A Primer On Decision Making

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Introduction. Book is based on his lecture notes from a course he taught at StanfordGives an overview of ideas for how decisions happen rather than how they should happenIdeas of decision making from all disciplines of social science. Consequential/Preference Based or Rule-Following. Decision ma

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A Primer On Decision Making

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1. A Primer On Decision Making By James March Reviewed by Kathy Yu

2. Introduction Book is based on his lecture notes from a course he taught at Stanford Gives an overview of ideas for how decisions happen rather than how they should happen Ideas of decision making from all disciplines of social science This book gives an overview of all the ideas about how decisions actually happen rather than how they should happen. March says the ideas in this book at not novel, and that he’s simply taking these ideas and looking at them/ elaborating them a bit more. This book is based on his lecture notes from a course that he had taught at Stanford. March tells us that ideas of decision making comes from all disciplines of social science, so all these ideas from these disciplines are woven together. Since March talks about so many ideas and theories in this book, I’m only going to highlight some of the important ideas.This book gives an overview of all the ideas about how decisions actually happen rather than how they should happen. March says the ideas in this book at not novel, and that he’s simply taking these ideas and looking at them/ elaborating them a bit more. This book is based on his lecture notes from a course that he had taught at Stanford. March tells us that ideas of decision making comes from all disciplines of social science, so all these ideas from these disciplines are woven together. Since March talks about so many ideas and theories in this book, I’m only going to highlight some of the important ideas.

3. Consequential/Preference Based or Rule-Following Decision makers Pursue a logic of consequence, make choices among alternatives by evaluating their consequences in terms of preferences? OR Pursue a logic of appropriateness, fulfilling identities and roles by their situation and following rules that match appropriate behavior of the situation? March first tells us that one of the deep issues that divide students of decision making is whether decisions are to viewed as consequence-based or rule-based. Rule-following, any decision in any context can be seen as being shaped by identities and a logic of appropriateness. March tells us there is no pure form of either making decisions based on preference or rules, he tells us that we often use a combination of preference and rule to guide us in decision making. In terms of making decisions based on preferences, March tells us that PREFERENCES: Instead of having a complete, consistent set of preferences, decision makers seem to have incomplete and inconsistent goals, not all of which are considered at the same time. People’s preferences change from time to time, so it’s hard to determine WHEN a certain preference will be evoked at any given time. As a result, decisions based solely on preferences are unstable. March first tells us that one of the deep issues that divide students of decision making is whether decisions are to viewed as consequence-based or rule-based. Rule-following, any decision in any context can be seen as being shaped by identities and a logic of appropriateness. March tells us there is no pure form of either making decisions based on preference or rules, he tells us that we often use a combination of preference and rule to guide us in decision making. In terms of making decisions based on preferences, March tells us that PREFERENCES: Instead of having a complete, consistent set of preferences, decision makers seem to have incomplete and inconsistent goals, not all of which are considered at the same time. People’s preferences change from time to time, so it’s hard to determine WHEN a certain preference will be evoked at any given time. As a result, decisions based solely on preferences are unstable.

4. Rational Theories Pure rational choice theory Assume that decision makers have perfect knowledge about all alternatives and consequences of those alternatives. Modifications made to improve the “pure” version of rational choice theory. Limited (Bounded) Rationality Not all alternatives are known, Not all consequences are considered, Not all preferences are evoked at the same time. Along with the idea of decision making process as a consequence-based process, March talks about the Rational Choice Theory. Pure rational choice theory assume that decision makers have perfect knowledge for any particular decision---that all alternatives are known, that all consequences of all alternatives are known with certainty, and that all preferences relevant to the choice are known, precise, consistent, and stable. As mentioned earlier, preferences are not stable and change from time to time. As mentioned earlier, students from all disciplines of social science have woven their ideas into ideas of decision making. So there’s modifications made to the “pure rational choice” theory. They see that there is no such thing as “rationality.” Rational choice theories have adapted to the idea that rationality is limited. Although decision makers TRY to be rational, they are limited by cognitive capabilities and incomplete information. Therefore, ideas of limited rationality have been integrated into the conventional theories of rational choice. Along with the idea of decision making process as a consequence-based process, March talks about the Rational Choice Theory. Pure rational choice theory assume that decision makers have perfect knowledge for any particular decision---that all alternatives are known, that all consequences of all alternatives are known with certainty, and that all preferences relevant to the choice are known, precise, consistent, and stable. As mentioned earlier, preferences are not stable and change from time to time. As mentioned earlier, students from all disciplines of social science have woven their ideas into ideas of decision making. So there’s modifications made to the “pure rational choice” theory. They see that there is no such thing as “rationality.” Rational choice theories have adapted to the idea that rationality is limited. Although decision makers TRY to be rational, they are limited by cognitive capabilities and incomplete information. Therefore, ideas of limited rationality have been integrated into the conventional theories of rational choice.

