The Fictional Self: Implications for Theories of Decision Making

1. The Fictional Self: Implications for Theories of Decision Making Nick Chater Behavioural Science Group

2. OVERVIEW • THE FICTIONAL SELF • THE ILLUSION OF DEPTH • WHY BEHAVIOUR IS (SOMEWHAT) COHERENT • IMPLICATIONS

3. 1. THE FICTIONAL SELF

4. The claim • We infer our own inner life from our words and actions, just as we infer those of a third person • A 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)

5. 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)

6. 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 2006 • IPOs with ‘fluent’ names do substantially better (though effect washes out) RDO vs KAR

7. 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.

8. Inferring our own emotions 1 • Schachter and Singer (1962) • Epinephrine or placebo injections • Raising (or not) arousal • informed (or not) about side-effects • Put with euphoric or angry ‘stooges’ • Higher arousal  participants are more euphoric/angry • When people can ‘explain away’ arousal, effect much reduced

9. Inferring our own emotions 2 • Dutton and Aron (1974) • Male/female interviewers of male bridge-crossers low vs high bridge • Interviewers give phone number “further explanation” of study • More calls to female interviewers for high bridge Arousal (caused by high bridge) misattributed as caused by attractiveness

10. Inferring our own preferences 1 • Johansson, Hall et al., Science • False feedback on choices • not noticed • rationalization given • later preferences changed • And it works with jam

11. 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

13. Pain magnitudes were presented in pairs in three blocks of ten trials • Two “endowment” conditions • £0.40 per trial • £0.80 per trial

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

16. 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?”

17. 2. THE ILLUSION OF DEPTH

18. Where does a rocket take off? • Triangulation will solve it; and the more measurements, the more error can be reduced

19. Where does a rainbow touch down? • Triangulation won’t work... • And the problem is not eliminating noise!

20. Rainbows, like beliefs and values have the illusion of depth • But different ‘bearings’ don’t converge • Because they are improvised on the fly • Not products of stable, (if somewhat hidden, motives) • Different methods of elicitation will yield irrenconcilable “bearings”

21. Reason-based choice (Shafir et al) Expensive, but exciting holiday vs. Cheap, but dull holiday Bali Bournmouth

22. Which holiday would you choose? Reason: “It’s exciting!” Bali Bournmouth

23. Which holiday would you reject? Reason: “It’s too expensive!” Bali Bournmouth

24. 3. WHY BEHAVIOUR IS (SOMEWHAT) COHERENT

25. 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?

26. 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

27. Prices • Decision by arguments (cfLoomes): • Comfortable vs uncomfortable seating • Cost £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?

28. EVERYTHING IS RELATIVE... How much would you pay for 1 h of sitting (more) comfortably? Or 4h 50m of sitting (more) comfortably? London to Edinburgh, return Second: £108.30 First: £229.90 2nd class: £164.10 Business: £325.10 In each case, double the basic price: comparison in action

29. By being able to ‘unbundle’ enforces additivity (and thus more stability) • Bundled -> multiplicative • House size and location • Car quality + stereo system • Doubling of all wine prices in a restaurant • Taking a percentage of sale in auctions, house sales, mergers • Same good: but will happily pay wildly different amounts • Unbundled • Computer hardware + software • Unlicensed restaurant; bring your own drinks • The supermarket, rather than the restaurant. • Same good, same price (but not via same utility)

30. 4. IMPLICATIONS

31. 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

32. 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

33. IMPLICATION 3UNANCHORED PRICES “value” “price” • 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? PEOPLE KNOW THE PRICE OF EVERYTHING, BUT THE VALUE OF NOTHING