the pro-EU corner the talk was about self-inflicted damage, even adding to Tusk’s mockery with the odd reference to the hapless Black Knight in Monty Python and the Holy Grail (who keeps battling on despite having his limbs chopped off one by one, dismissing his predicament as ‘just a flesh wound’).

It looks as if the stronger one identifies with one or other side, the more one dismisses or plainly ignores any angle that does not support that chosen identity. There was, for example, precious little sympathy on the one side for the affront and indignity that Mrs May visibly experienced, and for the predicament she finds herself in. There was no hint of admission that there might just have been some discourtesy, intransigence and arrogance on the part of the EU. On the other side, there was little willingness to appreciate that the red lines Mrs May herself chose to draw two years ago – primarily for political reasons and with scant evidence that they were “what the British people voted for” – are the key obstacle to a compromise. There was equally little recognition that the tactic of trying to divide the EU had perhaps not been all that wise.

In the US, President Trump’s nominee for the Supreme Court Brett Kavanaugh is the subject of (at the latest count: three) accusations of sexual assault. Here too the comments divide along ideological lines. Liberal and Democrat leaning people generally dismiss the accused’s denials, and side with the accusers, the women who were allegedly the victims of Mr Kavanaugh’s undesired attentions. Conservatives and supporters of the president and his party take the side of the accused, and denounce the accusers for having waited until now to come forward. (This gave rise to a social media hashtag #WhyIDidntReport, used by victims of sexual assault to give their answers to the question. It is unclear whether the often poignant stories have had much effect on Mr Kavanaugh’s supporters’ views.)

Avoiding the identity bias

Partisanship can play hard and fast with one’s cognitive ability, stoking confirmation bias and motivated reasoning. Is it possible to avoid this? It might take some effort, but there is no fundamental reason why we could not approach a situation without colouring what we see with our identity. It is not without its risks though.

The economist Robin Hanson posted a Twitter poll shortly after Christine Ford Blasey first came forward and accused Kavanaugh:

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This caused quite a stream of comments (do check them out), very few of which start from the assumption that all Hanson wanted to do get an idea of how likely or unlikely such an accusation would be. Most ascribed ulterior motives (sexist, rather than political) to him. (There is some irony here, as he is the co-author of “Elephant in the Brain, Hidden Motives in Everyday Life”.) In response, Hanson explained the background to his poll in a blogpost. It was indeed a serious attempt at dispassionately approaching a highly polarizing issue (not just across the ideological divide, but also across the gender divide) without taking an a priori position – in other words, without allowing a particular identity to dominate the reasoning.

Now one may, of course, question Robin Hanson’s sincerity. (In the olden days of the internet in the UK, the acronym MRDA was more popular than it is now, wheeled out when one wished to say “Well he would say that, wouldn’t he?”) However, anyone familiar with Hanson’s work will know that this kind of detached, unemotional questioning is quite characteristic for the way he analyses the world.

The intensity of the reactions to his poll shows that it is not enough to leave your own identity to one side to ensure a serene debate around divisive and controversial topics. Others map an identity onto you – as if you were a well-behaved BMW-driver – and speculate about your motives. People who strongly embrace their own identity, it seems, perceive equally profound identities in everyone else, in particular anyone who appears to go against the tenets of their own adopted identity. (This might explain Republican US senator Lindsey Graham’s recent tweet about the identity of the lawyer for the third alleged victim – he also represented Stormy Daniels.)

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Identity is powerful; use it wisely

Identity is not a bad thing. We are social beings, and we have a strong need to belong to groups of people with whom we can identify. There is nothing wrong even with on occasion exploiting someone’s identity. Rebelliousness is part of many teenagers’ identity, and if you can use that as a stratagem to encourage them to eat healthily, why not?

But it is very potent. We should not allow our identity to distort the truth, to make us tolerant of questionable behaviour (or worse) if it is perpetrated by people with whom we share an identity, or to makes us assume, without any evidence, ulterior motives in the behaviour of others who don’t fully align with our views.

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“Did The Who ever find out who you are?”

As Robin Hanson says in another post where he alludes to the controversy his tweets caused: “Let us instead revert back to the traditional intellectual standard: respond most to what people say, and don’t stretch too hard to infer what you think they mean in scattered hints of what they’ve said and done.”

Let us, whenever we feel strongly emotionally moved (favourably or unfavourably) by what someone says, or by what is said about someone, take a step back. Let us imagine the person at the centre was not someone who shares our identity, but whose identity is opposed to ours (or vice versa). Would we feel the same?

If not: let us beware of the identity bias, and reconsider how we choose and use our identity. It will make our own little world a better one – and quite likely the whole world out there too.

Posted in Behavioural economics, Cognitive biases and fallacies, Emotions, politics, Psychology, Society | Tagged , | Leave a comment