5. Satisficing vs. Maximizing Satisficing Choose an alternative that is “good enough” Maximizing Choose the “best” alternative Since we cannot know all alternatives and all consequences, people simply choose an alternative that is good enough. March tells us that people assume that decision makers always pick the best alternative, but March says this is not true and that people usually just choose one that is “good enough” Most people would think that rational decision makers would choose among all alternatives and select the best one, or one with largest expected return. However, Behavioral students have observed that decision makers often satisfice rather than maximize. Since we cannot know all alternatives and all consequences, people simply choose an alternative that is good enough. March tells us that people assume that decision makers always pick the best alternative, but March says this is not true and that people usually just choose one that is “good enough” Most people would think that rational decision makers would choose among all alternatives and select the best one, or one with largest expected return. However, Behavioral students have observed that decision makers often satisfice rather than maximize.

6. Coalitions Coalitions are important to policy formation Join coalitions for various reasons - join coalitions that hold the same identities and preferences - they want to belong to a winning coalition - join large enough, but not too large to maximize individual payoff or to gain control of the system 2 types of coalitions 1) congruence among all members, all coalition members want the same policy 2) a coalition of two indifferent members or groups “Logroll” – important in policies where size makes a difference In terms of preferences, some people would join a coalition that match with their preferences or identity as a way to satisfy their preferences or to fulfill their identity. Others join coalitions because they want to gain control of the system. p. 153 Rational actors generally desire to belong to a winning coalition, to which end they seek allies. However, they do not want to have too many allies, for each ally makes a claim on coalition winnings. They like to be members of a coalition that is large enough to gain control of the system, but no larger. First type of coalitions, where members would seek allies to help support the same policy. “logroll” policies that don’t affect one another. Logroll, where coalition size makes a difference. Indifferent to each other’s demands. Idea that wishes are combined. Wife and husband make different sets of decisions. Coalitions are important to policy formation. In terms of preferences, some people would join a coalition that match with their preferences or identity as a way to satisfy their preferences or to fulfill their identity. Others join coalitions because they want to gain control of the system. p. 153 Rational actors generally desire to belong to a winning coalition, to which end they seek allies. However, they do not want to have too many allies, for each ally makes a claim on coalition winnings. They like to be members of a coalition that is large enough to gain control of the system, but no larger. First type of coalitions, where members would seek allies to help support the same policy. “logroll” policies that don’t affect one another. Logroll, where coalition size makes a difference. Indifferent to each other’s demands. Idea that wishes are combined. Wife and husband make different sets of decisions. Coalitions are important to policy formation.

7. Consistency & Inconsistency In Partnerships, Teams & Groups This leads us to the topic of consistent and inconsistent preferences and identities in partnerships, teams and groups.This leads us to the topic of consistent and inconsistent preferences and identities in partnerships, teams and groups.

8. Partnerships and Teams Consistency and Teams A team is one with individuals involved having consistent preferences or identities Very rare to find teams that meet this strict definition of internal consistency Interests and identities are inconsistent -Different people want different things -Different people want to fulfill different identities -Not everyone can have everything desired p.117 p.125 March says that interests and identities in teams and partnerships are often inconsistent because people want different things and they want others to view things the same way as they do.p.117 p.125 March says that interests and identities in teams and partnerships are often inconsistent because people want different things and they want others to view things the same way as they do.

