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Sunday, November 20, 2011

The Paradox of Choice | Decision-making and Economics

We have never been this free—and this conflicted. Psychologist Barry Schwartz talks with Lars Mensel about the downside of choice, and the silver lining to the economic downturn.

The European: How did you get into researching choice and decision making?
Schwartz: For many years, I have been interested in the hold that the ideology of free market, economics has on people throughout the developed Western world. Why is it that everyone thinks that it’s a miracle of human intervention? I concluded that one of its principle attractions is that it seems to cater to the desire for freedom. That’s the most important thing about it: nobody tells you what to do, nobody tells you what to buy. There’s no other way to arrange things where that kind of freedom is nearly as substantial. The question then is: are people actually liberated by all this freedom? A study came out more than ten years ago, that actually showed that when you give people too much choice, instead of being liberated, they get paralyzed. That study has generated many many follow-up studies, that indicate that this is really quite a pervasive phenomenon, and it seemed to me that this undermined the principle justification for organizing everything around competitive markets. Even if your aspiration is to enhance human freedom, this doesn’t seem to be the way to do that.

The European: Yet modern times and Western prosperity has enabled us to do just about anything we want. What is the downside?
Schwartz: It seems fabulous in prospect and I can easily see why people embrace this with such enthusiasm. Not just choice when it comes to the stuff you buy, but choice when it comes to how you live. There’s no canonical form of intimate relations—you get to decide, and you get to change your mind. You’re not shackled the way your parents or your grandparents were, what could be better? It just turns out that when you give people this kind of unconstrained opportunity to reinvent themselves, they don’t know what to do. Or if they do it, they look over their shoulders, convinced that they’ve made the wrong decisions, made the wrong career move, the wrong romantic choices and so on. So you are plagued with doubt, you are always dissatisfied with whatever you’ve chosen because just around the corner there’s a better option. And I think we see this in the explosion of people seeking psychotherapy. In this land of milk and honey of unimagined freedom and affluence, everybody seems to be miserable.

The European: Many will confirm that even the most mundane decisions can be a burden. Is it the expectation to make something of our lives that weighs down on us?
Schwartz: Not just something: that we make something spectacular out of our lives. When choice was limited, I think people’s aspirations and expectations were limited. And so you could live a decent life and feel good about it. But living a decent life just isn’t good enough anymore. Why would you settle for decent when anything is possible? It seems possible that the economic calamity of the last few years might reverse this to some degree and move people back to more reasonable expectations about what life can be like. I think that the economic downturn would really have to last a substantial period of time before it changed the way people think about themselves and about their lives. I certainly don’t wish on us another decade of economic turmoil and suffering. But the potential benefits if that were to occur include lowering expectations, which I don’t think is a bad thing. The European: So the economic downturn is helping to usher along the lesson that settling down also means settling for something, and enjoying what we’ve got. Schwartz: Good things sometimes come out of tragic circumstances. I am not optimistic that any of this will happen automatically or quickly. As long as people think that tomorrow, it’s all going to change, they are basically just treading water, waiting for the downturn to end, so that they can go back to living the life that they had imagined for themselves.

The European: In the NYT magazine, scientist Roy Baumeister talks about decision fatigue: His theory is that too many decisions wear us out and negatively affect our judgement.
Schwartz: It’s the phenomenon where you have to exert self-control to get yourself to do something that is unpleasant and to stay at it. And when you do that, it’s sort of like tiring your muscles. When you now have to do it again, you don’t have the resources available. Like if you’ve run 15 miles, you can’t just hop up and run another 15 miles. You are worn out. He thinks the same thing is true with whatever mechanisms enable us to exercise discipline and self-control. One study that the Times article does mention is that one way of wearing people’s self-control out is by requiring them to make a series of decisions. Just like sticking with a really unpleasant reading assignment or a set of homework problems wears out your self-discipline, so also does making choices. And I find that quite plausible. I think there’s good reason to think that if you go shopping back to school at the mall with your kids, and you are making one set of choices after another, by the end of the day, you are doing some really stupid things, just to get it over with and get out of there.

The European: …which brings up the larger question of how many decisions we can even make. On the one hand, there are expectations, on the other hand there’s a limit to our ability to decide.
Schwartz: Another point that Baumeister makes that is not apparent in the article in the Times, is that if self-control is a muscle that gets fatigued with use, in theory it can also get strengthened with exercise. If that’s true, you may see lots of individual differences. Some of us can make more decisions over a longer period of time without getting worn out. It’s an empirical question and I don’t know that there really are any clear data to answer that. But there’s got to be a point for pretty much anybody, where you just can’t make another decision. We don’t regard a lot of decision that we make as decisions. You don’t decide to brush your teeth in the morning.

