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Planning for "Bozos"

All forms of public decision-making are subject to controversy and competing expectations. Many of these relate to the perceived utility gained -- or disutility incurred -- through public expenditures.
Michael Dudley | July 14, 2009, 10am PDT
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All forms of public decision-making are subject to controversy and competing expectations. Many of these relate to the perceived utility gained -- or disutility incurred -- through public expenditures. As economist Nathan Berg showed in a 2002 paper, public decision-making processes are largely exercises in behavioral economics.  Berg isolates five dominant tendencies:  

The status-quo effect: people are willing to pay a limited amount for something new (i.e., a neighborhood park), but want to be compensated to a far greater extent for something perceived to be lost. Berg argues this leads to a tendency to prefer things the way they are;

Loss aversion: A willingness to accept a minimal chance of future loss (i.e, 1,000 deaths from a nuclear power plant accident) but an unwillingness to pay more to avoid gravely disastrous consequences (upgraded safety technology to avoid 10,000 deaths);

Overconfidence: a systematically mistaken distortion on the part of consumers about the demand for a public good (e.g., everbody drives); and

Hyperbolic discounting: people are impatient in the short-run but ironically patient in the long-run (I want this new car now...I'm sure they'll come up with a replacement for oil someday).

Given such tendencies, we can see that planners must contend with a wide range of public expectations – some of which may be based on wholly mistaken assumptions.

But this shouldn't surprise us: after all, we're programmed for error. It's what makes us human. So argue Michael and Ellen Kaplan in their fascinating new book, Bozo Sapiens: Why to Err is Human. It provides some interesting insights into why public economic behaviors as described by Berg are so common. 

Much like Malcolm Gladwell's 2005 title Blink, Bozo Sapiens explores the complex processes behind our judgments and decision-making, but shows how our tendencies towards error are actually hard-wired into our genes. The Kaplans (a mother-and son writing team whose previous collaboration was Chances Are: Adventures in Probability [2006]), argue that those very visual and mental faculties that favored survival in a state of nature can also lead us astray in a world grown unimaginably more complex. 

The authors have woven together hundreds of scholarly studies from a wide range of disciplines. What emerges from their analysis is that we all struggle to fill the gap between what we know is true and what we feel to be so. More often than not, we rely on intuition and other shortcuts when the evidence is thin – or, indeed, when it argues against our beliefs.

We are cognitively programmed to classify, aggregate and summarize – in short, to simplify -- what we see and hear. Otherwise, we would be overwhelmed and unable to judge what information is important and what is not. Unfortunately this makes us susceptible to illusion and to miss entirely what is really going on. For an illustration, the authors cite a famous study that readers can replicate themselves on YouTube.

As well, our various rules-of-thumb based on experience that we employ to make decisions can lead us "off the rails", sometimes disastrously so. Worse, when we are motivated to believe something to be the case, we selectively check the available evidence to fit our beliefs.

The authors argue that these and other paths to error can be traced back to our evolutionary roots. We are, as they put it, "fresh off the Pleistocene Bus" and have not evolved appreciably since the days of our genetically identical cave-dwelling ancestors.

A particular fault arising from our classificatory efforts, according to the Kaplans, is our need to separate ourselves from a convenient "them," sometimes through suspicion, racism and xenophobia, with predictably terrible consequences. In an especially compelling example, the authors relate a study in which individuals identified by the researchers as "right-wing authoritarians" would be willing, if asked by the government, to repress and arrest any threat to its authority – including other right-wing authoritarians such as themselves!

In this light, NIMBY-ish responses to proposed developments that might bring new social groups into a neighborhood should not surprise us.

What elevates Bozo Sapiens beyond popular science interest is that it connects our faulty reasoning to troubling real-world social conundrums -- such as our tendencies towards racial prejudice and our apparent inability to stop ourselves from destroying the planet.

While we might all be tempted to believe -- along with Oscar Wilde's Lord Goring in An Ideal Husband -- that "falsehoods [are] the truths of other people," Bozo Sapiens dispels any such comforting thoughts. It is well worth reading, and makes some of the economic behavior exhibited in public decision-making processes much more understandable.  



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