Government 1759 Cognitive load, shortcuts, and anchors

Lecture 1

Imperfect optimization

People are often not good at knowing what to choose. Choosing requires cognitive effort and ability, and we have (human)

limitations.

Limited attention

we can only process and respond to a small set of stimuli or features of the choice environment at any moment.

Salience effects

salient features of the choice environment that grab our attention can have large impacts on our choices.

Selective attention

to manage complexity we narrow our focus to one aspect of a decision (or one decision among a set of decisions) and ignore everything else.

Limited computational capacity

People have limited computational capacity. This can result in people trying to avoid decisions and using quick shortcuts to evaluate options.

Decisional conflict

people get overwhelmed by complex and difficult choices and avoid making them or delay them.

Valuation issues

people have trouble evaluating choice options with different attributes and use shortcuts.

Mental accounting

people assign money for different purposes rather than using it wherever it is best used to improve overall wellbeing.

Biased reasoning

People are prone to biases when assessing probabilities.

Short cuts and biased reasoning

we use heuristics that can lead us astray, including “availability” and “anchors”

Motivational biases

our estimates are affected by overconfidence and wishful thinking

Availability Heuristic

People tend to assess an event as more or less likely depending on how readily examples come to mind.

Anchoring

People tend to use a readily available number as starting point to make a choice (sometimes just adjusting in the direction you think might be appropriate).