rational choice & psychological models of decision

1. Peffley
PS 474 Political Psychology

2.  Why do people (citizens & policy
makers) make “bad” decisions?
 Why did things go so wrong in the wars
inVietnam & Iraq?
 How do people make decisions?
 Two competing decision-making
theories:
 Political economists worshipAnthony
Downs
 Political psychologists worship Herbert
Simon & Daniel Kahneman

3. 1. 1-to get out of bed; rest is sleep-
walking
2. 10-20
3. 50-100
4. 100’s
5. 1000’s

4. 1. 3 (Little Debbie's)
2. 10-20
3. 50-100
4. 100’s
5. 1000’s

5.  We’re aware of only a small fraction of the 1,000s of
choices we make each day
 We think we make only 15 food choices each day when
we actually make 100s (“At the table or in the chair?”
“All or save half?”)
 Bad decisions can have important consequences
 Medical decision errors (misdiagnoses) by trained
professionals are the 6th most common cause of death
in the U.S., behind breast cancer, suicide & homicide.
 Judges, juries make life and death decisions
 War and peace, genocide, sexual harassment,
discrimination and altruistic actions are all decisions
with huge consequences
 Clearly, we need to study how we make decisions!

6.  Judgments: perceiving objects or events as good or bad or
likely to occur.
 Decisions: commitment (to oneself or publically) to an
option or a course of action selected from a set of options.
 Decisions have outcomes, which are the circumstances or
states that follow from the decision.
 Two views:
 Economists: people should be rational and choose what will
make them most satisfied in the future.
 Psychologists: people are not rational and often do not
appreciate what will make them satisfied in the future.
 Kahneman: people are in between rational and not rational.

7. ANTHONY DOWNS
 Economist, Senior Fellow at the
Brookings Institution in
Washington D.C.
 Famous for:Write the first application of
economic rational choice theory to
elections (his dissertation!).
HERBERT SIMON
 1916-2001, Nobel prize, Economics
 Carnegie Mellon: Cognitive Psychology,
Computer science & Political Science
 Famous for: Bounded rationality, actual
decision making.
 Simon was among the founding fathers of artificial intelligence,
information processing, decision-making, problem-solving and
more.

8. Anthony Downs vs. Herbert Simon (& Daniel Kahneman)!
Who are they fighting over?
The American voter:

9. Anthony Downs, The EconomicTheory of Democracy

10.  Definition of Rationality:
 Rational behavior is purposive behavior directed toward
the attainment of goals.
 To be rational, one selects the alternative course of action
(means) that most efficiently reaches one’s goal (ends).
 Rationality is assessed more by how people choose
between alternative actions (means) than by what their
goals are. However, Downs considers only political &
economic goals.
▪ In economics, people value money so the option that yields the
most money is taken.
 Requires a very high estimation of the average
individual's capacity for reason, choice, cognition,
and conscious calculations.

11.  People make a decision by determining the likelihood that
each option’s outcome will occur and the value of the
outcome in question. Then they multiply the likelihood and
value for each option, which equals its expected value, and
whichever option has the highest score is the option people
should choose because it brings them the most utility or
expected value.
 Situation: A player answers enough questions correctly to
achieve the $32,000 level, which can’t be taken away.
 Option 1: End the game now & keep the $32,000.
 Expected value = outcome X likelihood ($32,000 * 1.0) = $32,000.
 Option 2: Play another round where you must answer
correctly a multiple choice question with 4 possible answers
to receive $64,000.
 Expected value of answering the additional question = outcome X
likelihood of getting it right ($64,000 * 0.25) = $16K
+ outcome X likelihood of getting it wrong ($32,000 * 0.75) = $24K
$40,000.
▪ $16K + $24K = $40,000.
 Decide to play another round!

