The Psychology of Judgment and Decision Making | Scott Plous

Summary of: The Psychology of Judgment and Decision Making
By: Scott Plous

Introduction

In today’s world, we face countless decisions, ranging from everyday choices to life-altering decisions. ‘The Psychology of Judgment and Decision Making’ by Scott Plous delves into the world of cognitive biases and how they influence our choices and judgments. Pulling from various psychological experiments and studies, Plous uncovers the role of context, cognitive dissonance, flawed memory, and heuristics in shaping our decision-making processes. This summary will take you through insightful findings on human decision-making behavior and offer ways to improve the quality of your decisions.

Decisions and the Science of Context

Modern consumers face an overwhelming number of choices, but psychology researchers have discovered scientific insights that can help us make better decisions. Judgments are highly influenced by context and selective perception, as demonstrated in a famous experiment with playing cards. To avoid cognitive dissonance, we should acknowledge our psychological inconsistencies and elicit opinions in a variety of ways. A Jewish tailor used this tactic to change a group of anti-Semitic hooligans’ motivation from hate to a monetary reward, leading them to leave when the reward was no longer sufficient. Understanding these principles can help us navigate life’s choices more effectively.

Memory and Perception

Memory is not a perfect recall of past events but mental reconstructions. Context plays a significant role in how a person recounts their personal history. It affects all human perceptions, including judgment and decision-making. Even mundane queries can elicit “pseudo-opinions” based on the structure and framing of questions. Remembering details accurately is crucial, keeping good records is recommended to avoid flawed memory and influence from external factors.

The Six Basic Principles of Logical Decision Making

Decision theory has always been an area explored by geniuses, from the 18th-century mathematicians the Bernoulli brothers to the 20th-century mathematician John von Neumann and economist Oskar Morgenstern. They refined Bernoulli’s “expected utility theory” by defining six basic principles that apply to logical decision making. These principles include weighing choices logically, never choosing a strategy that is dominated by another, ignoring similar traits of different options, preferring results based on external context, gambling based on superior odds, and not being deterred by having lots of options. While many decision researchers have tried to supplant “expected utility theory,” it remains the primary concept for decision making. Finally, “prospect theory,” developed in 1979 by Daniel Kahneman and Amos Tversky, describes how people actually decide by incorporating the notion of loss aversion, a major factor in decision making.

Thinking smarter

Heuristics can lead to biased thinking. Reducing biases when estimating risk or judging probabilities requires you to keep records and avoid wishful thinking.

Heuristics are general rules of thumb that people use in making decisions to save time. While they are usually effective, they can lead to biased thinking, such as the “representative heuristic.” This heuristic deals with whether one choice approximates or stands in for another. For instance, when asked to choose between “Linda is a bank teller” and “Linda is a bank teller and an active feminist,” respondents often select the second option, even though it is less probable.

Kahneman and Twersky observe that as the scenario’s amount of detail increases, its probability decreases, but its representativeness and apparent likelihood may increase. The availability heuristic concerns an event’s probability based on its commonness or frequency and is subject to bias. People are likely to make judgments based on recent, easy to recall, or emotional events. For instance, people think shark attacks are more likely to cause death in the US than falling airplane parts, despite statistics proving otherwise.

These biases have important ramifications, such as discouraging people from living healthier lifestyles. To counteract this, organizations may use data to encourage individuals to take steps to minimize risk, such as posting billboards that remind individuals more people die from stomach cancer than car accidents.

To reduce bias when estimating risks or judging probabilities, it is crucial to keep accurate records and avoid wishful thinking. You can access a third party opinion to facilitate the elimination of this common bias. Groupthink, where groups are cohesive and insulated from external influence, is another bias to avoid.

In conclusion, being aware of biases when making decisions and taking conscious steps to eliminate them can lead to more informed choices.

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