This post is based on a review paper “Mindful Judgment and Decision Making,” Elke U.Weber and Eric J. Johnson, Annual Review of Psychology, 2009, 60:53–85, on the state of judgment and decision making research. The post is the second half in the outline form set up by Weber and Johnson and more or less summarizes accumulated knowledge. All I have done is create a sort of Cliff’s Notes version. Much of it is directly quoted without proper attribution in the interest of clarity and my laziness.
MULTIPLE INFORMATION PROCESSES
1. The emotions revolution of the past decade or so has tried to correct the overemphasis on analysis by documenting the prevalence of affective processes, depicting them as automatic and essentially effort-free inputs that orient and motivate adaptive behavior.
2. Affective Processes
Affect as information. Emotions experienced while making a decision are incorporated as information into choices. Positive emotions increase value and result in approach, whereas negative values decrease value and result in avoidance Incidental emotions. Incidental feelings influence judgments also by being misattributed to having been elicited by the task at hand. Men were shown to misattribute their arousal after viewing photos of attractive females to arousal generated by the prospect of having to delay consumption in a subsequent intertemporal financial-choice task, and they therefore discounted future outcomes more strongly. There seems to be a metacognitive awareness that these misattributions can occur, as evidenced by the fact that we use knowledge of other people’s incidental mood states in strategically correct ways. (Affect Gap)
Experienced emotions provide a common language on which the effects of both different outcome dimensions and variations in decision context can be integrated. Decision affect theory provides a unifying framework that incorporates special cases of emotional reactions to counterfactual outcome comparisons such as regret or disappointment.
3. Dual-Process Explanations(Dual Process Theories of Cognition)
Kahneman distinguished between a rapid, automatic and effortless, associative, intuitive process (System 1), and a slower, rule-governed, analytic, deliberate and effortful process (System 2). There is debate about the extent and way in which the two systems interact. Serial interventionist models put System 2 into a supervisory role because System 2 knows the analytic rules that the intuitive System 1 is prone to violate and thus can intervene to correct erroneous intuitive judgments, but other relationships, including parallel-competitive horse-race models, need to be considered.
Ultimately computational modeling may supersede dual-process arguments and may lead us to a single system or more than two systems.
Observed risk taking is the result of a long list of cognitive and affective evaluation and integration processes. Much real-world risk taking (e.g., binge drinking) involves repeated decisions where risk levels escalate as the result of previous decisions. Estimates of risk taking assessed in static risky-choice tasks do not predict risk taking in dynamic environments environments very well.
Intertemporal choice. Both cognitive and affective mechanisms have been demonstrated to
give rise to the discounting of future events. The cognitive processes specified by QT (query theory), which also explain the endowment effect and the status quo bias, account for both individual differences in discounting and for the observed asymmetry in discounting when people accelerate or delay consumption.
Self-other discrepancies. A dual-process model also explains differences in the risky
decisions people make for themselves versus those they predict others will make. Although
one’s own emotional reactions to choice options are very accessible and salient, those
of others are not. Analytic considerations such as differences in expected value, on the other
hand, can be assumed to apply equally to oneself as well as to others. As a result, people’s
choices on the gain and loss side are further away from risk neutrality than are the predictions they make about the choices of others.
4. Dual-Representation Models
Knowledge representation is centrally connected to the psychological cognitive processes
that make use of them. Fuzzy trace theory (Fuzzy Trace-Meaning, Memory, Development) accounts for apparent inconsistencies in inference and preference tasks by assuming that different cognitive processes can take advantage of different memory representations of choice options, i.e., encodings at different levels of precision, as a function of age and expertise.
Learning, as a topic of JDM research, was greatly diminished when the cognitive revolution replaced behaviorism. Most choice theories, including PT and DFT, do not include any learning processes. Erev (1998) revisits signal detection theory and replaces its ideal observer cutoff with a cutoff reinforcement-learning process, allowing him to account for phenomena from conservatism to probability matching and the gambler’s fallacy.
1. Predictive Accuracy
Future states/experiences. Most decisions are forecasts of how options will make us feel in the future. People tend to underestimate the ease of adapting to lifetime changes such as a move from California to Ohio, winning the lottery, or being turned down for tenure. (Learning, Feedback and Intuition).
Events. Predicting future events is a challenging task. However, experts who acquire information broadly and on multiple topics, and who contingently apply different prediction
strategies (foxes, in Isaiah Berlin’s terms), are more successful in predicting future events
than are experts who specialize in a small field and apply a smaller number of strategies more rigidly (hedgehogs).
CHARACTERISTICS OF THE DECISION MAKER
Women appear to be more risk averse in many contexts and situations.
Because psychological processes have developmental trajectories, JDM research has shown
interest in comparing the decision processes and competencies of children, adolescents,
younger, and older adults. Older adults have also been found to be more risk averse. Consistent with evidence on life-span changes in emotion regulation, Carstensen & Mikels show greater effects of negative mood on the decisions of younger adults and greater effects of positive mood on the decisions of older adults.
Personality theory has focused on five traits in recent years. Risk takers score high on extraversion and openness and low on neuroticism, agreeableness, and conscientiousness. Risky framing effects (e.g., lives lost versus lives gained) were larger for individuals high in conscientiousness and neuroticism.
4. Cognitive Traits/Styles
Cognitive reflection test (Cultural Cognition & Motivated Reasoning). Frederick’s cognitive reflection test (CRT) is a three-item math-puzzle test designed to elicit an incorrect “intuitive” answer (generated by System 1) that needs to be overridden by System 2 intervention. Individual differences in people’s ability to do so are found to be correlated with greater patience (less discounting) in intertemporal choices as well as risky choices closer to expected value maximization (less risk aversion for gains, less risk seeking for losses). This suggests that normative choice models may turn out to be descriptive for at least a subset of the general population, those who have a greater ability or inclination to use rational/analytic processing in their decisions.