Straw man rationality

Dan Ariely analogizes:

Here’s one way of thinking about this. Imagine that you’re in charge of designing highways, and you plan them under the assumption that all people drive perfectly. What would such rational road designs look like? Certainly, there would be no paved margins on the side of the road. Why would we lay concrete and asphalt on a part of the road where no one is supposed to drive on? Second, we would not have cut lines on the side of the road that make a brrrrrr sound when you drive over them, because all people are expected to drive perfectly straight down the middle of the lane. We would also make the width of the lanes much closer to the width of the car, eliminate all speed limits, and fill traffic lanes to 100 percent of their capacity. There is no question that this would be a more rational way to build roads, but is this a system that you would like to drive in? Of course not.

Assume rational drivers who have to exert effort to keep a perfectly straight track and with heterogeneous driving ability that affects the amount of effort that has to be exerted to keep a perfectly straight track. Add in random shocks to attention, like a kid that darts out from the side, wildlife, sun glare, a screaming toddler in the back seat or whatever, such that even the best driver devoting full attention to driving occasionally veers from a perfectly straight track.

The drivers are perfectly rational but have constraints. Optimal road design will incorporate things like paved shoulders and buzz lines to give more margin for error and feedback about errors. We could even want speed limits if drivers vary in ability and risk tolerance (both rationally) and if variance in speed contributes to accidents. All of these things build in room for error; without them, driving would be a horribly nervewracking experience: the slightest error could mean death. We'd all have to devote far too much effort to driving. I don't know why we'd need to assume irrationality to get any of the road features that Ariely seems to think can't be explained without it. Rather, I think it's a straw-man version of rationality that insists that we can never err.

What I find amazing is that when it comes to designing the mental and cognitive realm, we somehow assume that human beings are without bounds. We cling to the idea that we are fully rational beings, and that, like mental Supermen, we can figure out anything. Why are we so readily willing to admit to our physical limitations but are unwilling to take our cognitive limitations into account? To start with, our physical limitations stare us in the face all the time; but our cognitive limitations are not as obvious. A second reason is that we have a desire to see ourselves as perfectly capable— an impossibility in the physical domain. And perhaps a final reason why we don’t see our cognitive limitations is that maybe we have all bought into standard economics a little too much.

It's not irrational to err if there are information costs. It's not irrational to use heuristics if there are computation costs. We might sometimes pick the wrong heuristic, but we shift if we find a better one. It's no more irrational to pick the wrong heuristic when there are search costs over the domain of heuristics than it is to buy a car that costs $200 more than the one across town if there are search costs when buying a vehicle. The existence of price dispersion lets entrepreneurs profit by building price comparison websites; heuristic dispersion lets entrepreneurs profit by writing self-help books or working as life coaches.

And it's not irrational for folks to do things in maximizing their own utility functions that would be downright silly if they were trying to maximize mine.

Shifting the goalposts

First they said that fast food was bad because people underestimated the calories in it and so were deceived. Imperfect information meant market failure. Penn & Teller showed that was wrong; so too has Dan Ariely. And, worse, Ariely notes that when folks were presented with the accurate calorie count, they sometimes ate more as they'd previously overestimated things.

Me, I'd then say that there's no market failure and folks ought to be left to make their own choices. I'd have been pretty skeptical about market failure based on imperfect or asymmetric information in the first place as calorie information isn't hard to come by for folks who want it, but these findings show that, even if you thought there was a potential market failure of this sort, it didn't hold in the real world.

But it turns out that giving people accurate information and letting them make informed choices wasn't really the goal. Instead, it's back to the drawing board to find new ways to encourage people to reduce food intake.

Ariely says Duke University also conducted a similar study. He says they posted caloric labels at "the Duke version of Panda Express," a fast-food version of Chinese food. And they saw "absolutely no difference" in caloric consumption.

But then they took it a step further and said: "What else could we do? What other inventions?"

They decided to give people an option of receiving less of the main dish — for example, the orange chicken. People said, "No," according to Ariely. So then they asked people if they wanted less of the side dish. They asked people, "What about we give you half a portion of fries — that would save you 250 calories. Are you interested in that?" Ariely says that more than 40 percent of the people said, "Yes."

"What happened in eating is that no matter how much people give you to eat, you'll eat the whole thing," Ariely says. "So it's really a question of how much you start with. Because we've also tested this — we looked at what people end up with and how much they throw away. People eat everything you give them. But if you give people a mechanism to limit what they're going to have for food later on, people actually eat less as a consequence."

Ariely concludes that offering a smaller portion of the "secondary event" is more successful than trying to reduce the "main event."

"It cuts calories and lets people execute something that's good for them," he says.

But Ariely noticed something surprising. When they stopped the promotion and studied what happened the next day, they found that people did not keep asking for it. They did not say, "Hey, I was here yesterday, they offered me a half a portion of fries, can I do it again?"

"When you offer it [to] people, they understand it's a good offer and they cut down on the calories," Ariely says. "But when you don't offer it to people, they're not doing it for their own self. So we have to think about not just what information we give to people, but how we get them to think about different paths of saving caloric consumption."

Or, maybe the experimented with the new option, found they were still hungry, and wanted the larger portions.

Clearly it's time that New York City implemented a regulation mandating the offering of half-sized portions. Who knows. It might work. And the costs are only born by restaurants rather than by the city or state during times of fiscal restraint.