12. Alternative A
(End Game)
1.0
0.25
0.75
Alternative B
Another Round
$32,000
$64,000
$32,000
•Decision nodes – squares = choice points
•Chance nodes – circles = intervening uncertain events between choices and outcomes
•Probabilities – the likelihood that an outcome will occur
•Expected benefit – payoffs – the consequences of a given combination of choices and chances
EVA = 1.00*($32,000 ) = $32,000
EVB = 0.25*($64,000) +
0.75*($32,000)
= $16,000 + $24,000 = $40,000
This decision is a no-brainer but it still involves difficult calculations!

13.  Economists: irrational decisions are just noisy
and bothersome disturbances in their elegant
mathematical equations.
 Psychology: what economists consider
“irrational” decisions are meaningful because
they reveal how the mind works.
 Kahneman’s ProspectTheory (later): the values
associated with outcomes are not the same for
everyone or across all situations.They rather
they reflect people’s current standing.

14.  As the deadlocked U.S. government
flirts with the “fiscal cliff” and the
national debt rises beyond $16.2
trillion, Soucy and a handful of other
Americans have decided to take
actions of their own.
 A woman in Ohio left $1 million in her will
for the Department ofTreasury.
 An elementary school in Houston raised
$692 at a bake sale.
 A man in the Pacific Northwest started a
“debt-busting” nonprofit.
 Already this year, Americans have
donated a record amount to pay down
the debt, sending theTreasury more
than $7 million in personal checks.
Businessman on a mission to solve the U.S. debt crisis: Scott Soucy, a retired
Army captain and businessman, has spent the last two years sending a portion of
his earnings to help fix the debt. Now he’s on a mission to solve the crisis and get
other Americans to chip in.

15.  Deductive theories: the analyst makes
simplifying, "as if" assumptions about how the
world works and then deduces an actor's
behavior in a given situation.
 Theories are tested by the accuracy of their
predictions rather than the validity of their
assumptions.
 The end of science is prediction, rather than
explanation.
 Preference for producing "elegant models of
irrelevant universes" vs. "data dredging," inductive
methods. Parsimony vs. complexity.

16.  Citizens vote if PB > C, (expected benefits outweigh the
costs), where:
 B = the extent to which the individual feels that one party
(candidate) will benefit him or her more than the other
party (i.e., "expected party differential").
 C = costs associated with voting.
 P = probability that a citizen's vote will affect the outcome
of the election.
▪ The probability that any national election will be decided by a single
vote is effectively 0. Close votes that come down to 200 votes will
be decided in a recount or in the courts.
 Therefore, according to Downs, deciding not to vote is
perfectly rational. (“Rational abstention”)
 If there is a positive benefit of voting it’s psychological, not
rational.
 Rational ignorance: cost of becoming informed >
benefits because we can’t affect the outcome of
political issues. It’s rational to be politically ignorant!

18.  Adopting Downs’ purely instrumental model
or its variants, either everyone or no one
votes!
 "The Paradox that Ate Rational Choice
Theory”

19.  What are the goals/means of candidates and of
voters?
 Downs’ application of Hotelling’s spatial theory
in the MedianVoterTheorem
 What are the predictions of the model?
 Rational candidates can create irrational voters
(who rely on Party ID or candidate personalities
instead of issues) because:
▪ Candidates often won’t tell voters where they stand on the
most important issues.
▪ Candidates often converge on important issues and so don’t
offer voters a choice.

20. Candidates compete for
votes in ideological space

21.  Issue voting usually ranks dead last as a
determinant of the vote choice.
 Voters’ issue positions are often the result of
“rationalizing candidates’ positions in one of two
ways:
▪ Persuasion
▪ Projection
 Rational choice models provide poor
explanations (and predictions) of actual
voting behavior.

