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This article is a classic example of
well-meant "scientific" research and media reporting about human psychology.
It affirms that average people "aren't rational," and proposes using
this "flaw" to manipulate ("save") people into making wiser personal
decisions for their own good. The title should read "Using Psychology to
Save you from your False self." See my comments after the article. The links
and hilights below are mine. -
Peter Gerlach, MSW
+ + +
All Things Considered, June 8, 2009 ·
In the city of Greensboro, N.C., there's a program designed for teenage
mothers. To prevent these teens from having another child, the city
offers each of them $1 a day for every day they are not pregnant. It
turns out that the psychological power of that small daily payment is
huge. A single dollar a day is enough to push the rate of teen pregnancy
down, saving all the incredible costs — human and financial — that go
with teen parenting.
Cass Sunstein, President Obama's pick to head the Office of Information
and Regulatory Affairs, is a vocal supporter of the program, because
it's an economic policy that shapes itself around human psychology.
Sunstein is just one of a number of high-level appointees now working in
the Obama administration who favors this kind of approach.
All are devotees of behavioral economics — a school of economic thought
greatly influenced by psychological research — which argues that the
human animal is hard-wired to make errors when it comes to
decision-making, and therefore people need a little "nudge" to make
decisions that are in their own best interests.
And that is exactly what Obama administration officials plan to do: By
taking account of human psychology, they hope to save you from yourself.
This is the story of how obscure psychological research into human
decision-making first revolutionized economics and now appears poised to
remake the relationship between the government and its citizens.
How Behavioral Economics Came To Be
The ideas that underlie the Obama administration's approach to social
policies got their start in 1955 with Daniel Kahneman. Then a young
psychologist in the Israeli army, Kahneman's primary job was to try to
figure out which of his fellow soldiers might make good officers. To do
this, Kahneman ran the men through an unusual exercise: He organized
them into groups of eight, took away all their insignia so know one knew
who had a higher rank, and told them to lift an enormous telephone pole
over a 6-foot wall.
Kahneman felt the exercise was incredibly revealing. "We could see who
was a leader, who was taking charge," Kahneman says. "We could see who
was a quitter, who gave up. And we thought that what we saw before us is
how they would behave in combat."
Certain of their wisdom, Kahneman and his fellow psychologists would
make recommendations after the exercise. The chosen men would go to
officer school, and Kahneman would move on to the next batch of
soldiers. There was only one problem: Kahneman and his colleagues were
terrible at it.
Every month or so, Kahneman would get feedback from the school about his
picks, and "there was absolutely no relationship between what we saw and
what people saw who examined them for six months in officer training
school," he says.
But here's the remarkable thing: Despite the negative feedback,
Kahneman's faith in his own ability was unshaken.
"The next day after getting those statistics, we put them there in front
of the wall, gave them a telephone pole, and we were just as convinced
as ever that we knew what kind of officer they were going to be."
People Make Irrational Choices
Kahneman was surprised by the pure visceral power of his own certainty.
He eventually coined a phrase for it: "illusion of validity."
It's a problem that afflicts us all, says Kahneman, who won the 2002
Nobel Prize in economics for his work on this subject. From stockbrokers
to baseball scouts, people have a huge amount of confidence in their own
judgment, even in the face of evidence that their judgment is wrong.
But that mistake is just one of many cognitive errors identified by
Kahneman and his frequent collaborator, psychologist Amos Tversky. For
more than a decade, the two worked together cataloging the ways the
human mind systematically misjudges the world around it.
For instance, Kahneman and Tversky identified "anchoring bias." It turns
out that whenever you are exposed to a number, you are influenced by
that number whether you intend to be influenced or not.
This is why, for example, the minimum payments suggested on your credit
card bill tend to be low. That number frames your expectation, so you
pay less of the bill than you might otherwise, your interest continues
to grow, and your credit card company makes more money than if you had
not had your expectations influenced by the low number.
Through their research, Kahneman and Tversky identified dozens of these
biases and errors in judgment, which together painted a certain picture
of the human animal. Human beings, it turns out, don't always make good
decisions, and frequently the choices they do make aren't in their best
In the realm of academic psychology, this isn't much of a revelation —
psychologists see people as flawed in all kinds of ways. So, if the
ideas of Kahneman and Tversky had simply stayed in the realm of academic
psychology, there wouldn't be much of a story to tell.
Economics Mixes With Psychology
The economist Richard Thaler, frequently mentioned as a contender for a
Nobel, was the one who integrated Kahneman and Tversky's ideas about
human irrationality into economics. Now a well-respected professor at
the University of Chicago, Thaler was first introduced to the work of
Kahneman and Tversky when he was still a young professor.
Thaler was so smitten with their ideas that he contrived to spend a year
at Stanford, where the two psychologists would also be teaching for the
"I remember Dick showing up to my office … and our friendship really
started immediately — and it has gone on to this day," Kahneman says.