9. To Cope with Inconsistencies - Inconsistencies are removed by aligning incentives for both partners through bargaining, side payments, and agreements Exchange Models of Power: Participants exchange their resources such as money, property, knowledge, competence, access, authorities, and information - Formation of partnership: a potential partner may conceal unattractive properties, or intentionally hide information at time of agreement - Decentralization/Organizational subunits- departments build barriers to friendship, loyalty to other departments, define their group in opposition to other groups, other departments (highlight inconsistencies AMONG groups, while inconsistencies WITHIN groups are ignored) p. 128 March says that the most effective way to for building effective partnerships between individuals with inconsistent preferences or identities is to remove the inconsistencies. Removing inconsistencies means aligning incentives for partners. They negotiate in contracts, make exchanges (make side payments) so that both parties will benefit or have their desires met. p.140 When interests and identities are inconsistent, POWER p. 141, in the face of inconsistencies when different people want to have different things, want to fulfill different identities, and not everyone can have what they desire. Individuals and groups struggle, they compete and cooperate with each other, trying to satisfy their individual preferences and identities. Power is the capabilities to get what you want or to fulfill your identity. p.105 In a larger setting such as organizations, Organizational subunits/decentralization is a device for concealing and tolerating incoherence. In large organizations, individuals are organized or divided into multiple groups/team. As we can see this is a method used to highlight the inconsistencies AMONG groups, inconsistencies WITHIN groups are ignoredp. 128 March says that the most effective way to for building effective partnerships between individuals with inconsistent preferences or identities is to remove the inconsistencies. Removing inconsistencies means aligning incentives for partners. They negotiate in contracts, make exchanges (make side payments) so that both parties will benefit or have their desires met. p.140 When interests and identities are inconsistent, POWER p. 141, in the face of inconsistencies when different people want to have different things, want to fulfill different identities, and not everyone can have what they desire. Individuals and groups struggle, they compete and cooperate with each other, trying to satisfy their individual preferences and identities. Power is the capabilities to get what you want or to fulfill your identity. p.105 In a larger setting such as organizations, Organizational subunits/decentralization is a device for concealing and tolerating incoherence. In large organizations, individuals are organized or divided into multiple groups/team. As we can see this is a method used to highlight the inconsistencies AMONG groups, inconsistencies WITHIN groups are ignored

10. Theories of Attention Attention is a scarce resource - “information overload” Rational decision makers invest their time to information/problems only to the point where marginal costs equal marginal expected return. -Decision makers look for ways to reduce time/costs of attention, they “buy” time. -such as hiring a manager, or delegate someone to represent them. March talks about the importance of “attention” Going back to the idea of limitations to attention, March tells us that Attention is a scarce resource Attention is a scarce resource, March says there are more things to do than there is time to do them. Interested participants cannot be present at a give decision because they need to be somewhere else. Some things may be overlooked because attention is attended somewhere else. This is problematic because some issues/problems are often overlooked because people don’t give attention to it. March talks about the importance of “attention” Going back to the idea of limitations to attention, March tells us that Attention is a scarce resource Attention is a scarce resource, March says there are more things to do than there is time to do them. Interested participants cannot be present at a give decision because they need to be somewhere else. Some things may be overlooked because attention is attended somewhere else. This is problematic because some issues/problems are often overlooked because people don’t give attention to it.

11. Decision Makers Face Limitations Limitations to Attention, Comprehension, Memory Strategies to cope with these limitations -Abstract central parts of a problem -Look for consistent information, ignore inconsistent ones -Attend to problems that are close in proximity rather than problems that are distant March says decision makers struggle and know about these limitations, but they simply find strategies and ways to cope with these limitations. Some of the ways decision makers cope with limitations in information is that they “abstract” central parts of a problem and ignore others. Decision makers look for information that they expect to see that are consistent with their beliefs/preferences while ignoring other inconsistent information. March says decision makers struggle and know about these limitations, but they simply find strategies and ways to cope with these limitations. Some of the ways decision makers cope with limitations in information is that they “abstract” central parts of a problem and ignore others. Decision makers look for information that they expect to see that are consistent with their beliefs/preferences while ignoring other inconsistent information.

12. Garbage Can Process Decision process involves a collection of individuals/groups who are simultaneously involved in other things. “Time” brings order to complex interactions among actors, solutions, problems and choice opportunities. Activities can be ordered in time and connected by their temporal relations – events that occur at the same time are associated with each other. Decision processes build on these temporal categories by combining people, problems, solutions in terms of their simultaneity. Any particular decision is a combination of different moments of different lives. As mentioned briefly last week by Prof. Gen, this is very similar to the Multiple Streams Theory. March tells us that participation is a fluid process, attention received by any particular decision can be both unstable and remarkably independent of the properties of the decision. Decision makers are characterized by their arrival times (when they enter the system), by their access to choice opportunities (decision structure), and by their energy (ability to solve problems). P.200 Their participation depends on features of the alternative choice opportunities, in particular on the apparent nearness of a choice to decision. As mentioned briefly last week by Prof. Gen, this is very similar to the Multiple Streams Theory. March tells us that participation is a fluid process, attention received by any particular decision can be both unstable and remarkably independent of the properties of the decision. Decision makers are characterized by their arrival times (when they enter the system), by their access to choice opportunities (decision structure), and by their energy (ability to solve problems). P.200 Their participation depends on features of the alternative choice opportunities, in particular on the apparent nearness of a choice to decision.