22.  Voting is an expressive, not an instrumental act,
with an intrinsic value of expressing one’s
preferences.
 Throw out the P term because people aren’t good at
probability calculations. B includes psychological
gratification that Downs ignored.
 Example of Iraqi or Miami voters waiting in lines for hours.
 Voting is very different from economic
consumption:
 Voting is a collective action, and theVoter isn’t
guaranteed anything from voting. She doesn’t necessarily
get the candidate she wants.
 An election is a public good that is made available to
everyone, regardless of whether or how they voted.
 In contrast to the market, instrumental decision-making
is less relevant because in elections the outcome depends
only marginally on the individual’s actions.

23. VOTING
Expressive act, with intrinsic
value of expressing one’s
preferences
Voting is a collective action,
with the outcome in doubt.
She doesn’t necessarily get
the candidate she wants.
An election is a public good
that is made available to
everyone, regardless of
whether or how they voted.
ECONOMIC CONSUMPTION
Instrumental act.
Consumption is a private
act, and the consumer alone
determines the outcome
(either pays for the good or
not).
 Consumer goods are
private goods.

24.  Implications for election laws: even small increases in costs
outweigh even smaller perceived benefits of voting.
Examples:
 In the U.S., with so many elections and so many offices, the costs of
voting are higher than European countries.
 Mandatory voting would increase turnout!
 Motor voter registration decreases costs and increases turnout.
 Tighter registration requirements increase the costs of voting and can
be expected to depress voting, especially among…?

25.  Half the states have them. Some laws blocked
by Obama admin for 2012. “Emerging
research” (2000 to 2006) shows:
 The strictest forms of voter identification
requirements — combination requirements of
presenting an identification card and positively
matching one’s signature with a signature either
on file or on the identification card, as well as
requirements to show picture identification —
have a negative impact on the participation of
registered voters relative to the weakest
requirement, stating one’s name.
 We also find evidence that the stricter voter
identification requirements depress turnout to a
greater extent for less educated and lower
income populations, but no racial differences.

26.  Studying candidate behavior, which
is more instrumental.
 Studying the interactions between
different types of actors (e.g.,
candidates and voters in spatial
models), if we don’t have to take
into account lots of individual
variation in the way actors actually
make decisions.
 Thinking about a normative model
of decision making; how to make
“best” or optimal decisions.

27. Rick Lau, “Models of Decision Making,” pp. 19-38.

28.  Unrealistic: “homo economicus” voters
must seek out all relevant information on all
issues and all candidates, where each
candidate proposal is an alternative
associated with a range of outcomes and
probabilities.
 Ignores constraints in ability & motivation.
 Very limited cognitive capacity (small working
memory)
 Motivation: P*B rarely > C
▪ Rational abstention, ignorance
 Dismisses departures from rational choice.
Treats people’s “irrational” decisions as
noisy and bothersome “errors” that are
meaningless and should be ignored.

29. Alternative A
.25
.75
.6
.4
.2
.8
.7
.3
.4
.6
.1
.9
Alternative B
$500.00
$200.00
$300.00
$400.00
$100.00
$600.00
$650.00
$50.00
•Decision nodes – squares = choice points
•Chance nodes – circles = intervening uncertain events between choices and outcomes
•Probabilities – the likelihood that an outcome will occur
•Expected benefit – payoffs – the consequences of a given combination of choices and chances

30.  EVA1=.25*.2*$500.00=$25.00
 EVA2=.25*.8*$200.00=$40.00
 EVA3=.75*.7*$300.00=$157.50
 EVA4=.75*.3*$400.00=$90.00
 EVA=$312.50
 EVB1=.6*.4*$100.00=$24.00
 EVB2=.6*.6*$600.00=$216.00
 EVB3=.4*.1*$650.00=$26.00
 EVB4=.4*.9*$50.00=$18.00
 EVB=$284.00

31.  Many models of rational choice view
the mind as if it were a supernatural
being possessing demonic powers of
reason, boundless knowledge, and
all of eternity with which to make
decisions.
 Humans make inferences about their
world with limited time, knowledge,
and computational power.

