We're Not As Rational As We Think

We often praise the importance of rational analysis, believing that people should be a little more rational and not be swayed by emotion or unnecessary information. Yet if being rational means objectively analysing all the available data and arriving at the best possible decision, most human beings would be classed as irrational — and the reason is precisely the cognitive biases that influence us without our ever noticing.

Cognitive Bias and Rationality

The best way to explain cognitive bias and human irrationality is through examples.

Suppose you want to buy a can of coffee. The supermarket downstairs charges HK$20, while a grocery shop at the far end of the street charges only HK$3. Would you be willing to walk 15 minutes to the distant grocery shop? Quite possibly you would. Now suppose you want to buy a mobile phone. The electronics shop downstairs charges HK$5,888, while a department store at the end of the street charges HK$5,871. Would you still be willing to walk 15 minutes to the department store? You might hesitate, and in the end decide to buy the phone you need at the shop downstairs. The saving is HK$17 in both cases, and the walk is 15 minutes in both cases — so why would people make different decisions and behave differently?

Economists have found that the same value — HK$17 — carries a different subjective utility in people's minds. Subjective utility falls as the objective value of an item rises. Not clear yet? Take a look at the diagram below.

Because subjective utility falls as objective value rises, the same HK$17 gap feels different to us depending on the value of the item. HK$17 is negligible against a phone costing more than five thousand dollars, but against a can of coffee it amounts to an 85% difference! You might insist that your decision was based on percentages. And yet HK$17 is HK$17 in any situation, and in theory a perfectly rational decision-maker should make the same choice in both cases.

Of course, humans have more than one cognitive bias, and they are not confined to economic decisions. Among those widely applied in marketing are the decoy effect and the endowment effect, which we will not discuss here for reasons of space. People likewise rely too heavily on certain (even irrelevant) information when forming judgements — for instance, finding content more agreeable simply because it is set in an elegant typeface, or making faulty assumptions on the basis of certain existing labels. When other people's behaviour goes wrong, we tend to attribute their mistakes to personal failings; when we ourselves slip up, we tend to blame external, environmental factors. Psychologists call this asymmetry attribution bias.

Cognitive biases mostly show that people overestimate their own rationality, but our lives are hardly short of irrational moments either. Being controlled by emotion, acting on impulse — these are far from rare phenomena. As people deeply affected by them, how then should we regard them?

How Should We Regard Our Own Irrationality?

Whether absolute rationality is worth pursuing, I dare not presume to judge. But cognitive bias is not merely a weakness of human nature. According to the theory of evolutionary psychology, our mental processes have all been shaped by evolution and serve the survival of the organism. Cognitive biases often arise because people rely on certain heuristics, also known as mental shortcuts. People use these mental shortcuts to make decisions based on only a small amount of information. Since we have to make countless decisions every day, carefully calculating each one would demand enormous mental resources and time. In most situations, even though mental shortcuts are sweeping generalisations, they still allow people to reach correct decisions — though not necessarily the most correct ones. In an environment of competition and survival of the fittest, saving resources and time may matter more than making the most correct, fully rational choice.

The role of emotion in decision-making should not be overlooked either. The neuroscientist Antonio Damasio once took on a case: a patient named Elliot whose cognitive abilities appeared, on the surface, to be intact — he could rationally analyse the consequences of different choices, yet he had lost the capacity to feel emotion. When Elliot made decisions, although he reasoned rationally, he was unable to actually decide; Damasio traced the cause to his lack of feeling. This case led Damasio to later propose the Somatic Marker Hypothesis, which holds that when making a decision a person needs to imagine the feelings that will follow it, and to draw on the bodily reactions those feelings trigger, in order to judge the value of different choices and decide how to handle matters big and small in life. This shows that emotion is indispensable to human decision-making.

Although human behaviour is not like a rational computer program, that is precisely where psychology becomes fascinating. TreeholeHK has now launched a Psychology 101 online course. As the saying goes, "Know yourself and know your enemy, and you will never be defeated." In every area of life — whether in your career or in love — understanding both yourself and the other person helps you find your way out of the fog and discover the direction in your heart. The course is taught by a psychology professor from a local university, and we hope it will help you understand yourself and your relationships through psychology, and see your own life from a fuller perspective.