The European: David Eagleman thinks that decisions are mostly subconscious: Our brain is on a certain trajectory and that all decisions are built upon.
Schwartz: Of course that is true. Think about what you do every day when you get up: you brush your teeth. Is that a decision? No. You put your underwear on. Is that a decision? No. You put on your socks before you put on your shoes. Is that a decision? No. Well of course, all those things are decision, but they have become so habitual that you do them automatically. You drive to work. Do you decide whether to make a left turn here or make the left turn on the next block? No. You are sort of on automatic pilot, you follow the same route every day. That saves us. If every real choice involved a deliberate decision for us, we would be worn out before we even got ourselves out of the house.

The European: If you think about something as fundamental as picking up a glass of water; it involves plenty of the decisions.
Schwartz: Yes. There’s some very interesting research done by a psychologist named Hazel Marcus on cultural differences on what counts as a decision. She brings people into the lab to do some study, but in the course of doing the study, they get to choose which cubicle to sit in, which writing implement to use, and a whole bunch of other trivial things like that. And when they are all done, they get asked: “how many decisions did you make?” And what she finds is that Caucasian Americans think they have made many more decisions than people from India or Japan. The way we organize our experience is itself heavily influenced by the culture we come from, and if you come from a culture that does not celebrate choice, all of these choices aren’t interpreted by you as choices.

The European: Does the notion of free will also differ between cultures?
Schwartz: I think it probably does, but I am not myself aware of research that has asked that specific question. There is a lot of work that Western societies need to do to figure out what stance to take. What does it mean to say that somebody is in charge of his decisions? We have operated with the notion that human beings are autonomous agents, that what we do is the product of conscious reflection, and we don’t have to do any of the things we do, so that we are of course responsible for our actions. This is the framework with which we operate when we are interacting with other people. It’s why we blame people when they do something bad, praise people when they do something right, it’s why we put people in jail for committing crimes, and so on. And it’s a fiction. By that I don’t mean that we are never in charge, all I mean is that we are certainly not always in charge. And our social and legal institutions have not caught up with modern understanding that has come out of research in the psychology of decision making. So we are going to have to think hard about how to revise the framework of holding people accountable in light of this new evidence.

The European: The classical economic point of view is that peoples’ decisions results from a careful weighing of what will create the most desirable result. What do you advocate?
Schwartz: Well, I think this picture is completely false, but I think that even economists have known it was false almost from the start. Arguably the leading economist from the 20th century, Keynes, wrote about animal spirits. So here’s this framework of rational, utility-maximizing choice, and along comes Keynes and there’s this package of stuff that he calls animal spirit, that we just might call psychology, that has an enormous influence, moderates, completely negates all these processes of rational deliberation that economist models are built on. So this has been the dirty secret of economics forever. They build models as if people are rational actors, knowing that that assumption is unjustified. And what they hope, I think, and what Keynes thought was also a mistake, is that our irrational quirks are idiosyncratic, so that they basically just cancel each other out. Since economists are not particularly interested in predicting what you will do, or what I will do, but rather what whole markets will do, quirkiness doesn’t matter if it’s random. What Keynes appreciated is that it’s not random. In fact, bubbles are the opposite of random. Every time one of these bubbles pops, it seems to me, it’s a real thorn in the side of the kind of models of rational choice that economists build.

The European: Interestingly, it still seems to surprise economists.
Schwartz: Some people did see it coming, but nobody listened to them. Alan Greenspan, the former chairman of the Fed, who everybody thought was a guru, whose every sentence needed to be chiseled into stone—when the downturn happened, he testified in front of US Congress and he said, “Everybody needs a world view. The world view I’ve been operating on is that people are rational decision makers. I was wrong.” It didn’t do us much good that he said it when he no longer had power. If he’d appreciated this when he was actually making decisions, it’s quite possible that this calamity could have been avoided. There were opportunities that people who run major financial institutions had that could have prevented this from happening. But easier and easier credit, fewer and fewer regulation: all of that made sense on the model that people are rational actors, will act in their own best interest, and collectively that will lead to better results in everyone’s best interest. A different person in the chair’s position could have prevented a lot of the catastrophe, I think, from happening. Every time a bubble happens, a huge segment of profession is shocked.

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