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6 October 2005

A Bit on Human "Irrationality"

Amy Perfors

One of the key applications of cognitive science to the other social sciences can lie in testing some of the assumptions made about human psychology in other fields. A classic example of this is in economics: as I understand it, for a long time economists envisioned people as rational actors who act to increase their utility (usually measured by money) as much as they can. The classic results of Kahneman & Tversky, which earned the Nobel Prize, were among the first to show that, contrary to this assumption, in many spheres people act "irrationally." I am putting the word "irrational" in quotes because it's not that we act completely randomly or without motivation, simply that we do not always simply exist to maximize our utility: we use cognitive heuristics to calculate the value of things, we value money not as an absolute but with respect to many other factors (such as how much we already have, how things are phrased and sold to us, etc), and our attitudes towards money and maximizing are influenced by culture and the social situation. This means that models of human economic or group behavior are often only as good as the assumptions made about the people in them.

One researcher who studies these problems is Dan Ariely at MIT. In a recent line of research, he looks at what he calls two separate markets, the monetary and the social. The idea is that if people perceive themselves to be in a monetary market (one involving money), they are highly sensitive to the quantity of compensation, and will do less work if they receive less compensation. If, on the other hand, they perceive themselves to be in a social market (one in which no money is exchanged), they will not be concerned with the quantity of "social" compensation, such as the value of any gifts received.

I really liked this article, in part because (unusual for academic articles) it is kind of funny in places. For instance, their methodology consisted of having the participants do a really boring task and measuring how well their effort correlated to how much they were paid, in either a monetary or social market. The task is really grim: repeatedly dragging a computerized ball to a specific location on the screen. As the authors dryly state, "pretesting and post-experiment debriefing showed that our implementation continues in the grandest tradition of tasks that participants view as being utterly uninteresting and without any redeeming value." (I do not envy that debriefer!)

Funny parts aside, the point this research makes is really interesting: people approach the same task differently depending on what they think it is. When they are not compensated or compensated with a gift (a "social" exchange) they will expend a high amount of effort regardless of the value of the gift. When compensated with money or a gift whose monetary value they are told of, effort is proportional to the value of the compensation. Methodologically, this makes an important point -- if we want to model all sorts of aspects of the market or even social behavior, it's good to understand how our behavior changes as a function of how we conceptualize what is going on. From the cognitive science side, the question is why our behavior changes in this way, and in what instances this is so.

And the message for all of us? If we have a task we need help on, the authors suggest "asking friends and offering them dinner. Just do not tell them how much the dinner costs."

Posted by James Greiner at 6:24 AM