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Thinking and Decision

- The document discusses that rational decision-making is an assumption that is often incorrect, as human decisions are influenced by intuition, biases, and environmental cues rather than pure rationality. - Thinking and decision-making are interrelated processes that are limited by memory constraints like working memory capacity and knowledge stored in long-term memory. - This bounded rationality, where people do not always make optimal decisions due to cognitive limits, was an area of research by Kahneman and Tversky on the mental shortcuts and biases that influence judgment and choice.

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ATID Fabi Rodríguez de la Parra
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19 views4 pages

Thinking and Decision

- The document discusses that rational decision-making is an assumption that is often incorrect, as human decisions are influenced by intuition, biases, and environmental cues rather than pure rationality. - Thinking and decision-making are interrelated processes that are limited by memory constraints like working memory capacity and knowledge stored in long-term memory. - This bounded rationality, where people do not always make optimal decisions due to cognitive limits, was an area of research by Kahneman and Tversky on the mental shortcuts and biases that influence judgment and choice.

Uploaded by

ATID Fabi Rodríguez de la Parra
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Thinking and decision-making

There is an implicit assumption that humans are rational, and that thinking and
decision-making is guided by reason. It turns out that rationality is a rather large,
and possibly erroneous, assumption about human behaviour.

Psychologists, economists and social scientists of all backgrounds have been


fascinated by human decision-making for decades. Sometimes, really smart
people make really bad decisions, even when they have all the information at
their disposal, and this applies equally to day-to-day decisions that impact only a
person, to political or economic decisions with global consequences. Maybe
these decisions are guided by intuition, or perhaps they are shaped by biases,
cognitive shortcuts or cues from the environment. The point is that people do not
always make rational decisions.

Thinking and decision-making are inter-related cognitive processes, because


the act of thinking is required to make a decision. Although thinking and
decision-making can be studied as separate concepts, any psychological
theories about thinking are also theories about decision-making, because the
two concepts are so intertwined.

The key idea is that people do not always make rational decisions, in part
because thinking is sometimes guided by intuitive 'rules' that may frame a
problem too narrowly.

The systemic lack of rationality in decision-making is a legitimate puzzle for


psychological science, and all kinds of research has been conducted since the
1970s to understand the various factors leading individuals astray from rational
choices. This departure from optimal decision-making is known in psychological
and economic circles as bounded rationality.

Bounded rationality
The problem is that while rational decisions might be ideal, the reality is that
rationality is often limited or constrained by a variety of circumstances, some
environmental, and some most certainly cognitive. It is not always possible for
individuals to make the reasonable decision in a given situation, because of
various limits on rationality, including:

• the limits of working memory


• the limits of long-term memory
• the decision-making problem itself.

Any thought process or any decision is ultimately limited by how many chunks
or ideas a person can bounce around in their working memory, while working
through a problem or making a decision. In theory, someone who has a higher
working memory capacity might have an easier time making more complex
decisions, because they can process more ideas at once.
The basic idea is that working memory limits whatever information is currently
available, and therefore individuals cannot always compute the optimal
decision, because not enough information is accessible (March and Simon,
1958, as cited in Hastie and Dawes, 2010).

Figure - Decision-making is limited by memory.

Similarly, thinking and decision-making are limited by long-term memory too.


Semantic memories, procedural memories and episodic memories all have an
influence on thought processes and decision-making. Someone deciding
whether to buy or sell a particular stock, or whether to ask another person out
on a date, could be influenced by:

• their own experiences stored in episodic memory


• the procedures involved in buying a stock or asking someone out
• the meanings associated with each decision, also stored in long-term
memory.

For example, if the decision-making revolves around a game of chess between


a master chess player and a novice chess player, it stands to reason that the
chess master will make better decisions and probably win the chess game. This
could be because the chess master has a larger working memory capacity than
the novice, but this is unlikely since working memory capacity does not vary
widely from person to person. It is more likely that the chess master makes
better decisions because s/he has more chess knowledge stored in long-term
memory (Hastie and Dawes, 2010), and the procedural, episodic, and semantic
memories associated with chess make decision-making more effective.

In both psychology and economics, these limits on decision-making came to be


known as bounded rationality. This topic was explored
further by Daniel Kahneman and Amos Tversky, through their research on
the mental shortcuts and biases they thought might explain departures from
rational thinking.

Thinking Fast, Thinking Slow

You are walking home, late at night, after watching a movie at a friend's
house. The street is dark, and dimly lit. Around the corner, the shape of a large
man appears. He is tall and strongly built, and is walking straight towards you,
carrying a metallic, black object in his hands. Your heart starts beating hard in
your chest, and you brace yourself for the worst.

Just as you are about to make a break for it, the man steps under a street lamp,
and you get a better view. You notice that he is dressed in the uniform of an
office worker, and the metallic object in his hand was just a cellphone. Calming
yourself down, you tell yourself that he must have been working late at night at
the office, and is probably on his way home, just as you are. Your heart starts
slowing down to its regular pace.

What sort of thinking caused you to be afraid at the sight of the stranger, then
later on decide that there was nothing to worry about? Nobel prize winner
Daniel Kahneman devoted his life to researching how people think and make
decisions. His research led to the dual process theory of thinking. According
to Kahneman, there are two distinct modes of thinking: fast, automatic thinking,
and slow, deliberate thinking. To see these two systems in action, try out the
activity below.

Try It Out

Complete the quiz below:

1. What emotion is the woman feeling in the photograph below?

2. What is 10 x 10 = ?

3. John enjoys listening to classical music and solitary walks in nature. John
has always been rather introverted and detail oriented. As a child, John spent
much of his time reading books. Do you think John is more likely to be a
librarian or a business owner?

4. What is 17 x 14 = ?

5. A bat and a ball costs $1.10 in total. The bat costs $1 more than the
ball. How much does the ball cost?

Now, think about how you answered these questions. Were you able to answer
some of the questions instantly? Did other questions require more
deliberate thinking and effort before you knew the answer? Which questions
did you answer with fast thinking, and which required slow thinking?

Write 5 bullet points about the correlation between the two memory models
(MSM and WMM).

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