Ordinarily I really enjoy learning about behavioral economics.  I find it truly fascinating that there are invisible forces subconsciously affecting our behavior.

Here are just a few of my favorite examples:

In Predictably Irrational, Dan Ariely taught me that you can influence a choice between two alternatives by introducing a crappy third choice.  For instance, let’s say that someone is evaluating vacation packages and the choices are:

1) Three nights in Chile, all expenses paid, or
2) Three nights in Brazil, all expenses paid.

You can drastically increase the chances that someone will choose Brazil by introducing a third option:

3) Three nights in Brazil, all expenses paid (except coffee in the morning costs extra).

This third option is an objectively inferior choice – but by comparison it makes option two look more attractive, thus swaying our behavior toward that choice.

In Free, Chris Anderson taught me that people respond to free things much differently than they respond to things that cost money (even if the cost is insignificant).  A quintessential illustration of this point is an experiment he conducted in two stages.  In the first stage, he asked participants to choose between a fancy gourmet chocolate that cost $0.20 and a plain chocolate that was free.  In this first stage the overwhelming majority chose the free plain chocolate.  In the second stage he increased the price of both chocolates by $0.10; the gourmet chocolates were now $0.30 and the plain chocolates were now $0.10.  In this second stage, most people chose to pay the higher price for the gourmet chocolate.  The experiment illustrated that we evaluate “free” much differently than anything that costs money – no matter what the price.

In Willpower: Rediscovering the Greatest Human Strength, Roy Baumeister taught me that blood glucose levels significantly affect decision-making.  A surprising demonstration of this point can be found in the courtroom.  Baumeister’s research shows that the duration and severity of punishment for a particular crime can differ significantly based on whether the case is seen just before or just after lunch.

I love these little twists of the human condition and since learning about them I’ve been able to observe and study them in my own life.

However, I recently learned about another twist of behavioral economics that I’ve found to be somewhat hard to digest.  In Thinking Fast and Slow, Daniel Kahneman writes about a concept called Duration Neglect.  To illustrate this concept he describes a research experiment where people undergo two painful experiences:

1) Holding their hand in ice water for 30 seconds, and
2) Holding their hand in ice water for 30 seconds, then continuing to hold their hand in the cold water for 30 more seconds while the water is warmed slightly (but still uncomfortable).

In evaluating these experiences he found that participants did not consider the duration of the experience while evaluating which experience was more painful.  When asked a day later which experience they’d rather repeat, most of the people in the experiment actually opted for the longer experience rather than the shorter experience because their recollection of the pain was skewed by what Kahneman calls the “Peak-End Rule.”

The Peak-End Rule states that the recollection of our past experiences is based solely on what we perceive as the “peak” of the experience (the most painful, or pleasurable part) and the end of the experience.  Duration was found to have no impact on evaluation.

On the surface this seems fine, but Kahneman also found that this principle applies to the evaluation of an entire life.  A very happy life lasting 60 years was evaluated to be less pleasurable when it was extended for five pleasant, but less enjoyable years.  The same was found for a life that was extended from 30 to 35 years old.  In evaluating the pleasure of someone’s life, it seemed the duration was totally ignored, but rather people based their opinions exclusively on the perceived peak and the end.

I’ve been thinking about the Peak-End Rule for a few weeks now and I’ve found it quite troubling.  Except in cases of extreme suffering, it’s very uncomfortable for me to think about someone’s life being happier if it were shorter.

Although Kahneman has the scientific method and test results on his side, I fortunately have the power of cognitive dissonance.  I still prefer to believe that (except in extreme cases) a longer life is always better.

Duration Neglect
  • I don’t think Kahneman is saying a shorter life is better – he’s saying that PERCEPTION is such that a shorter life can seem better. This is objectively false (in most cases), and so illustrates the applicability of the principle.

    So, it follows that it might be easier to get a promotion with less experience, as the quality of your tenure will matter more than its length – and a string of bad luck in a sea of good performance can doom you.

    (You would always measure life as quality over time, i.e. an integral, so unless quality is negative longer is always better).

  • Andrew Eifler

    I like it. I suppose it’s always a bit difficult to tell a true effect apart from the perception of that effect in primary research. I think that’s one of the reasons I’m always so skeptical of survey based research.

    Thanks for commenting!