Schafer: Here's how our stupid choices may be rational

  • Article by: LEE SCHAFER , Star Tribune
  • Updated: August 28, 2013 - 8:51 PM

The marketing professor Vladas Griskevicius thinks we humans are not nearly as stupid as he once thought.

Yes, we can drop $3,200 on engagement rings when many marriages end in divorce or spend $5,000 to $7,000 more on a Toyota Prius hybrid than a fuel-efficient conventional car, but he said that we have perfectly rational reasons for doing so.

Not that we really understand why these choices were rational, because we probably didn’t get that our brains were trying to achieve some deep-seated evolutionary goal.

Griskevicius teaches at the University of Minnesota’s Carlson School of Management and was trained as a psychologist, and his writing partner in a new book coming out next week, Doug Kenrick, is a psychology professor at Arizona State. Their term “deep rationality” is the key idea in their entertaining and informative book called “The Rational Animal: How Evolution Made Us Smarter Than We Think.”

The idea that we humans are not that smart comes from behavioral economics, which seeks to apply principles from psychology to deepen the understanding of how people make economic choices. The neoclassical economists think people carefully and rationally choose options to maximize their well-being, and the behavioral economists say that people aren’t really capable of doing that.

Flip a coin and get tails five times in a row, for example, and everyone knows the odds strongly favor getting heads the next time.

Wrong. That’s called the gambler’s fallacy.

Then there’s the clustering illusion, the tendency to see patterns where none exist, and the hindsight bias that causes people to react to new information by saying they knew it all along. Many other biases have been identified, and one particularly strong one is that we secretly think it’s everyone else who is the complete fool.

“A lot of what I learned in behavioral economics is how stupid people are,” Griskevicius said. “A long list of stupidities. And at some point it was so dissatisfying, because the point of the science became documenting a new way in which people are dumb. Why would the brain be so stupid? The answer to that, from an evolutionary biology perspective, is that we are not that stupid.”

Loss aversion

By evolutionary goals he means things like warding off disease, seeking status in a group and finding a mate. When it comes to money, these ancient goals lead to biases like loss aversion.

Behavioral economists have long noted this bias, that it feels OK to find $100 on a sidewalk, but it feels terrible to find $100 missing from a wallet. A rational view is that $100 is $100, but behavioral economists are even pretty precise on how much worse it feels to lose the $100: It’s 2.75 times worse to lose something than the good feeling that comes from gaining it.

That loss aversion is what makes many of us so cautious as investors, and it’s pretty much universal.

And maybe not irrational. For nearly all of human history, humans lived on the edge of survival, just one lost antelope from serious hunger. Ignore the skinny calf to chase after the big bull? Bad idea.

What’s new is bringing evolutionary biology into the world of economics, and one reason why a marketing professor is so keenly interested in it is that the concept can be helpful to anyone trying to build or sell products and services.

Griskevicius and his partner aren’t just arguing that there’s a deeply rational reason for human behavior. They show how people try to reach multiple evolutionary goals — sometimes with the goals in conflict.

That’s one reason why consumers can feel great leaving the store and later regret their purchase. They were meeting one evolutionary goal — say, status seeking — and only later did they grasp how much less money will be available for a college fund for the kids.

That’s also what makes humans inconsistent, not just over the course of a lifetime but over the course of a single afternoon.

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