Behavioral Economics: What’s Up With That Mindset?
“You will never let yourself have more money than you think you deserve.” ~ Robert Anthony
An Economist article about the work of Nobel laureate Daniel Kahneman’s new book, Thinking, Fast and Slow, describes how our mindsets warp our decision-making. As a Behavioral Economist he asks us: “What’s up with that mindset?!” through his experiments and writing. Try one of his tests: If you were given £50 and were told that you could ‘keep’ £20 or must ‘lose’ £30—which would you do?
If you are like the participants in Kahneman’s research you would say that you want to keep £20 because “keeping” something feels instantly better than “losing” something–even though the outcomes are identical!
He also shows that it is more threatening to say that a disease kills ‘1,286 in every 10,000 people’, than to say it kills ‘24.14% of the population’, even though the second mention is twice as deadly. Vivid language often overrides basic arithmetic.”
Not too surprising, considering what Ellen Langer has shown us about mindsets and their powerful ability to influence how we live our lives. (See my recent guest blog post, Ellen Langer: Priestess of Possibility.)
How about these findings: “Experimental subjects who have been ‘primed’ to think of money, perhaps by seeing a picture of dollar bills, will act more selfishly. So if someone nearby drops some pencils, these subjects will pick up fewer than their non-primed counterparts.”
His findings mirror the findings of Langer’s work in Counterclockwise, “Even obliquely suggesting the concept of old age will inspire people to walk more slowly—though feeling elderly never crossed their mind, they will later report.”
Kahneman feels that we have a two tiered system of response. The first, “System 1 thinking” explains such non-rational behavior and is what Langer describes as “automatic” thinking—the knee-jerk response we make in the absence of mindful attention.
“System 2”, by contrast, is slow, deliberative and less prone to error. System 2 kicks in when we are faced with particularly complex problems, but much of the time it is all too happy to let the impulsive System 1 get its way.” Ellen Langer would agree with this. She would say that when we cultivate mindful attention that we counteract the bias of our automatic thinking.
It never crossed their minds, but it determined their behavior. No one wants to be the victim of “System 1” thinking, I am quite sure. But if you were told that you could rise above such automatic ways of thinking would you be willing to give it a try?
The reason we act in specific ways is because of the way we think. I use a process of Appreciative Inquiry that helps shed the mindsets that determine behavior and overrides pernicious organizational cultures. The goal: aligning attitude with purpose to achieve one’s potential.
If you would like a complimentary session to discuss how coaching might help you to shed your mindsets, you can schedule a session at the website of Dr. Lynn K. Jones.
P.S. Thanks in advance to anyone who chooses to add their comments to the discussion or wishes to forward the blog link.
Dr. Lynn K. Jones, Certified Personal and Executive Coach
Your Mojo Maven
Dr. Lynn K. Jones is a Certified Personal and Executive Coach based in Santa Barbara, California and a sought after coach and consultant for organizations and individuals across the US. Her doctoral work completed at the Wurzweiler School of Social Work, Yeshiva University concerned organizational culture; she coaches, consults and trains organizations on what they need to do to create organizational cultures that are aligned with their vision and values using a process of Appreciative Inquiry. She coaches individuals on achieving their reflected best selves. An MSW@USC faculty member, Dr. Lynn K. Jones, MSW, DSW, CSWM, teaches Human Behavior and Social Environment.
The concept of the two forms of response to a challenge is interesting. I like to pause when I feel that knee jerk stupid response on the tip of my tongue.
Just to stop and have an analytical moment with myself. When I am happiest with myself, I take that moment, analyse the situation and make a decision rather than yeild to that option 1 response.
Thanks for writing about our responses, it encourages us to remember we have options.
Your way of handling the “automatic,” “knee-jerk” response is perfect, Calla! If you can be aware of it and use it as a trigger to stop and think a moment you are practicing “mindfulness” as Langer suggests! It is important for us to be aware that we have options in our behavioral responses. So the important question to consider is what mindsets are causing us to react automatically that we are not aware of?
Thanks for thinking about this and commenting!
I believe this same theory applies with love and relationships as well.
-Christina M. Weber, MS
founder the Catholic Women’s Guide to Healthy Relationships
Very interesting thought, Christina. And of course you are right. Langer talks about this in her guest post on this blog, https://www.lynnkjones.com/newsbreak/ellen-langer/ She talks about GLADO, being Generous, Loving, Authentic, Direct and Open, her prescription for mindfulness in love and relationship. Let me know what you think!
One more reason to be deliberate and thoughtful about how we manage the stage of our mind.
So true, Joni! The reasons are piling up! 🙂
I realy enjoyed whats up with the mindset…it is like a gift for me I am going to watch my thoughts and learn .
Love to hear that Mad! Let us know what happens when you mindfully pay attention.
Of course, I am giving it a try! I wonder what both Robert Anthony and Ellen Langer would think about catching the reaction (knee-jerk response)after it happened or watching it as it happens. I believe that the awareness of the action is also mindfulness and a step closer to a “system 2” response.
Yay to mindfulness!
Good point, AO. Let us know how it works out when you give it a try! 🙂
In response to the question Daniel Kahneman presents about whether a person would be willing to keep £20 or lose £30, my mind instantly went to wondering what does losing £30 entail. If losing £30 entails making an investment or giving to a worthy matter or cause, I am more willing to lose than to keep. Keeping the £20 hinders a person to the opportunities that may come from losing or giving the £30. The reason is that the £30 can be viewed as a seed that is planted into a ground to grow rather than kept in a package to remain as is. As a result of a person planting their £30 seed, the person aligns himself or herself for a harvest of more benefits than the one-time benefit of keeping the £20. In other words, people should look beyond the immediate benefits they can gain from something. Rather, they should strive to determine how they can gain endless and multiple benefits from something. Moreover, it is equally important for people to realize that a loss can actually be gains.
Behavioral Economics “What’s Up With The Mindset”?
Great point Kahneman made in keeping or losing the euro. In the end, they both really had the same result.
I also liked Keisha’s statement in her post, “moreover, it is equally important for people to realize that a loss can actually be gains.”
It is really true that we have such a hard time when we think we have “lost” something. I had that experience yesterday with a project that I had invested some time and money into. When I decided that I was going to write off the loss and move on several better options presented themselves. It is so interesting to see what happens when we let go, even if it means a psychological loss! Thanks for commenting Shasta.