Eldar Shafir - US grants

Most theories of choice are "consequentialist", in the sense that they assume human choice behavior to be determined by the subjective value of potential consequences. The present project is concerned with people's internal conflict in choice and judgement. It posits that people's decision behavior is the result not simply of a concern for value- maximization but is, instead, guided by the need to increase subjective confidence and resolve the conflict inherent to the decision making situation. We suggest that people are "non-consequentialist", in the sense that they frequently behave in ways that are incompatible with a prevailing focus on the value of consequences. The research is organized under the major topics of choice and judgment. Various choice-situations are investigated that explore people's reluctance to choose in situations of conflict, and their willingness to wait or pay for information that has no bearing on their preference, but may increase their confidence in making the choice. Their concern with conflict and confidence, moreover, is predicted sometimes to lead people to choose in ways that are inconsistent with their actual preferences. A preoccupation with internal conflict is assumed to contribute to a somewhat cursory evaluation of the actual consequences. This, in turn, leads to inappropriate estimates in judgmental situations. Diverse choice and judgment situations will be investigated in a variety of ways. Among other methods, subjects' responses to hypothetical questions, computer generated situations, and actual choice scenarios will be collected. An understanding of the role of internal conflict in choice and judgment, it is argued, may shed light on other, well-known phenomena in game theory, reasoning, judgment and decision making is presented. The research is intended to shed light on important psychological factors that guide human judgement, decision making, and reasoning. It may thus contribute both to the improvement of decision making practices in general, and in the medical field in particular, as well as to an increased understanding of aberrant behaviors related to decision making, judgment, and reasoning.

The proposed research focuses on people's memory for past choices. Memory for choices has the potential
to affect people's self-concept, well-being, attitudes, and future decisions. Regret for options not taken can cast a shadow, whereas satisfaction at having made the right choice can make a good outcome seem even better. Our memories of past options provide essential information about our tastes and experience in the context of current and future decisions. These memories have implications for other people as well (e.g., as we give advice about others' choices or participate in collective decisions). Understanding the causes and consequences of distortion in memory for choices, and possible ways to avoid such distortion, can have far- reaching benefits in domains ranging from therapy and consumer education to medical decision making and the law.

Theoretical explanations of memory distortion share many common themes and emphasize the constructive
nature of memory (e.g., Bransford & Johnson, 1973; Loftus, 1979; Reyna & Lloyd, 1997; Roediger &
McDermott, 2000; Schacter, Norman, & Koutstaal, 1998). The current proposal uses the source monitoring
framework (e.g., Johnson, Hashtroudi, & Lindsay, 1993), one of the most well-developed theoretical
approaches to memory and its distortions, to help predict how factors that have been shown to be associated
with memory distortion will affect memory for choices. Preliminary work (e.g., Mather, Shafir, & Johnson,
2000) indicates that people have choice-supportive biases in memory, favoring the option selected over the
one rejected. This choice-supportive tendency goes beyond simply selectively remembering the strengths of
chosen options and the weak attributes of rejected alternatives. People also tend to make errors that favor
their chosen option, misattributing positive features to their chosen option and negative features to the
rejected option. The studies in the first section of the proposal investigate the mechanisms underlying such
choice-supportive memory distortion. The second section investigates some potential effects of choice-
supportive memory on well-being and on future decisions, and the final section investigates how choice-
supportive biases may be avoided or attenuated.

Remembering choices plays a central role in making future decisions. A better understanding of memory
distortion and its influences may help improve decision making in important domains. Better insight into the
role of memory also promises to add to our understanding of intuitive decision making practices and
emergent biases. Finally, an understanding of how memory of past decisions affects our satisfaction, goals,
perceived responsibility, and remembered experience may contribute to well-being in numerous ways. The
proposed studies are intended to shed light on how past choices may be remembered or misremembered, on
how these tendencies may be altered, and on the hedonic consequences that such alterations might have.

Cost-benefit analysis - an analytic tool that is growing ever more influential in helping determine which interventions to protect human health and the environment society will pursue - absolutely requires at least two different kinds of reliable, understandable, and accurate information. Risk analysts, drawing on information from the biological, physical, and engineering sciences, provide information that enables decision makers and the public to understand the nature, magnitude, and distribution of the harms to health and the environment that could be avoided. Society relies upon regulatory economists to explore - the other side of the coin - the cost to society of taking action to reduce particular risks. This project brings together experts in risk analysis, regulatory economics, and several other disciplines to explore whether estimation and communication methods used increasingly routinely to quantify risks can profitably be adapted for use on the ?cost side? of cost-benefit analysis.

The project team will focus on two aspects of risk analysis that have greatly improved this discipline in the past 20 years: the attention to quantifying uncertainty in risk, and the emphasis on exploring the inter-individual variation in the risks that different people face. Regulatory economists generally do not quantify uncertainty in cost as thoroughly as scientists do for risk, and are even less likely to consider the distribution of costs across affected groups of consumers, producers, workers, and others. The investigators will explore whether there are sound empirical or normative reasons for this asymmetry, and will develop econometric models for two regulatory programs in order to assess how decisions and public communication might change if more information about uncertainty and variability in costs were made available. A major portion of the project will involve psychometric survey research that will begin to complement the literature on risk perception with the analogous but unexplored issue of ?cost perception? ? that is, how do laypeople and experts process information about the costs of regulatory programs, and how might those perceptions change when the presentation is enriched with information on uncertainty and variability? The results of these investigations will improve the analytic basis for making cost-benefit decisions that are better informed by realistic estimates of both costs and risks, and that are more responsive to public values and perceptions. The project will also serve as a proving ground for collaborative research among risk scientists and regulatory economists, two groups that work on the same problems but generally do so without direct collaboration.

