Joseph Nathan Cohen

Department of Sociology, CUNY Queens College, New York, NY

Rational Decision-Making: Theory versus Reality

This is video was part of an early experiment with teaching through YouTube videos. It discusses rational decision-making.

To see more about the “Teaching through YouTube” series.  For more, see this post.

Original Video Description

We often assume that our decision-making is rational and well-informed. Often, it is not. This video describes the ways in which our decision-making often deviates from the ideal of a rational, well-informed decision-maker. CLOSED CAPTIONS AVAILABLE ON THIS VIDEO – USE THEM IF YOU HAVE TROUBLE FOLLOWING! This video was produced in January 2013 for my research methods seminar (SOC 334) at Queens College in the City University of New York. If you are enrolled in this class, you must also complete the assigned readings and exercises. Instructions will be posted on my web site and on Blackboard. This video is part of an experiment in teaching with technology. In the coming semester, I plan on releasing other videos and an overview of this experiment. If you are interested, please visit my web site ( and share your questions, corrections, thoughts or criticisms. I appreciate any feedback or advice on the video’s content (admittedly poor) production, or the format of moving my lectures to sets of short (5-10 minute) streaming videos.

Transcription (Auto-Generated)

We like to think of ourselves as rational, well-informed decision makers. In reality, we’re not in this video. I describe this assumption of rationality and being well informed and how this assumption often fails in real life. When we think of how we make decisions, we generally do not assume that we’re impulsive, ignorant or illogical. Instead, we often have a vision of ourselves as being something that economists might call rational, well-informed actors. This model of well-informed, rational actors has two parts to it. One is the assumption of rationality. And two is the assumption that the person is well-informed when making a decision. By rational, I mean that it’s assumed we make logical, objective decisions. In this case, by logical, I mean clear and sound reasoning. We assume that we don’t make our decisions willy nilly without reason or in some other senseless way by objective I mean that we assume that we take a cold, hard look at the evidence and make our decisions without bias or undue sway from personal preferences or our own mental glitches in describing ourselves as well informed. We’re seeing that we have a good idea of what our choices are and the potential consequences of each of these choices when we’re deciding how we act. We generally assume that we have a good grasp of what’s possible for us to do, and we’re not missing any major possibilities. We also assume that we have a good idea of how each of our choices will play out, what their potential consequences will be. Implicitly, we’re assuming that we have a reasonable grasp of how the world works. Take a moment and jot down the five most important decisions you made in the past week. Now jot down the first five decisions you made today, whether or not to hit the snooze button, what to eat for breakfast, when to check your phone, how to commute to work. Did you make them rationally? Did you think through the reasons for your choice? Did you map out the outside the upsides and downsides and contemplate your alternatives? Did you start to wonder if you considered all of your options? Did you think about whether or not things could be done better? Probably not. Most of our decisions are not done rationally with some processing of information, at least a deliberate processing of information. There are three problems with this rational, well-informed actor model. One not deliberative decisions, too low information. And three mental errors. Let’s think about these errors one by one. The first problem is that most of our decisions are made not deliberately. The word deliberate has to do with having a discussion back and forth. Either you talk about the discussion with other people or have an internal conversation about it in your head. Deliberative decisions are choices that we make with extensive thought about their options and their consequences. Many of our decisions that were non deliberative, they’re made without extensive thought. Many of our decisions are made impulsively. That’s where there’s no contemplation of our choices or their consequences. A good example of impulse decision making is when we go to the checkout counter of a store and our hand just reaches out and grabs a National Enquirer pack of gum or five, our energy bottle. Those products that store is put next to the counter are called impulse items. They put them there to capitalize on our proclivity to just make a decision on the spot without thinking it through. Some of our decisions are made habitually. Those are decisions that we might have thought through once, but ever since we’ve been going through them automatically without thinking about them. Repeating these decisions over and over again. In retail, a lot of products are like that. We decide once that we’re going to try and work in Salt or Tide laundry detergent, and then after that, we don’t really think when we’re at the shopping counter about which salt or detergent to buy. We become loyal customers, but our loyalty is it doesn’t stem from the fact that we love the brand and have faith in it. Instead, our loyalty comes from the fact that we just stop thinking about the choice and do it over and over again without thinking. A third example is a practice called sufficed. Those are decisions where we don’t contemplate all of our choices or their consequences fully, but rather we start a decision making process and then we stop as soon as we find a choice That’s good enough. It’s not a completely rational way of making decisions in terms of selecting your best option. Although it might be rational in terms of not wasting time on a decision that you don’t care a lot about. The thing is that we often suffice in decisions that do ultimately matter