The Paradox of Choice - Barry Schwartz Flashcards
Introduction
The culture of abundance robs us of satisfaction.
The promiscuous amount of choice renders the consumer helpless and dissatisfied.
Most of us would often be better off with fewer choices.
People prize and value the opportunity to be self-determining. Healthy people want and need to direct their own lives. But there is a darker side to freedom.
As the number of choices keeps growing, the negatives escalate until we become overloaded. At this point, choice no longer liberates, but debilitates. It might even be said to tyrannise.
Isaiah Berlin made an important distinction between ‘negative liberty’ and ‘positive liberty’. Negative liberty = freedom FROM constraint. Positive liberty = freedom TO do what you want.
Increased choice among goods and services may contribute little or nothing to the kind of freedom that counts. It may impair freedom by taking time and energy better devoted to other matters.
We would be better off:
1/ If we embraced certain voluntary constraints on our freedom of choice, instead of rebelling against them.
2/ Seeking what was ‘good enough’ instead of seeking the best
3/ If we lowered our expectations about the results of decisions
4/ If the decisions we made were nonreversible
5/ We paid less attention to what others around us were doing.
Part One - When We Choose
We may suffer from what economist Fred Hirsch referred to as the ‘tyranny of small decisions’. We say to ourselves ‘let’s go to one more store’.
People will not ignore alternatives if they don’t realise that too many alternatives can create a problem.
Our culture sanctifies freedom of choice so profoundly that the benefits of infinite options seem self-evident.
Choosing who to be - each person comes into the world with baggage form his ancestral past - race, ethnicity, nationality, religion, social and economic class. All this baggage tells the world a lot about who we are. Now greater possibilities exist for transcending inherited social and economic class.
What is means to choose
Novelist and existential philosopher Albert Camus posted the question: “Should I kill myself or have a cup of coffee?”
His point was that everything in life is a choice.
During the working week, you’re an automaton. This is a very good thing.
Part Two - How we Choose
To say that we know what we want means that three utilities align: expected utility is matched by experienced utility, and experienced utility is faithfully reflected in remembered utility.
Several studies have demonstrated that familiarity breeds liking.
People rate familiar things more positively than unfamiliar ones.
Evaluation the information
Daniel Kahneman and Amos Tversky have spent the last 30 years studying how people make decisions (behavioural economics). Their work documents the variety of rules of thumb (heuristics/mental shortcuts) we use that often lead us astray.
Availability - people tend to give undue weight to some types of information (e.g. anecdotal evidence) in contrast to others. They called it the availability heuristic.
It says that we assume that the more available some piece of information is to memory, the more frequently we must have encountered it in the past. Salience or vividness matters as well.
This is how inaccurate information can create a bandwagon effect, leading quickly to a broad, but mistaken consensus.
Sensitivity to availability is not our only Achilles heel when it comes to making informed choices.
Anchoring - a particular form of priming effect whereby initial exposure to a number serves as a reference point and influences subsequent judgments about value.
This is why department stores seems to have some of the merchandise on sale most of the time, to give the impression that customers are getting a bargain.
Context that influences choice can also be created by language.
The framing effect is an example of cognitive bias, in which people react to a particular choice in different ways depending on how it is presented; e.g. as a loss or as a gain.
People tend to avoid risk when a positive frame is presented but seek risks when a negative frame is presented.
Gain and loss are defined in the scenario as descriptions of outcomes (e.g. lives lost or saved)
Prospect theory shows that:
- A loss is more significant than the equivalent gain (loss aversion)
- A definite gain is favored over a probabilistic larger gain (risk averse)
- A probabilistic loss is preferred to a definite loss (risk seeking)
Prospect theory is a behavioral economic theory that describes the way people choose between probabilistic alternatives that involve risk
Law of diminishing marginal utility = as the rich get richer, each additional unit of wealth satisfies them less.
The endowment effect is the hypothesis that people ascribe more value to things merely because they own them.
People will tend to pay more to retain something they own than to obtain something they do not own—even when there is no cause for attachment, or even if the item was only obtained minutes ago.
Once people own them, the products are worth more to their owners than the mere cash value, because giving up the products would entail a loss.
Maximisers vs Satisficers
Maximisers need to be assured that every purchase or decision was the best that could be made.
To satisfice is to settle for something that is good enough, and not worry about the possibility that there might be something better.
The goal of maximising is a source of great dissatisfaction. It can and does make people miserable.
Psychologist Herbert Simon introduced the idea of ‘satisficing’ in the 1950s. He suggested that when all the costs (in time, money and anguish) involved in getting information about all the options are factored in, satisficing is, in fact, maximising strategy.
Maximisers are more likely to experience regret after a purchase.
Maximisers savour positiver events less than satisfiers.
After a negative event, maximisers’ sense of well-being takes longer to recover.
Maximisers tend to brood or ruminate more than satisficers.
There is a cost to high maximisation.
Studies show that being a maximiser is correlated with being unhappy, which does NOT necessarily indicate cause and effect.
Maximisers are much more susceptible than satisficers to all forms of regret, especially that known as ‘buyer’s remorse’.
Maximising is not a measure of efficiency; it is a state of mind.
Perfectionists have very high standards that they do NOT expect to meet, whereas maximisers expect to meet them.
We can adhere to very high standards without expecting to attain perfection. We must accept ‘losses’.
Most of us have the capacity to be satisficers.
Why do people maximise?
1/ Not aware of tendency in themselves
2/ Concern with status - we are in an arms race of exquisiteness
3/ Link between scarcity and value - the more affluent a society becomes, and the more basic material needs are met, the more people care about goods that are inherently scarce.
