When 1+1=3 (Part 19 of Cognitive Biases)

Our 19th installment of Cognitive Biases covers the status quo bias, stereotyping, and the subadditivity effect.


Status Quo Bias

Sigmund Freud suggested that there were only two reasons people changed: pain and pressure. Evidence for the status quo bias, a preference not to change established behavior (even if negative) unless the incentive to change is overwhelming, comes from many fields, including political science and economics.

Another way to look at the status quo bias is inertia: the tendency of objects at rest to remain at rest until acted upon by an outside force. The corollary, that objects once in motion tend to stay in motion until acted upon by an outside force, gives hope for change. Unfortunately, one of those outside forces is friction, which is as easy to see in human affairs as it is in the rest of the material universe.

Daniel Kahneman (this time without Amos Tversky) has created experiments that can produce status quo bias effects reliably. It seems to be a combination of loss aversion and the endowment effect, both described elsewhere.

The status quo bias should be distinguished from a rational preference for the status quo in any particular incident. Change is not in itself always good.

Stereotyping

A stereotype, strictly speaking, is a commonly held popular belief about a specific social group or type of individual. It’s not identical to prejudice:

• Prejudices are abstract-general preconceptions or abstract-general attitudes towards any type of situation, object, or person.
• Stereotypes are generalizations of existing characteristics that reduce complexity.

The word stereotype originally comes from printing: a duplicate impression of an original typographic element used for printing instead of the original. (A cliché, interestingly, is the technical term for the printing surface of a stereotype.) It was journalist Walter Lippmann who first used the word in its modern interpersonal sense. A stereotype is a “picture in our heads,“ he wrote, “whether right or wrong.“

Mental categorizing and labeling is both necessary and inescapable. Automatic stereotyping is natural; the necessary (but often omitted) follow-up is to make a conscious check to adjust the impression.

A number of theories have been derived from sociological studies of stereotyping and prejudicial thinking. In early studies it was believed that stereotypes were only used by rigid, repressed, and authoritarian people. Sociologists concluded that this was a result of conflict, poor parenting, and inadequate mental and emotional development. This idea has been overturned; more recent studies have concluded that stereotypes are commonplace.

One theory as to why people stereotype is that it is too difficult to take in all of the complexities of other people as individuals. Even though stereotyping is inexact, it is an efficient way to mentally organize large blocks of information. Categorization is an essential human capability because it enables us to simplify, predict, and organize our world. Once one has sorted and organized everyone into tidy categories, there is a human tendency to avoid processing new or unexpected information about each individual. Assigning general group characteristics to members of that group saves time and satisfies the need to predict the social world in a general sense.

Another theory is that people stereotype because of the need to feel good about oneself. Stereotypes protect one from anxiety and enhance self-esteem. By designating one's own group as the standard or normal group and assigning others to groups considered inferior or abnormal, it provides one with a sense of worth, and in that sense, stereotyping is related to the ingroup bias.

Subadditivity Effect

The subadditivity effect is the tendency to judge probability of the whole to be less than the probabilities of the parts.

For instance, subjects in one experiment judged the probability of death from cancer in the United States was 18%, the probability from heart attack was 22%, and the probability of death from "other natural causes" was 33%. Other participants judged the probability of death from a natural cause was 58%. Natural causes are made up of precisely cancer, heart attack, and "other natural causes," however, the sum of the latter three probabilities is 73%. According to Tversky and Koehler in a 1994 study, this kind of result is observed consistently.

The subadditivity effect is related to other math-oriented cognitive biases, including the denomination effect, the base rate fallacy, and especially the conjunction fallacy.

More next week.

To read the whole series, click "Cognitive bias" in the tag cloud to your right, or search for any individual bias the same way.

How Much Will You Pay for this Cheese Sandwich? (Part 6 of Cognitive Biases)

A cognitive bias is a pattern of deviation in judgment that occurs in particular situations, and boy howdy, are there a lot of them! Links to the first five parts follow below.

In this week’s installment we’ll look at biases that begin with the letters “D” and “E.”

Disposition effect

Markets are supposed to be rational, but investors aren’t, according to the discipline of behavior finance. Investors have a tendency to sell shares whose price has increased, but hold onto assets that have dropped in value, because the pain of recognizing losses exceeds the potential pleasure of having assets that may yet grow. The disposition effect is measure of that tendency.

Egocentric bias

There are two different types of egocentric bias — social and memory.

The social egocentric bias makes people tend to take more credit for their own part of a joint action than an outside observer would give them. What’s interesting about the egocentric bias is that not only do people claim more credit for positive outcomes (which would make this the same as “self-serving bias”) but also claim more responsibility for negative outcomes.

The memory egocentric bias is a self-serving tendency to remember our own past in a way that makes us look better. Like most memory biases, this isn’t the same thing as lying about our past; it’s a form of self-deception in which we really do recall things that way, facts notwithstanding.

Endowment effect

The endowment effect is also found in behavioral economics, where it’s also called “divestiture aversion.” In one test, people demanded a much higher price to sell a coffee mug they’d been given than they were willing to pay for a coffee mug they didn’t yet own. This contradicts a standard principle of economic theory that a person’s willingness to pay (WTP) should be equal to their willingness to accept payment (WTA).

There are arguments about why this is so. One possibility is that emotional attachments to things you already own may make them seem more valuable to you. It’s also been linked to a form of “status quo bias,” a general dislike of change. Some other experiments have not detected this effect.

Extraordinarity bias

A cheese sandwich that appears to have the image of the Virgin Mary on it isn’t tastier than one without, but a normal cheese sandwich costs a couple of bucks while the one with the Virgin sold for $28,000. A guitar once owned by Elvis Presley might not play better (or possibly even as well) as a new one, but people are willing to pay much more for it.

That's not wrong, it's simply a bias. The extraordinarity bias is the measure of your willingness to pay more (sometimes much more) for an "extraordinarity" of an object that doesn't in itself change the intrinsic value of the object. The extraordinarity can be personal as well as external: a present from a loved one, for example, could have far more value to you than the intrinsic object is worth.

There's no reason to avoid the extraordinarity bias; the only thing you need to do is to be conscious of it.

Previous Installments

Part 1 "Unknown Unknowns — A Survey of Assumptions, Biases, and Bigotry" — Bias blind spot, confirmation bias, déformation professionnelle, denomination effect, moral credential effect.

Part 2 "Looking for the Pony" — Base rate fallacy, congruence bias, experimenter’s bias

Part 3 "Women Drivers and Balls" — Ambiguity aversion effect (Ellsberg paradox), choice-supportive bias, distinction bias, contrast effect

Part 4 "If I Already Know I Don't Like Your Conclusion, Why Should I Listen to Your Argument?" — Actor-observer bias, anchoring effect, attentional bias, availability cascade, belief bias

Part 5 "Patterns, Probability, and Plagiarism" — Clustering illusion, conjunction fallacy, cryptomnesia

See you next week!