to us, and so we turn off our rational minds as soon as we find something that could plausibly be described as having been rationally discerned. We just move on. So, for example, I might not like thinking about cars, but I know I need a good car that’s has good fuel economy, and I just ask my friends if they know of a good fuel economy, a cool car until the first person gives me a name and then I run out and go buy it. It’d be a sort of facing type of purchase decision. I didn’t decide. I didn’t look into what was the best choice for me all round, but rather I took the first decent option that came my way. The second major problem in our decision making is that we often lack information. We don’t know what our choices are. We don’t have a firm grasp of the upsides and downsides of each of our choices. Think about when you were picking colleges. Were there other colleges that you wish you had considered? When you look back, do you think that there was a lot you didn’t know that you know now and you wish you had known when you were making your choices? Did you know what qualities to look for in a college? Were you misinformed about what what college life was like? These are all informational problems and they’re very frequent. Sometimes it’s our fault we didn’t look things up. Maybe we should have bought some books on the topic or done a little search on the internet. But very often everybody likes information. There’s only so much that people can know with much certainty. And probably if you asked ten different experts about choosing a college or just about any issue, you’d get ten different answers. Some things we don’t know because research is not up to where we’d like it to be. But as we’ll see later, there are some limits to what research can tell us, what people can know with much confidence. Some questions can’t really be answered scientifically at all. The third type of problem that keeps our decision making from being rational, well informed are mental errors. These are common mistakes that we make when we’re trying to rationally calculator options. One example is anchoring. Anchoring happens when you give disproportionately to the first piece of information you receive when you make decisions. Be careful not to latch on heavily to the first piece of information that you get. Just because it came to you first doesn’t mean it’s the most important. A second common mental error is one that favors the status quo. That means when we’re making a choice, we give sort of an extra advantage to the choice that requires the least amount of change on our part. Maybe we do it because it’s easier. Or maybe we do it because the status quo is more familiar. Just because a choice is easier or more familiar doesn’t mean it’s better. A third glitch in our decision making process is something called ignoring sunk costs. Sunk costs, ignoring sunk cost rather occur. When we made a bad decision in the past. But we don’t walk away with it because we’ve already invested so much in it. Here’s the kind of ridiculous example. Imagine that I’m not popular with the ladies and I decide that my real problem is that I don’t have a mustache. And so I spend weeks trying to grow a mustache. But at the end, I find that I’m no more popular with the ladies than I was before the mustache. Now I have a decision to make. Do I go back to the drawing board or do I double down on my bad decision and maybe think that the problem is that my mustache isn’t shapely enough, and so I go out and buy some mustache wax. Now, the smart decision says, Well, a mustache probably isn’t a great solution to your social problems and that you’d be throwing good money after bad if you put some money into buying mustache wax. But we have a glitch in our cognition. Once we put time, our time and energy into something, it’s hard for us to admit that it failed and walk away from it. We often double down on bad choices. That doubling down is called ignoring sunk costs, and we do it all the time. A third glitch is that we often look for confirmatory evidence. It means that our senses are more tuned to information that justifies decisions that we want to make anyways. There’s a bias in the information that we receive or that we detect or pay attention to when we’re balancing the pros and cons of our decisions. For example, if you’ve ever talked to a friend about dumping an abusive boyfriend or quitting smoking and you find that their minds immediately go to their 90 year old aunt who has been smoking two packs a day or those, you know, moments of genuine niceness or vulnerability that that abusive boyfriend displays. You’re you’re seeing somebody exhibit confirmatory bias. They want to find reasons to stay with their boyfriend or to keep on smoking. And they’re not being dishonest, but instead they’re mind is hyper tuned to pieces of evidence that justify the view that they want to accept as the best one. The final example of mental traps that we fall into are estimating and forecasting problems. Those are instances in which we’ve experienced something that resonates with the soul vividly that we allow it to. We give it a disproportionate amount of influence for making decisions. For example, if we’ve ever gone to the casino and on one lucky night we hit the jackpot. That memory leads us to think that if we go to the casino, we have a reasonably good chance of walking away with more money when in fact we know that the odds are that we will lose money. The vividness of that memory, the emotional imprint, distorts our evaluation of the costs and benefits of a visit to the casino. So we often like to think that we’re rational, well-informed decision makers in general. We’re not. We make decisions without thinking them through. We lack information. And when we do process things mentally, we have glitches that prevent us from dealing with things in a logical, well-thought out way. Now, even though we’re vulnerable to these types of problems, it doesn’t mean that we are trapped in them. We can adopt techniques and practices that improve our decision making ability, and we’ll focus on those over the course of the semester.