Cognitive Psychology Essay

PSYC*2650, Cognitive Psychology Essay Assignment

Name : Trevor Egles

Student ID: 0855692

Selected Question: “In contrast to the once dominant view that human beings are inherently rational agents, the work of Kahneman and Tversky revealed that our judgment is often subverted by systematic biases and heuristics that lead to cognitive illusions. Discuss the evidence that refutes the idea that humans are fundamentally rational beings, as well as what, if any, strategies we can use to avoid these traps when making judgments under uncertainty. Justify your argument.”

According to Rational Choice and the Framing of Decisions by Tversky and Kahneman, the logic of choice, as defined by principles stating that individuals are effective at pursuing their goals and especially when there are opportunities to learn from experience, does not accurately give a solid theory of decision making. They have found that digressions from the typically supposed rationale of choice are too common and fundamental for the theory of rational choice to be correct, and we are actually emotional and subjective all the time (Tversky & Kahneman, 1986). The convolutions subsist in behavioral economics, relating to which Kahneman is concerned with the notion that we feel the pain of a loss more immediately than the pleasure of a gain, and it is my perspective that an economic system that realizes we do not make traditional rational decisions needs to be established. Furthermore as to economics, the tenets of expected utility, meaning the usefulness of an economy under a set of circumstances, give a vastly crucial theory for the field of psychology of decision making. Plainly this is because expected utility is used to scrutinize scenarios in which decisions must occur under uncertainty (Chen, 2020). In financial and insurance markets, uncertainty must be modeled explicitly, so for rational choice theory to be disproven signifies didactic societal progress.

Kahneman and Tversky have used prospect theory, a behavioral economics conjecture, which refutes the previously described expected utility theory, to explain that how an issue or predicament is framed affects the decision. Prospect theory states how we assess loss and gain perspectives, and it opposes expected utility because it models how we actually act instead of what perfectly logical agents would stipulate (Daniel Kahneman). It is also titled loss-aversion theory and posits that of two options, the one presented in terms of potential gains will be nominated above the one presented in terms of potential losses. Some assert that animals are more instrumentally rational according to decision making performance because the complexities of human value systems do not allow us to choose correctly according to immediate goals. The discovery of cognitive biases conclusively prove that humans make judgements that defy common sense and rely on a restricted number of heuristics which often yield systematic errors, but that the irrationality is beneficial and better outcomes occur (Goldhill, 2020). Our brains initiate cognitive maps, meaning patterns of what we expect given what we have learned, in relation to these simple heuristics and the knowledge is applied later via the principle of hidden learning (Albar, Jetter, 2009). There is more definitive evidence to confirm that heuristics allow better predictions of situational outcomes than logistic regression. The three main types of heuristics are representativeness, availability, and anchoring and adjustment for high-achieving judgements. Representativeness allows one to ascertain if an object belongs in a general category; availability allows one to assume how likely an event is to occur; and anchoring and adjustment allows one to estimate a number by working from an initial value (Lim, 2018). We have to judge potential outcomes based on how available examples are; thus is the bias of “availability”. Heuristics may however lead to bias, because relying on pre-existing heuristics can introduce stereotypes and prejudice. But typically they reduce the work of decision making in many ways: the user does not have to inspect many signals and reduce the work of storing facts in memory – less information is needed to pass judgement. Many analogies confirming the breakdown of rationality are proposed including base-rate neglect, which refers to the phenomenon of ignoring a theoretical probability, selecting instead the alternative of less informative but more instinctually appealing data (Holt, 2011). This is also known as the base-rate fallacy or base rate bias, and it supports the demise of rational choice theory because it depicts ignoring general information and only noticing specific facts.

Kahneman developed two systems in order to describe our mental lives: one comprising the effortless and intuitive aspect of thinking and one consisting of effortful concentration, and that we have option as to which system to implement at any given time (What determines human decisions). Errors of intuitive cognition cannot be prevented because system one perpetually operates without being turned off at will. Logical positivists are cast into suspicion and objection to the psychological political methods they endorse and their understanding of reason is based on too simplistic a notion of human psyche. Evidently, the regular theories of rational action are antiquated and decisions are actually invariably subjective. Desirable outcomes unfailingly manifest when unattainable ideals of completely rational conduct are attempted, and overall cognitive processes of premonition-based inclination actually give more correct solutions.

References

Albar, Fatima M.; Jetter, Antonie J.: Heuristics in Decision Making, in: Proceedings of PICMET 2009: Technology Management in the Age of Fundamental Change, p. 578-584, August 2-6, 2009, Portland, OR

Chen, J. (2020, January 29). Expected Utility Definition. Retrieved March 27, 2020, from https://www.investopedia.com/terms/e/expectedutility.asp

Daniel Kahneman. (n.d.). Retrieved March 27, 2020, from https://www.econlib.org/library/Enc/bios/Kahneman.html

Goldhill, O. (2020, March 12). Humans are born irrational, and that has made us better decision-makers. Retrieved March 26, 2020, from https://qz.com/922924/humans-werent-designed-to-be-rational-and-we-are-better-thinkers-for-it/

Holt, J. (2011, November 25). Two Brains Running. Retrieved March 27, 2020, from https://www.nytimes.com/2011/11/27/books/review/thinking-fast-and-slow-by-daniel-kahneman-book-review.html?auth=linked-facebook

Lim, A. (2018, November 9). Understanding Heuristics: The Psychology of Mental Shortcuts. Retrieved March 27, 2020, from https://www.thoughtco.com/heuristics-psychology-4171769

Tversky, A., & Kahneman, D. (1986, May 29). Rational Choice and the Framing of Decisions. Retrieved March 26, 2020, from https://apps.dtic.mil/dtic/tr/fulltext/u2/a168687.pdf [PDF File]

What determines human decisions? (n.d.). Retrieved March 26, 2020, from https://www.ubs.com/microsites/nobel-perspectives/en/laureates/daniel-kahneman.html