A Look at Behavioural Economics
I have previously written about my gripe with digital algorithms being used as an analogy for decision-making in the real world. My passion is to understand how people make decisions in the real world and they do not seem to use rationalistic algorithms. Often, the study of rational decision-making has been done in the realm of economists. Emulating the ideas of the natural sciences a lot of economists have often attempted to make assumptions in their models that people act rationally. Over the last 50 years an alternative research program has been evolving that is often referred to as “behavioural economics”. This behavioural economics tradition has started to pejoratively call the rational being from economic textbooks “homo economicus” and argued that people consistently show deviations from this supposed rationality. Behavioural economists have defined the rational decisions in economics texts are based on the idea that rational people:
“have well-defined, stable preferences along with unbiased beliefs;
make optimal choices based on these beliefs and preferences; and
their primary motivation is self-interest" (Thaler, 2016).
There have been over 200 different biases identified by now – each showing people as more and more fallible. But has behavioural economics gone too far? Has human nature been downgraded from the perfectly rational “Homo Economicus” directly to Homo Simpson who has inbuilt biases? Behavioural economists argue that instead of full rationality we have this thing called bounded rationality. The story of Homo Simpson goes that because of the bounds of our cognition we use these things called “heuristics” or rules of thumb which are: “cognitive shortcuts or rules of thumb that simplify decisions, represent a process of substituting a difficult question with an easier one” (Kahneman, 2003).
This view of heuristics has become famous due to the work of Daniel Kahneman and Richard Thaler that center on what happens in people’s heads when faced with difficult decisions. Our System 1 thinking is supposed to be fallible and error prone compared to our slow and deliberate System 2 thinking. The practical implication here is that people need to be “nudged” towards a “System 2” thinking where possible. This focus on people’s psyche in isolation of their environment has been useful to an extent but in the field of place branding where we are interested in the interaction between people and place (or at least the images of place), we can benefit from another perspective.
A Look at Evolutionary Psychology
Through my PhD research in place branding and work as a user experience designer I have uncovered another strand in the behavioural economics discipline that focuses not on people’s heads being studied in isolation. The focus in what is called the “fast-and-frugal" view of heuristics is on people’s interaction with an “environment”. In this tradition the interpretation of what rationality is can be summarised by the concept of “ecological rationality” as opposed to the narrower understanding of what “bounded rationality is. Heuristics in this view become not an inconvenience of our fallible minds but rather detailed descriptions of how we approach different situations through a multitude of adaptive strategies that we have evolved to us in a complex and uncertain world:
“A heuristic is a strategy that ignores part of the information, with the goal of making decisions more quickly, frugally, and/or accurately than more complex methods." Gigerenzer and Selten (2002)
So, having outlined the usefulness of heuristics does not mean that I will diminish the work of those behavioural economists who focus on the study of the bias associated with a heuristic. I just think it is a lot more useful and fun to study the exact ways in which a decision-making process works rather than... for want of a better word “gaslighting” a decision as biased. Even if a decision is wrong – the study of the exact process that someone went through to reach that conclusion is useful knowledge.
An Example of the Usefulness of Heuristics in Digital UX Design
The focus on the useful side of heuristics is nothing new to the field of design which is becoming ever more involved in the building of digital representations of places or services provided by those in charge of the management or brand management of places. In the early 1990s Jakob Nielsen summarised 10 Heuristics for good user interface design and these are still in use today as a good starting point in designing usable digital interfaces. Does the digital presence of your place violate any of these. Nielsen recommends that 3-5 non expert users can spot 80% of the usability problems in an interface if they are given these 10 rules of thumb and instructed to spot if they are violated by the design of the interface. This method has limitations and of course the Homo Simpson bias but it costs very little and can remove design problems before paying for formal research.
#1: Visibility of system status
The system should always keep users informed about what is going on, through appropriate feedback within reasonable time.
#2: Match between system and the real world
The system should speak the users' language, with words, phrases and concepts familiar to the user, rather than system-oriented terms. Follow real-world conventions, making information appear in a natural and logical order.
#3: User control and freedom
Users often choose system functions by mistake and will need a clearly marked "emergency exit" to leave the unwanted state without having to go through an extended dialogue. Support undo and redo.
#4: Consistency and standards
Users should not have to wonder whether different words, situations, or actions mean the same thing. Follow platform conventions.
#5: Error prevention
Even better than good error messages is a careful design which prevents a problem from occurring in the first place. Either eliminate error-prone conditions or check for them and present users with a confirmation option before they commit to the action.
#6: Recognition rather than recall
Minimize the user's memory load by making objects, actions, and options visible. The user should not have to remember information from one part of the dialogue to another. Instructions for use of the system should be visible or easily retrievable whenever appropriate.
#7: Flexibility and efficiency of use
Accelerators — unseen by the novice user — may often speed up the interaction for the expert user such that the system can cater to both inexperienced and experienced users. Allow users to tailor frequent actions.
#8: Aesthetic and minimalist design
Dialogues should not contain information which is irrelevant or rarely needed. Every extra unit of information in a dialogue competes with the relevant units of information and diminishes their relative visibility.
#9: Help users recognize, diagnose, and recover from errors
Error messages should be expressed in plain language (no codes), precisely indicate the problem, and constructively suggest a solution.
#10: Help and documentation
Even though it is better if the system can be used without documentation, it may be necessary to provide help and documentation. Any such information should be easy to search, focused on the user's task, list concrete steps to be carried out, and not be too large.