The following post is the first in a series exploring 'mind and culture: pathways to economic development,' the theme of the World Bank's upcoming World Development Report 2015 .
Try to guess the answer to the question:
How many seven -letter words of which the sixth letter is “N” (_ _ _ _ _ N _) would you expect to find in four pages of a novel in English (about 2,000 words)?
Now guess the answer to another question:
How many seven-letter words of which the last three letters are “ING” (_ _ _ _ ING) would you expect to find in the same four pages?
If you are responding as most people have, then your estimate is several times greater for ING words than for _N_ words. This violates logic. With some reflection, it’s easy to see that every ____ING word is also an _____N_ word. The mistake is famous and so is its explanation. _ING words are a standard category, _N_ words are not, and standard categories shape how we think. We confuse what it is easy to think of with what is frequent. This bias, called the availability bias, is just one of a multitude of biases that appear to be universal.1
Although in economic textbooks people are assumed to think logically, most real people—most of the time—think psychologically. They think with heuristics (mental short-cuts) rather than thinking deliberately and effortfully. When we think deliberatively, our pupils dilate, our heart rate increases, and energy is consumed. This is costly, and so we automatically economize on cognitive effort. We may make even major decisions—how much to save, which occupation to enter—by intuition This can be useful. Heuristics are often adaptive, and many decisions have to be made quickly. But heuristics can lead to systematic biases. Since heuristics are designed to channel our attention, they cause us to miss a lot of what happens around us. If we do not expect new opportunities to arise, we may systematically fail to see them.
This is even more true because we have limited attention. An experiment that reveals in a humorous way how we see—and don’t see—our world has become famous. Chabris and Simons made a 60-second video in which two teams of people move around and pass basketballs.2 One team wore white shirts and the other wore black shirts. Chabris and Simons asked volunteers to silently count the number of passes made by the players wearing white. Halfway through the video, a person wearing a full-body gorilla suit walked into the scene, stopped in the middle of the players, faced the camera, thumped her chest, and then walked off. After watching the video, Chabris and Simons asked the volunteers,
Q. Did you notice anything unusual while you were doing the counting task? Did you notice a gorilla?
A. A what?
About 50% of viewers did not see it! The experiment has been replicated many times, in many countries. The results are always similar. You can watch the video at: http://www.theinvisiblegorilla.com/gorilla_experiment.html .
Economics is often described as the science of scarcity, but standard economic models consider only material scarcity and overlook the limits of cognitive resources and of attention. Whereas economics long banished the subjective from the science, the weight of an enormous body of research demonstrates that we are subject to systematic biases and that different cultural groups see things in systematically different ways.3 But most of the time, we believe we see that world as it really is. We are naïve realists— we believe we see events as they are in objective reality, unmediated by mental structures like categories, concepts, or ideology; and if others who see the same events do not perceive the same things as we do, we assume they are wrong.
The distorted beliefs we hold about our minds are dangerous. Recognition of this has energized policy makers. Policy makers and development practitioners all over the world are experimenting with “nudging” people to make better choices –for example, by putting healthy foods at the front of the cafeteria line, making it easier to enroll a child in school, making more tangible and public the consequences of teachers’ efforts, and mandating pictures of throat cancer victims on cigarette packages.4
The recognition of our biases also informs polices that can bring about societal, macro-level changes. An important bias is that prolonged exposure to a given institution affects our perceptions and our sense of the possible.5 My favorite recent example that brings our biased judgments and their societal consequences into sharp relief is political affirmative action for women in the Indian state of West Bengal. Political affirmative action for women led some villages, selected at random, to have female leaders. According to several different measures, men with limited exposure to women leaders evaluated them in a biased way. After just seven years’ exposure to women leaders, men in villages with women leaders were no longer biased against them and parents’ aspirations for their daughters were higher. After the reservations ended, women continued to run for and, in many cases, to win elections.6 The presence of female political representatives produced another surprising change: it greatly increased both reporting of crimes against women and police responsiveness to such crimes in India.7 This change occurred despite the absence of any legal jurisdiction by the female village leaders on these matters. The new responsiveness to women’s concerns appears to reflect a cultural shift that changed women’s perceptions of the costs—psychic and otherwise—of reporting crimes committed against them.