In this research the Principal Investigators embark on an examination of the psychology of scarcity, and its associated computational challenges and behavioral consequences and how they affect everyday decision-making. In particular, the investigation focuses on scarcity in the realms of money and time. In the case of money, this leads to the study of poverty from a different perspective than has been traditional in poverty research. Specifically, the project explores the notion that scarcity itself -- the chronic state of having scarce resources -- creates a psychological state with identifiable psychological and physiological markers, with non-trivial implications for financial, health-related, and other decision behaviors. Optimal decisions concerning health, economic well-being, and planning are more difficult for those experiencing scarcity, it is suggested, because the unique and stressful context of scarcity yields complex demands concerning tradeoffs, and produces cognitive depletion, which renders the making of good decision all the more difficult, with more severe ramifications due to the thinner buffers available in the lives of the poor.

The proposed studies explore the characteristics of tradeoff thinking shown by people under scarcity, consider some of the behavioral ramifications presumed to arise under conditions of budgeting under scarcity, and then extend the analysis from financial scarcity to scarcity in time. It is proposed that patterns observed under time scarcity, among the "time-poor," are behaviorally -- and theoretically -- similar to those observed in monetary matters amongst the money poor. The proposed studies range from laboratory explorations of money and time budgeting and depletion, to field studies of low-income people whose circumstances shift from slack to scarcity. Implications for a variety of daily tasks, ranging from the take-up of benefits to resisting temptation and adherence are explored. The proposed research explores a profoundly different vision of some of the difficulties afflicting the poor from those that are typically explored in the social and behavioral sciences -- a view of the sources and consequences of fallible decision-making under scarcity that very naturally suggests novel policy analyses and programs.

The proposed research explores the psychological mindset that arises in contexts of scarcity. Previous research has documented the greater focus and precision that emerge under scarcity, as well as the accompanying costs that are incurred as those who focus on scarcity neglect things in the periphery. The present studies investigate several additional yet central aspects of this scarcity mindset. We extend earlier work on how scarcity captures attention and encourages tradeoff-thinking, thereby yielding greater consistency in decision-making. Among other things, we explore persistent shifts of attention, and investigate how a focus on tradeoffs can make people highly effective budgeters with respect to the resource that's currently scarce, but much less effective regarding competing and future resources. We probe how resource inequality can exacerbate the attention drawn to scarcity, and we explore whether increased tradeoff thinking, by capturing attention, can actually undermine subjective well-being and the ability to savor real-time experiences. A second line of studies addresses not whether scarcity improves or harms decision-making; instead, it looks at how a scarcity mindset changes the texture of everyday thinking and experience along various qualitative and affective dimensions. It investigates what kinds of thoughts or concepts are most accessible when we inhabit scarcity, how our thinking changes as a result, and how, under scarcity, people end up organizing the world into different categories. It also explores why scarcity-related thoughts might prove more cognitively taxing than the everyday worries that plague individuals who are not laboring under scarcity. The proposed studies range from surveys and laboratory experiments to field studies, and explore the differences between poorer and richer participants both in naturally occurring settings, as well as in controlled experimental settings where participants are randomly assigned to scarcity (limited budgets) versus plenty (larger budgets), before their reasoning and decision-making are assessed. The research provides a new and different perspective on decision-making in contexts of scarcity in general, and of poverty in particular. It focuses on how scarcity mindsets can change the texture of everyday thinking and experience, and derives several novel predictions, both for theory and for practice. It has profound implications for the debate about the causal connections between poverty and behavior, and for how we might interpret various policy failures. Scarcity is an inherent feature of the world, yet the psychology of scarcity only arises in specific circumstances. This has important implications for the study of cognition, decision-making, and well-being, and it can have profound repercussions for how behavioral economics and the social sciences understand contexts of scarcity, and for potential solutions to problems of public policy.

This research provides a new and different perspective on fundamental problems surrounding decision-making behaviors in contexts of scarcity in general, and of poverty in particular. It focuses on how scarcity mindsets can change the texture of everyday thinking and experience, and derives several novel predictions, both for theory and for practice. Previous research explored the greater focus and precision that emerge under scarcity, as well as the accompanying costs that are incurred as those who focus on scarcity neglect things in the periphery. We extend earlier work on how scarcity captures attention and encourages tradeoff-thinking, thereby yielding greater consistency in decision-making and judgment. Among other things, we explore the resulting attentional shifts, and we investigate how the attention devoted to such tradeoffs can make people good budgeters with respect to the resource that is scarce, but less effective budgeters on competing resources. We probe how resource inequality can exacerbate the attention drawn to scarcity, and we explore whether increased tradeoff thinking, by capturing attention, can actually undermine subjective well-being and the ability to savor real-time experiences. We also investigate the kinds of thoughts or concepts are most accessible when we face scarcity, how activated semantic networks change as a result, and how, under scarcity, people end up organizing the world into different categories. We also ask why scarcity-related thoughts might be more cognitively taxing than the everyday worries that plague individuals who are not laboring under scarcity. This research has profound implications for the debate about the causal connections between poverty and behavior, and for how we ought to interpret failure in circumstances of poverty, and of scarcity more generally. Scarcity is an inherent feature of the world around us, yet the psychology of scarcity only arises in specific circumstances. This has important implications for the study of cognition, decision-making, and well-being, among other things, we predict that certain errors and inconsistencies typically observed in situations of abundance will dramatically diminish under scarcity. We also expect the nature of certain affective experiences to differ in scarcity contexts. This can have profound implications for how behavioral economics and the social sciences understand experiences in scarcity contexts, and for ensuing applications to policy challenges.