Jackpot or jack-all: you decide
In our day-to-day lives we need to make thousands of decisions, big and small: what should I wear? Should I take an umbrella? Is it safe to walk down that alley? In order to deal with this number of judgments, the brain uses decision-making ‘heuristics’, otherwise known as rules of thumb. These rules serve us well for the most part, but sometimes they can lead to irrational behaviour.
One of the most famous of these biases is the “Gambler’s Fallacy”. This is the belief that past events have an influence on a chance event in the future. For example, if you are playing a fruit machine where there is a 25% chance of winning, the outcome is statistically independent of any prior pull of the lever. However, people often feel like they are “due” a win if they have had a run of losses. Or, they might feel like they are on a “good streak” and should therefore keep playing. This bias is very difficult to overcome when playing a game of chance, and may be a contributing factor to the addictiveness of gambling.
Decision-making rules are sometimes seen as errors in judgment. However, we probably have good reasons for thinking the way we do, in terms of the problems we encounter in everyday life. One study asked people everyday questions involving judgments about various things such as box office results, life spans and lengths of marriages. For example, “Imagine you are in somebody’s kitchen and notice that a cake is in the oven. The timer shows that it has been baking for 35 minutes. What would you predict for the total amount of time the cake needs to bake?”
They compared participants’ responses to a computational model that had access to various real-world sources of information such as recipe websites, just as the human brain has memories of the real world. They found that people performed very similarly to the model, which was designed to give an accurate response. This study shows that reliance on prior information is actually very useful and produces the optimal results in a more real-world setting, i.e. not a casino.
Another example is the bias of ‘loss aversion’, which means that we strongly prefer avoiding losses to acquiring gains. For example, imagine your disappointment at dropping a pound coin down a drain. Now compare this to the happiness you might feel at finding a pound on the street. For most people, the negative feeling of loss is greater than the positive feeling of gain.
Studying biases in our thinking can help us be more aware of them when we are making important decisions. It can also help to explain human behaviour more generally, and even economic trends.
Image: Fruit Machine by Garry Knight under Creative Commons License