Every day we are faced with an insurmountable amount of choices. Will we buy brand A or brand B and will we diet or eat that candy? When making each of these choices we like to believe that we are free to choose what we want, but in how far are we that rational to make the best choice? A lot of attention nowadays is going out to choice fatigue, to a cognitive overload of the brain that then shuts down. In this article the focus will be a step more fundamental, are we even deciding our own choices?
A choice architect is someone that is responsible for organizing the context in which people make decisions. Without realizing you too are probably a choice architect. To demonstrate the power of organizing the context in which you make a decision the article will start with the subject of organ donations. From this example, the principles of defaults are explained. The rest of the text will explain principles of error reduction, mapping, and incentives.
Defaults can be organized in two ways; opt-in or opt-out. In the opt-in, version you still have the check the box, the opt-out version allow you to check the box if you don’t want it. From a rational viewpoint, a person who would want to donate his organs will do so no matter the form. Research and real life examples however show a very significant effect of the defaults. People tend to take the most easy route, the way of least resistance. As for the organ donation forms, this resulted in an enormous difference between very alike countries The Netherlands (opt-in, 27,5%) and Belgium (opt-out, 98%). Important to note is that whilst The Netherlands spent a lot of money on promotion and campaigning, Belgium had an effective consent percentage of almost a hundred percent without spending any money.
Next to shaping how we make decisions, choice architecture can also help us when making choices. A large percentage of women take birth control pills, these are taken every day for three weeks and then skipped for one week. To solve this problem and make the process automatic, the pills are sold in containers with 28 pills, of which 7 are placebo’s, just to make the process automatic. In the same spirit checklists for taking medicines can help prevent errors and save millions of dollars. And who has been using Gmail may have once or twice notices a reminder for adding the attachment, because you typed the words but did not add any document.
By mapping all the choices you can make a better decision for yourself. But this is also where advertisement comes into play. When choosing between a vacation to Rome or Paris we are assuming people are similarly attracted to both options. But what if we expand the map with a third alternative that looks a lot like the Rome options (lets say with another hotel), people now are far more likely to choice the Rome option. This is know as the asymmetric dominance or decoy effect. Probably almost no one is going to go for the new option, but it highlights the other option that is very alike (Rome).
Incentives too can change what we choose, and especially the salience of incentives. Sometimes you are very aware of the costs and use something wisely, like the taxi meter ticking away every few seconds. And in other times you are not so aware of the vast costs that you are making, like the bills you accumulate on a credit card each month. A system of showing the price of energy that is consumed by a household during peak hours may be a very effective way of adjusting families behavior. By changing the choice architecture an effect larger than adjusting prices can be achieved.
What it all boils down to is that we are not the rational beings economists would love to think of us. We are not so free in our (ir)rational choices (Predictably Irrational) and are influenced by many factors that come from the environment. These influences can help us for the better and let us solve the donor problem, safe for retirement and take our medicine. But at the same time also market us things we may not have needed, decoy us into buying a specific product and hide costs from us. We must be careful and aware of the choice architecture that is happening in our daily life, and use the principles for the good, not bad.
References & Further Reading:
1. Johnson, E., & Goldstein, D. (2003). Do defaults save lives?. Science, 302, 1338-1339.
2. Thaler, R., Sunstein, C., & Balz, J. (2010). Choice architecture. Available at SSRN 1583509.
3. Davidai, S., Gilovich, T., & Ross, L. D. (2012). The meaning of default options for potential organ donors. Proceedings of the National Academy of Sciences,109(38), 15201-15205.
8. Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions – Dan Ariely – ISBN-10: 0061353248 | ISBN-13: 978-0061353246
9. The Upside of Irrationality: The Unexpected Benefits of Defying Logic at Work and at Home – Dan Ariely – ISBN-10: 0061995037
10. The (Honest) Truth About Dishonesty: How We Lie to Everyone—Especially Ourselves – Dan Ariely – ISBN-10: 0062183591 | ISBN-13: 978-0062183590