The three of them spent a year walking the hills of Stanford. Kahneman
and Tversky taught Thaler about psychology; Thaler, in turn, taught
Kahneman and Tversky about economics.
In the early '80s, they began to publish their ideas — an integration of
psychological research and economics with this new flawed decision-maker
at the center. But initially, mainstream economists largely rejected the
The main point of contention, says Thaler, was the suggestion that
humans are less than perfectly rational when it comes to
decision-making. For the majority of the 20th century, and for the most
part even today, the human beings imagined by economists and placed at
the center of their economic models have had a Spock-like rationality.
"Economists literally assume that the agents in the economy are as smart
as the smartest economist," Thaler says. "And not just smart: We're not
overweight; we never overdrink; and we save just enough for retirement.
But, of course, the people we know aren't like that."
So why would economists assume that human beings are so hyper-rational?
Because using a rational human in their mathematical models works. For
decades, economists have been using idealized humans to predict
everything from international trade to market prices, and they've done
pretty well. They've been able to figure out all kinds of things. Also,
it's hard to include more realistic human behavior in an economic model.
The Challenges Of Modeling An Irrational Human
"Behavioral economics has identified a dizzying array of human foibles.
We clearly can't incorporate all of them, and because of that, people
feel that incorporating one error into your model may be just as
unrealistic as incorporating none," says Ed Glaeser, a professor of
economics at Harvard University.
But there's probably another reason for economists' resistance. An
imperfectly rational human being challenges a really important idea: the
notion that markets work well because individuals can be counted on to
make the best choice for themselves.
"Merely accepting the fact that people do not necessarily make the best
decisions for themselves is politically very explosive. The moment that
you admit that, you have to start protecting people," Kahneman says.
In other words, if the human brain is hard-wired to make serious errors,
that implies all kinds of things about the need for regulation and
Thaler and Sunstein wrote a book on exactly this issue called Nudge:
Improving Decisions About Health, Wealth and Happiness.
The book proposed that if you want people to save for retirement, for
example, it's important to take account of the fact that people are
easily overwhelmed by information and so are likely to simply opt for
the status quo. The lesson for policymakers is clear, says Thaler.
"If you want people to enroll in the pension plan, then automatically
enroll them — and let them opt out if they want to." You must push them
in the right direction.
The Psychological Research Jumps To Policy
But critics like Glaeser are worried. Glaeser, as well as many
Republican critics, believes that our current economic predicament is
the product of government intervening in the markets in a way that
distorted incentives. Glaeser says that, if anything, the current crisis
is proof that the Obama administration has drawn just the wrong
conclusions from Kahneman and Thaler's work.
"Just understanding that human beings don't make perfect decisions does
not make the case for government by any stretch of the imagination,"
Glaeser says. "After all, governments are made up of people, too. They
are subject to the same foibles and weakness as the rest of us."
But Thaler argues that government policymakers don't need to be
hyper-rational to help people make better choices.
He offers this example: Any American who goes to London realizes that
they are endangering their lives every time they try to cross the
street, because the traffic comes from the wrong direction. Our instinct
is to look left, but if you look left, you'll get run over by a
To help us, Thaler says, someone in the British government decided to
write on the sidewalks of busy intersections filled with American
tourists the words "look right."
"British bureaucrats are no smarter than American bureaucrats," says
Thaler, "but they know that tourists tend to look the wrong way and
could use a helpful nudge to avoid getting hit by a truck."
The Obama administration believes it needs to shape policy in a way that
will keep us all from getting hit by trucks — health care trucks,
financial trucks, trucks that come from every direction and affect every
aspect of our lives.
+ + +
NPR and Yahoo News reach millions of people as trusted sources of news. This
article describes the work of several respected academicians at prestigious
Universities of Chicago, Harvard, and Stanford. These learned men agree that
humans make "irrational" (self-neglectful)
economic (and other?) decisions.
Instead of exploring why average people don't act in their best long-term
interest (like most kids), these economic psychologists propose "nudging"
(persuading) people to make healthier decisions for themselves - at least
economically. This may be useful, but is a bandage, not a cure. Their
approach implies that nothing can be done to make average people "more
From 36 years'
clinical research, I propose that
the real problem is that most people
are unaware of being ruled by a well-meaning
''false self'' because of unrecognized childhood abandonment, neglect,
and abuse. This false-self is short-sighted and focused on immediate
gratification, rather than on long-term welfare. It is clever at
this focus, and denying or discounting obvious harmful consequences - like
overspending or overeating now and letting the future "take care of itself"
(e.g. not planning for retirement).
A viable alternative is educating people on basic topics - including
high-nurturance families. This promotes healing
psychological wounds, and freeing the resident true Self to make wise short
and long-term (self-caring) decisions.
in this nonprofit Web site offers a practical way to do this. - PKG