As the sociologist Paul DiMaggio emphasizes, the cognitive basis of the social order is neglected in economics.8 The categories we use and the worldviews we share are collective, cultural goods. Our ongoing use of cultural categories and worldviews in daily life reaffirms their importance to us, and they become taken-for-granted aspects of our environment. Consequently, a whole society can get stuck coordinating on a set of maladaptive mental models and institutions. What political affirmative action for women appears to have done in West Bengal is to collectively shift people’s expectations regarding women’s roles and capacity for leadership. By normalizing the impossible, the intervention affected judgments (just as the category of “ ___ing” words affected judgments), which in turn affected material outcomes (who won office in free elections after reservations in a village ended). A change in institutions changed cognitive structures and led to new possible ways of ordering society.
Besides our reliance on heuristics and other mental short-cuts and mental models to think, another key aspect of human nature that has been underemphasized in economics is our social nature. In standard economic models, incentives depend on material resources. After all, in the standard models, it is only material resources that are scarce! But real people are concerned with a much greater variety of things than material goods. They care about their status, reputations, and their incomes relative to those of others. They care about their groups, their identities, and compliance with social norms. Children as young as three are acutely sensitive to following rules and want to punish those who don’t follow rules.9 Many people care a great deal about reciprocity and fairness. They are conditional cooperators—they cooperate if others cooperate, even when they incur costs for doing so—and they do not cooperate if others do not.10
The assumption of rationality and selfishness is powerful in some domains, but uncritical acceptance of the assumptions now appear to be stumbling blocks in the path of future progress in understanding development and designing development policy.11 The topic of WDR 2015 is not a sector or a single development challenge. Instead, it is an approach to development policy. It is about how a more realistic account of people —for whom logic does not always discipline thinking, to whom a man dressed up in a gorilla suit in the middle of their field of vision is not always seen , and whose institutions affect what people perceive and aspire to—can improve development theory and practice.
1Appear to be universal: Tversky, A., & Kahneman, D. (1973). “Availability: A heuristic for judging frequency and probability,” Cognitive psychology, 5(2), 207-232.
2Move around and pass basketballs: Simons, D. J., & Chabris, C. F. The Invisible Gorilla (2010), Crown Publishing Group.
3See things in systematically different ways: See for example, Henrich, J., Boyd, R., Young, P., McCabe, K., Alberts, W., Ockenfelds, A., & Gigerenzer, G. (2009). What is the role of culture in bounded rationality.
4Cigarette packages: Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Yale University Press; Glewwe, P., & Kremer, M. (2006). Schools, teachers, and education outcomes in developing countries. Handbook of the Economics of Education, 2, 945-1017.
5Sense of the possible: Hoff, K., & Stiglitz, J. E. (2010).” Equilibrium fictions: A cognitive approach to societal rigidity,” American Economic Review. 100(2), 141-46.
6Ran for and in many cases won elections: Beaman, L., Chattopadhyay, R., Duflo, E., Pande, R., & Topalova, P. (2009). Powerful women: does exposure reduce bias?. The Quarterly Journal of Economics, 124(4), 1497-1540; Beaman, L., Duflo, E., Pande, R., & Topalova, P. (2012). Female leadership raises aspirations and educational attainment for girls: A policy experiment in India. Science, 335(6068), 582-586.
7Police responsiveness to such crimes in India : Iyer, L., Mani, A., Mishra, P., & Topalova, P. (2010). Political representation and crime: Evidence from India. Draft paper. Washington DC: International Monetary Fund.
8Neglected in economics: DiMaggio, P. (1997). “Culture and cognition,” Annual review of sociology, 263-287.
9Punish those who don’t follow rules: Rakoczy, H., Warneken, F., & Tomasello, M. (2008). “The sources of normativity: young children's awareness of the normative structure of games.” Developmental psychology, 44(3), 875.
10If others do not: Fehr, E., & Gächter, S. (2000). “Fairness and retaliation: The economics of reciprocity.” Journal of Economic Perspectives, 14(3), 159-181.
11See, for example, D. North, Understanding the process of economic change, Princeton University Press, p. 5.