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rationality-kahneman-quiz

How rational is our behavior?

Rositsa Keranova is currently a BSc Economics student in her second year.

Rationality is the state of being reasonable. It is decision making process, based on our intuition to weight the benefits against the costs and to maximize our utility. With past experiences in our pocket and all available information at hand to make a rational decision, we still divert from this behavioral pattern. Is decision making only based on external factors or is there a deeper explanation to it? Could it be possible that our genetics are part of the reason for our rationality or lack thereof?

How rational are we in reality? Most the time our actions do not really follow a given line of reasoning. This might be due to a bias that the whole population suffers from, but some of us are more affected than others. Introduce cold and hot state? If we were given a certain decision in our cold state we are expected to make a rational choice. However, when it actually comes to it, when we are in our hot state, we might make a different choice. This shows that our behavior is not always consistent with our rationality. As an example, if you are offered two choices: one you receive a pack of candies within a year or two packs within a year and a week. You gain more in the second case as it will give a higher utility and it is also the rational choice. However, in a year from now you might be thinking in a different way when you actually have to make a choice. If you are presented with the same two options again: one is that you can get a pack of candies now and the other is that you can get two packs of candies, in a week, you might pick the first case. Even though the second one will give you higher utility and you decided a year ago, that two packs of candies are the optimum. Moreover, we know which of the two choices is the better one, but when faced with immediate benefits we tend not to act in our best interest.

Could this inconsistency in human behavior be explained by our genetics or is it purely experience and our surroundings? Researchers in UCL have taken interest in this topic and tried to give an answer. Their main reason was that different cultures are differently exposed to a certain bias ,so a genetic influence might play an important role in our rational decision making. The gene analyzed is the serotonin transporter gene. Serotonin carries signals between nerves and is a chemical responsible for our happiness and mood balance. This gene has two versions – a “short” and a “long” one. It also influences the response of an area of the brain that controls the way we react in a presence of an emotion, called amygdala.

This is all of the biology background information you would need to understand the following experiment and findings. For the experiment the researchers gathered a sample of thirty volunteers. They were presented with the following problem: there were two frames – a gain and a loss frame – and in each they had to choose whether to gamble or not. The theory tells us that in a “gain frame” scenario people normally prefer a certain outcome, rather than a gamble – they are risk averse. When the gains are replaced by losses, people behave in exactly the opposite way – they become risk loving. The framing effect plays a major role in decision making as it shows how the option of a higher gain or a higher loss might affect our decision making in two drastically different ways. In the current experiment the researchers in UCL came to the conclusion that the people in the sample with two copies of the short version of the serotonin transporter gene are more easily affected by the framing effect. On the other hand, the people with the long version of the gene make more rational decisions. They are more successful in keeping their behavior in the borders of reason and isolating the framing effect. This gene explains about ten percent of variability in sensitivity towards the framing effect. The other ninety might be due to the people’s experience, influence in life or even other genes.

There are times when we might be impulsive and might make an irrational choice. We cannot always perceive a situation in the right way but occasionally we have a perfect grasp on what is the reasonable move.  However, we can see that there is more to this topic than we think. There are already researches that can prove as to why some people are more likely to maximize their utility by being rational and some are just too affected by emotions and the surrounding environment and fail at being reasonable. Hence, one day we might even find a full explanation for our inconsistent behavior codded in our genes.

 

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