13. Loose Coupling Talk and action are loosely coupled, the talk of decision making is not always closely connected to the action of decisions. Decisions and Implementations -logrolls, makes implementation difficult because members of the coalition are likely to be elsewhere or uninterested in the implementation of the decision. -symbolic commitments, the act of supporting a policy has more symbolic meaning than its adoption, and its adoption can be more important than its implementation. Once a decision has been made among the complex interaction of actors, implementation is needed. However, March tells us that the talk and action is not closely connected. This reminds me what Prof. Gen’s discussion about how with over 10,000 bills introduced, only about 600 get passed. People know in the beginning that their bill won’t get passed, but at least they can claim the credit of having supported or fought for the bill.Once a decision has been made among the complex interaction of actors, implementation is needed. However, March tells us that the talk and action is not closely connected. This reminds me what Prof. Gen’s discussion about how with over 10,000 bills introduced, only about 600 get passed. People know in the beginning that their bill won’t get passed, but at least they can claim the credit of having supported or fought for the bill.

14. “Intelligent” Decision Decision Engineering a process dedicated to producing decisions that are intelligent Action is intelligent if all the results has satisfied the wishes of all relevant parties Intelligence of an action/decision is based on its outcomes Whether a decision is intelligent or not is highly subjective Decision outcomes unfold over time, decisions that may seem good in a short run may have deleterious effects in a long run Bias towards effects that are clear and close - leads to decision making procedures to be inattentive to important concerns that are fuzzy and distant While implementation faces challenges, the “intelligence” of a decision is often challenged and criticized. One group may see a decision as “intelligent” while another group may see it as a “bad” decision. March tells us that decision making based on rationality and rule-following are useful procedures for decision making, but no form guarantees intelligence. P.222 His example is “individual eaters implicitly compare the immediate delights of eating chocolate with the more uncertain future costs of weight and health problems. They give less weight to the pains in the future and give more weight to the instant pleasure. p.232 individuals seem to often sacrifice their long-run interests for short-run pleasures.While implementation faces challenges, the “intelligence” of a decision is often challenged and criticized. One group may see a decision as “intelligent” while another group may see it as a “bad” decision. March tells us that decision making based on rationality and rule-following are useful procedures for decision making, but no form guarantees intelligence. P.222 His example is “individual eaters implicitly compare the immediate delights of eating chocolate with the more uncertain future costs of weight and health problems. They give less weight to the pains in the future and give more weight to the instant pleasure. p.232 individuals seem to often sacrifice their long-run interests for short-run pleasures.

15. Symbolic Significance of Decision Making Decision making tells us more than just the decision rendered It tells us: - who is the decision maker, how he thinks, talks, acts - who is smart, who is powerful - who is virtuous - what is morally important, what is proper behavior March says, “the meanings elaborated in decision making have importance beyond mundane realities of rendering decisions, in the course of decision making, decision makers develop and communicate meaning not only about decisions. They define what is morally important, what is proper behavior, define an individual worth. It helps to mold and sustain a social order of friendship and antagonisms, trust and distrust.”March says, “the meanings elaborated in decision making have importance beyond mundane realities of rendering decisions, in the course of decision making, decision makers develop and communicate meaning not only about decisions. They define what is morally important, what is proper behavior, define an individual worth. It helps to mold and sustain a social order of friendship and antagonisms, trust and distrust.”

16. Conclusion Decision making is a very complicated process Hard to be confident that any decision process will yield an intelligent decision Pessimistic? “the elegance and beauty of human life is augmented within a vision of decision making, and the human spirit is elevated. The idea of decision making gives meaning to purpose, to self, to complexities of social life.” March tells us all the problems in a decision making process, this may seem pessimistic, but March tells us in the end that by understanding different frames of looking at decision making, “we can profit from an understanding of how decisions happen in order to make them better.”p.271 March tells us all the problems in a decision making process, this may seem pessimistic, but March tells us in the end that by understanding different frames of looking at decision making, “we can profit from an understanding of how decisions happen in order to make them better.”p.271

17. Questions?

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