The evolution of irrational decision-making: insights from non-human primates

The evolution of irrational decision-making: insights from non-human primates Venkat R. Lakshminarayanan (venkat.lakshminarayanan@yale.edu) Department of Psychology, 2 Hillhouse Avenue New Haven, CT 06520 USA Laurie R. Santos (laurie.santos@yale.edu) Department of Psychology, 2 Hillhouse Avenue New Haven, CT 06520 USA Abstract opportunity to exchange it for a second object of equal value (e.g. a mug). Surprisingly, participants consistently refused the opportunity to swap an endowed object for an equal valuable one and instead elected to hold on to the mug (or box of pens) that they were initially assigned. Moreover, they demanded nearly twice as much money to give up this object as buyers were willing to pay in order to acquire it. (Kahneman et al., 1990; Kahneman et al., 1991). Similarly, loss-aversion also creates inconsistencies in when people are willing to take risks. When an outcome is framed as an opportunity to avoid a loss people are risk-seeking but, in contrast, people become risk-averse when the same outcome is phrased to emphasize gains rather than losses (Kahneman & Tversky, 1979). A simple demonstration of this phenomena (termed “the reflection effect”) is that subjects reverse their preference to take a risk based on whether they’re asked to make decisions about gains or losses, even though each case is simply an alternate formulation of the same outcome (since the gain and loss questions essentially present the same pair of choices: choosing between $1500, or a lottery with an expected value of $1500, Kahneman & Tversky 1979): Despite our species’ impressive cognitive sophistication, adult humans are nevertheless notoriously bad at making normatively rational economic decisions. Much work has examined the nature of biased decisions such as framing effects, the endowment effect, and the peak-end principle in adult humans; however, research examining the origins of these biases is still in its infancy. This paper examines existing work on origins of economic biases – that is, whether these biases are shared with non-human primates. We survey recent work using a comparative approach to address the evolutionary origins of several classic biases, such as loss aversion, reference- dependence, the endowment effect and the peak-end principle. Novel evidence is provided that the peak-end principle – a bias involved in retrospective evaluations – is also found in capuchin monkeys. These studies suggest that such biases emerged long ago in our evolutionary history, and shed light on the psychological mechanisms behind biased decision-making. Keywords: decision making, evolutionary psychology, experimental research with animals. Introduction In a variety of laboratory and real-world settings, people make decisions that conflict with what would maximize economic well-being. Although economists classically assume that we make decisions like rational optimizers – that is, by maximizing our utility in a mathematically axiomatic fashion -- social scientists have extensively documented that humans often make decisions that are at odds with this view. Rather than treat consequentially-identical outcomes the same (i.e., exhibiting context invariance), decision- makers’ choices depend heavily on the way outcomes are presented or framed and not on the absolute consequences of their decisions (a phenomenon termed reference dependence) (Kahneman & Tversky, 1979; Tversky & Kahneman, 1982, Tversky & Kahneman, 1992). Furthermore, people view losses as more consequential than equally-sized gains (Kahneman & Tversky, 1979). Consequently, people require more resources to give up an object in their possession than they would spend to newly acquire that same object. Kahneman, Knetsch, and Thaler (1990) presented each participant with a new object (e.g. a box of pens) and then gave them the “Scenario 1: Gains You have been given $1000. You are now asked to choose between: (A) 50% chance to receive another $1000 and 50% chance to receive nothing [16%] (B) receiving $500 with certainty [84%] Scenario 2: Losses You have been given $2000. You are now asked to choose between: (A) 50% chance to lose $1000 and 50% chance to lose nothing [69%] (B) losing $500 with certainty [31%]” (Kahneman & Tversky, 1979, p. 273) Finally, similar framing effects also have been found to impact peoples’ subjective experiences of an past event. Kahneman and colleagues also observed that memories of pleasurable (and painful) experiences are also susceptible to systematic framing effects, which subsequently affect the choices people make.