Now that the Conservatives have secured a parliamentary majority, a referendum on Britain’s membership of the EU is inescapable. As the debate on the when and how of the referendum presses on, which includes the possibility that 16 and 17 year olds will be able to vote, how can we best understand the way people make decisions on such complex matters?
I recently attended a lecture by the economist Dr. Richard Thaler. The presentation accompanied the launch of his new book, Misbehaving: The Making of Behavioural Economics, which suggests how behavioural economics can help us understand our own decision-making habits.
In his speech, Thaler explained that theoretical models, for the most part, have rested on the assumption that people have ‘well defined preferences’ and make decisions by optimising.
But true human nature is built on an unshakeable foundation of fallibility. We are not good at solving difficult problems that involve complex calculations; our expectations are not always rational; we are not always able to exercise self-control and there are altruistic traits in all of us which do, from time to time, prevent us from making entirely self-interested decisions. When it comes to base instinct versus logical deduction, we lean closer to the characteristics of Homer Simpson than we do Mr. Spock.
When challenged on this point, economists have argued that despite being prone to making bad decisions, people will do the right thing when the stakes are raised. The outcome of a plebiscite vote on Britain’s relationship with the EU is likely to be highly consequential for this country, so the electorate will give it due consideration – yes?
One of Thaler’s most striking revelations is that the empirical reality is precisely to the contrary: the higher the stakes, the less familiar the territory and the more likely we are to get it wrong. He asks us to consider the following list of decisions most of us take: buying a pint of milk, buying a suit, getting married, buying a house and retiring.
We have had plenty of experience with milk: we know how much we need, what size the bottle should be and when we are likely to run out. The stakes are low, and our training has been consistent. But how often do we get married, buy a house or retire?
Indeed, how often do we vote on our country’s relationship with the largest trading bloc in the world? There seems to be an inverse relationship between the importance of a decision and the amount of training we have received to make it.
And while it may be tempting to counter this, as economists do, with the argument that people will consult the opinions of experts when the stakes are high, Thaler remains unmoved. After all, you are not likely to come across that many impartial experts. Even if you did have access to a resource of unbiased and detailed expertise, Thaler maintains that most people would not defer to its authority. In the aftermath of the Scottish referendum, a YouGov survey found that 71% of respondents got most of their information from TV and Radio.
What does this mean? The media has a responsibility to provide impartial and clear coverage as the events unfold, because it is the source people use to inform their decisions. Those seeking to influence voters’ decisions will be doing their best to influence the media. And trusted organisations also have a role to play in presenting clear and impartial evidence that appeals to both the head and the heart.