32.  Instead of a fully rational decision making
process (i.e., an optimal choice with full
information),
 Decisions made only after simplifying the choices
in a variety of ways because the decision maker is
a satisficer seeking a satisfactory solution versus
an optimal one
 Herbert Simon developed computer models of
actual decision making, artificial intelligence
 Known for the concepts of “bounded rationality”
and “satisficing” in realistic models of decision
making.
 Herbert Simon was a political scientist as well as a
psychologist and computer scientist

33.  The (toilet paper) example
Bounded Rationality:
Herbert Simon

34.  Limitations
 Cognitive limitations on rationality: Limited working memory means
limited attention, calculations, limited & biased retrieval from
memory, and so on.
 Motivation:
 Ways of coping: i.e., simplifying decision-making in
“Bounded rationality,” fast & frugal decision making
(Herbert Simon)
 Use heuristics (Simon & Kahneman)
▪ Use prior beliefs to make sense of new information
▪ What other cognitive shortcuts?
 Decompose decisions into smaller parts,
 Edit (ignore) some aspects of decision.
 Goals of boundedly rational decision makers
 Make “good” decisions (though not the “best” possible)
 Use minimal cognitive effort
 Costs: while humans often make “good enough” decisions,
we often make poor decisions and are unaware of our
limitations.

35. 1. Stands on the issues
2. Ideology
3. Past or future economic performance
4. Partisan affiliation
5. Personal characteristics
6. Spouse, Dog

36. 1. Prospective issue voting
2. Retrospective performance voting
3. Partisan affiliation
4. Personal characteristics
30%
22%
41%
8%

37. Rick Lau & David Redlawsk

38. Model 1
Rational Choice:
Dispassionate Decision
Making
Model 2
Party ID
Early Socialization &
Cognitive Consistency:
Confirmatory Decision
Making
Model 3
1-2 Issues
Fast and Frugal
Decision Making
Model 4
Bounded Rationality
and Intuitive Decision
Making
Assumptionsabout
Information Search
Decision makers should
actively seek out as much
informationas possible,
about every available
alternative [until the cost of
additional information exceeds
its expected benefit].
Information gathering is
basically passive, except party
identification should be
sought early. Most exposure to
relevant information comes
from the media and is largely
inadvertent. Perception of
media messages is often
biased in favor of early-learned
predispositions (PID), and to
the extent information search is
purposeful, it too is biased
toward those early-learned
predispositions.
Decision makers should
actively seek out only a very
few attributes of judgment
which they really care about or
which they have found to be
most diagnostic, and ignore
everything else.
People actively seek out
only enough information to
allow them to reach a
decision (although depth of
search is conditioned by the
perceived importance of the
decision). Cognitive
shortcuts and various
decision heuristics are
heavily (and almost
automatically) utilized.
Method of Decision Making Explicit, conscious, cognitively
difficult memory-based
consideration of the positive
and negative consequences
associated with each
alternative
Memory-based evaluations of
what is known (long-term) and
has recently been learned
(short-term) about the different
alternatives
Explicit memory-based
consideration of the one or
two positive and negative
consequencesassociated
with each alternative
“Satisficing” or related
methods which attempt to
make choice relatively easy
by restricting information
search
Motivations for Choice Self-interest Cognitive Consistency Efficiency Making the best possible
decision with the least
amount of effort; Avoiding
value tradeoffs
Electoral Inputs to
Decision
Mainly retrospective (e.g.,
job performance) and
prospective (e.g., issue
stands) judgments about
candidates.
Primarily party identification,
but also issue stands,
economic evaluations,
perceptions of the candidates,
and evaluations of the
incumbent's job performance.
Candidates' "stands" on the
few attributes a voter
considers (but certainly not
limited to policy stands)
Cognitive shortcuts
(stereotypes, schemas, etc)
and other political heuristics

39.  Surveys: measure only the end-products of
our decisions and our flawed, constructed
descriptions of them, not the actual process
of decision making.
 Dynamic information boards that trace the
process by which voters search for
information about candidates and their
resulting decision.

