I’ll tell you why you always make the wrong decision

 If you find yourself in front of a sign that says “what would you choose between the 50% chance of winning 1000 euros and 50% chance of no winnings, against a sure gain of 450 euros”, what would be your answer?

 Yes, I would also choose the 450 euros safe, like most people; but you want to know why? Why do we always choose something for sure without ever going to analyze options well?. Let’s start with a bit of (boring) history:

In 1978 an American psychologist won the Nobel Prize for his research on decision-making processes in economic organizations. Another psychologist questioned how to change the decision-making processes when you are in situations of risk, until he advanced the theory of the prospectus.

The same question I asked you was put by that  psychologist to a number of participants. Not considering the actual possibility of gain, they chose the second option. This is defined as the certainty effect: when comparing a profit which is certain  with a probable one, people overestimate the ford, when it is safe, and then choose option B. Understood? No? Neither did I.

Let’s compare it to our daily life. How often have you realized to have made the wrong decision immediately after taking it?

We do not rationally reflect on the actual probabilities of an event, but select information according to individual subjective patterns, until we determine different choices. The number of automatic processes (both irrational and instinctive) that activate in our brain at the time we have to make a decision, is considerably greater than the number of controlled processes. This is due to the fact that to save resources, our brain prefers to process information with minimal effort. What makes personal choices are nothing more than processes of simplification, and therefore processes that are not very scientific; this is why the same person can make different choices in the face of the same problem. So, in essence, we cannot be certain that the decisions we are making are absolutely the best, because they are based on our experience and not on reasoning; they will certainly be satisfactory but not optimal.

So I leave you with these questions: if we can’t be sure how we’re making a decision, how can we say that the decision-making process is rational and controlled? And how do we know one decision is better than the other?

Emanuela Lipani

Bibliography  

stateofmind.it/2016/05/teoria-del-prospetto-kahneman/  https://it.wikipedia.org/wiki/Neuroeconomia  

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