Quote from rlb21079:
I watched the presentation on the Nobel site, here are some of what I felt were key points made:
1) Perception --> Intuition --> Reason
The authors of this theory use a hierarchical model to describe human experience as it pertains to the decision-making process. Perception is the process we share with the animal kingdom, wherein we feel, see, smell, etc. The important aspect to remember here is that our perception is relativistic. For example, if you aligned three bowls of water in a row: cold, tepid, hot and placed your left and right hands in the cold and hot bowls for a time and then moved them both into the tepid bowl the nerve endings in each hand would stimulate a different perception of the temperature of the tepid water. Intuition was loosely defined as those thoughts, or decisions, which occur very quickly and without the aid of reason. 'Intuition as constrained to and reflecting perception.' It should be noted that the presenter also stated that intuition is used very often and can be used in a very complex manner. It occurs when the labor of reasoning is no longer necessary, like when a tape reader simply 'sees,' or senses a change in the market.
2) Decision-making is often left to the intuition.
The speaker described the historical model of the decision-making process and its originator briefly. In summary, the previous model described human decision-making as a process whereby value-judgements were made concerning the options at hand and decsisions were made based on the weighing of these perceived values. The criticism of this theory was that it failed to describe certain phenomena.
An example:
a)Is this gamble attractive? -
50% chance of winning $15,000 and
50% chance of losing $10,000 ?
b)Estimate your total net worth and call this 'W'
You own 'W.'
Which is more attractive? -
50% chance of owning W - $10,000
50% chance of owning W + $15,000 ?
Informal results:
(a) Unattractive. It is generally found that unless a gamble has a two to one payout 50% odds are not acceptable.
(b) Slightly more attractive.
The presenter notes that the only difference is in the consideration of wealth, and that the preference for (b) is a failure of the 'pure reason' notion of decision-making.
An example: Given the question, "how much would you pay?," three groups were presented [A] 4 dishes, 4 cups, 4 knives & 4 dishes, 4 cups, 4 knives, 4 bowls (1 broken), 4 forks (2 bent).
Group 1 was shown both [A] & and valued more, as expected
Group 2 was shown only [A] and valued the set at $33
Group 3 was shown only and valued the set at $23
By showing Groups 2 & 3 only [A] or their ability to reason that the two were equivalent, save some extra pieces in , is removed. As a result, the groups were negatively biased against because of the broken pieces. So, the value of things is transient - based not soley on preference and reason, but phrasing (or presentation).
3) Pleasure and Pain.
Here's the set up:
a) Person discovers their net value went from $4 mil to $3 mil
b) Person discovers their net value went from $1 mil to $1.1 mil
The point of contention: Who is happier?
Prior theory would indicate that person (a) should be happier because of greater total wealth. It is obsevered however, that person (a) is relatively discontent. My personal take on this would be that we become accustomed to our states of wealth as we become accustomed to being in hot/cold water. We adapt perceptually, and this adaptation also occurs in the abstract. Also, it would seem direction is a good rule of happiness - am I making progress?, or am I losing money? But I have digressed.
4) Averages and Sums.
See the dishes, cups, knives example. This is the presenter's discussion of why such things are valued differently.