It is certainly possible that choice and maximising are not independent of each other.
Differences in consumption opportunities between cultures can have effects on people’s satisfaction with their lives.
Part 3 - Why We Suffer
Choice has both an instrumental and expressive value
Expressive - it enables us to tell the world who we are and what we care about
Learned helplessness occurs where the subject endures repeatedly painful or otherwise aversive stimuli which it is unable to escape or avoid.
After such experience, the organism often fails to learn or accept “escape” or “avoidance” in new situations where such behavior would likely be effective.
Learned helplessness theory is the view that clinical depression and related mental illnesses may result from such real or perceived absence of control over the outcome of a situation.
Learned helplessness can affect future motivation to try. What’s the point of getting out of bed, getting dressed, and trying again if the results are foreordained.
It is not an exaggeration to say that our most fundamental sense of well-being crucially depends on our having the ability to exert control over environment and recognising that we do.
Most important factor in happiness = close social relations.
Being connected to others seems to be much more important to subjective well-being than being rich.
People have 2 general classes of responses available when they are unhappy. They can exit the situation, or they can protest and give voice to their concerns.
Second-order decisions are decisions about the appropriate strategy for reducing the problems associated with making (first-order) decisions. For instance, second-order decisions may involve deciding when to decide and when not to decide, how much time to spend deciding, and what inputs to seek when deciding something (rules, presumptions, standards etc.)
Part of the downside of abundant choice is that trade-offs have negative psychological consequences.
Being forced to confront trade-offs in making decisions makes people unhappy and indecisive.
The emotional cost of potential trade-offs does more than just diminish our sense of satisfaction with a decision. It also interferes with the quality of decisions themselves. There is a great deal of evidence that negative emotional states of mind narrow our focus.
When we are in a good mood, we think better.
Trivial decisions become important if we believe that these decisions are revealing something important about ourselves.
As the stakes of decisions rise, we feel an increased need to justify them.
We are biologically unprepared for the number of choices we face in the modern world.
Keeping options open seems to extract a psychological price.
‘Good enough’ can survive thinking about opportunity costs. A satisfier is not likely to be thinking about the hypothetical perfect world.
Concern about regret is a major reason that people are maximisers.
Omission bias - a bias to downplay omissions (failures to act) when we evaluate the consequences of our decisions.
Counterfactual thinking is a concept in psychology that involves the human tendency to create possible alternatives to life events that have already occurred; something that is contrary to what actually happened.
Upward counterfactual thinking focuses on how the situation could have been better.
Downward counterfactual thinking focuses on how the situation could have been worse.
In this scenario, a person can make themselves feel better about the outcome because they realize that the situation is not the worst it could be.
We should try to do more downward counterfactual thinking.
There are benefits to downward comparison.
Inactive inertia - the phenomenon of not choosing a good option because we let a better option slip away.
Anticipated regret - a fear projection of how we think we will feel after a certain event.
Sunk-cost effects are much bigger when a person bears responsibility for the initial decision.
Adaptation is a ubiquitous feature of human psychology which says that very little in life turns out quite as good as we expect it will be. We get used to things and then we start to take them for granted.
The hedonic treadmill, also known as hedonic adaptation, is the observed tendency of humans to quickly return to a relatively stable level of happiness despite major positive or negative events or life changes.
Novelty can change someone’s hedonic standards so that what was once good enough, or even better than that, no longer is.
As people adapt - as novelty wears off - pleasure comes to be replaced by comfort. Comfort is nice enough, but people want pleasure. And comfort isn’t pleasure.
In general, human beings are remarkably bad at predicting how certain experiences will make them feel.
Factoring in adaptation may help us be satisfied with choices that are good enough rather than ‘the best’.
Keep wonderful experiences rare.
Downward comparison has been found to boost self-esteem, increase positive mood, and reduce anxiety.
People are driven to social comparison largely because they care about status.
Positional goods are goods and services that people value because of their limited supply, and because they convey a high relative standing within society.
We might all agree that everyone would be better off if there were less positional competition. It’s stressful and it distorts people’s lives.
When people pursue goods that are positional, they cannot help being in the rat race. To choose not to run is to lose.
When we inevitably fail, the culture of heightened individualism biases us towards causal explanations that focus on personal rather than universal factors.
Unattainable expectations, plus a tendency to take intense personal responsibility for failure, make a lethal combination.
Part 4 What We Can Do
Satisfice More and Maximise Less
Strategies to avoid the disappointment that comes from thinking about opportunity costs:
1/ Unless you’re truly dissatisfied, stick with what you always buy
2/ Don’t be tempted by ‘new and improved’
Make your decisions nonreversible
The grass is always greener. Finding a life partner is not a matter of comparison shopping and ‘trading up’. Wondering whether you could have done better is a prescription for misery.
Knowing that you’ve made a choice that you will not reverse allows you to put energy into improving the relationship that you have rather than constantly second-guessing it.
Practice an ‘Attitude of Gratitude’
With practice we can learn to reflect on how much better things are than they might be, which will in turn make the good things in life feel even better.
Regret Less
Anticipate Adaptation - acknowledge the thrill will wear off
Control Expectations
Curtail Social Comparison
Social comparison seems sufficiently destructive to our sense of well-being that it is worthwhile to remind ourselves to do it less.
Remember that “He who dies with the most toys wins” is a bumper sticker, not wisdom
Focus on what makes you happy, and gives meaning to your life.
Learn to love constraints.