41.  Voting correctly: selecting the candidate who
is the “best” from the voter’s perspective.
 A correct choice is one that would have been
made if the individual had been fully informed.
▪ Self-assessment: After subjects vote using info board,
they are given full info on candidates and asked if they
voted for the correct candidate (63 and 70% voted
correctly in mock general and primary elections)
▪ Researchers: compare subject’s issue positions with the
candidates and decide whether the vote was correct.

42.  Lau & Redlawsk Findings: Rational choice
decision-making is inferior to heuristic
decision-making (e.g., either partisanship, 1-2
issues, or other short-cuts) under most
conditions!

43. Even after controlling for inexperience with computers and slower manual dexterity among older people, Lau and Redlawsk
still find:
Age is associated with less information search, less memory, less accurate memory, and a lower probability
of making a correct vote.
Age has minimal effects on the probability of correct voting until the mid-60s, but we observe very sharp
drop-offs thereafter.

44. RATIONAL CHOICE
 Strengths
 Normative model
 Studying interactions among
different types of actors
 Better for elites than masses
 Parsimony
 Weaknesses
 Ignores individual differences
 Highly unrealistic explanation
 Less applicable to political vs.
economic behavior
HEURISTIC CHOICE
 Strengths
 Realistic explanation of actual human
decision making
 Explains “good” as well as “bad,” error-
prone decision making
 Suited to masses & elites
 Applicable to many behavioral domains,
including politics
 Weaknesses
 Difficult to aggregate individuals to
macro level behavior (reductionist)
 Complexity makes precise predictions
difficult

46.  http://www.theinvisibl
egorilla.com/videos.ht
ml
 We think we are seeing
the world the same as
everyone else does.
 But two people looking
at exactly the same
world can be seeing
two different things at
the same time.

47. CHARACTERISTICS OF SYSTEM 1 CHARACTERISTICS OF SYSTEM 2

48.  Using S2 can be unpleasant
 Bat & ball
 S1 & Associative Networks
 Moses
 NewYork
 ideomotor effect,The Florida Effect
 Smiling

49.  S1: Mood, intuition, creativity, gullibility and
reliance
 S2: Cognitive strain, suspicion, sadness,
vigilance & threat
 Bottom line: we prefer simplicity to
complexity, certainty to doubt, coherence to
ambiguity

50.  The halo effect & voting
 The primacy effect
 Easier to form judgments early and then avoid
having to update them with new (and
inconsistent) evidence
 Swiftboating, early negative ads, 2012
 Coherence-seeking S1 + lazy S2 means S2 will
endorse many intuitive beliefs, which closely
reflect the impressions generated byS1
 Use of stereotypes and unlearning prejudice

51.  • Overconfidence
 • Base-rate neglect
 • Framing effects

52.  Df: heuristic: a simple procedure that helps find
adequate, though often imperfect, answers to
difficult questions.
 When faced with difficult target questions, S1’s
answer is an easier heuristic question comes
readily to mind
 Target question: How popular will the president be
six months from now?
 Target question:This woman is running for the
primary. How far will she go in politics?
 Target question: How much would I contribute to
save an endangered species?

53.  REPRESENTATIVENESS HEURISTIC
 #5, #2
 Categories, base-rates & stereotypes
 Why often ignore base-rates but over-use
stereotypes (a type of base-rate)?
 AVAILABILITY HEURISTIC
 #3 & 4
 ANCHORING

54.  Helping behavior: Nisbett and Borgida
 Cass Sunstein:
 Certain policy decisions should be left to experts—
not to the public or to their elected officials
 All heuristics are equal, but availability is more
equal than the others
 Ebola virus?
 Terrorism?
 HIV/AIDS vs cancer?
 Kahneman: “Hawks always win”