## What Drives Our Decisions?Why do otherwise rational people turn to unproven or implausible treatments? Why does nonsense sell? Let’s follow the money and turn our attention to economics. Until recently, economists often thought of economic decision makers as ideal, rational beings. “Homo economicus” is a rational, self-interested agent, who makes logical decisions based on real probabilities of maximizing his or her economic goals. Members of this mythical species are often referred to as “Econs”. Econs maximize utility as consumers, and maximize profit as producers. They minimize losses and maximize gains without distorting probabilities. Econs do not exist; humans do. An improvement to this ideal model was Expected Utility Theory. In the 18th century, Daniel Bournoullli proposed that people made decisions about monetary gambles with respect to their current wealth. He pointed out correctly that people are basically loss averse. Under the theory, people make decisions to avoid lowering their current wealth. There is a limit to the risks that people are willing to take due to loss aversion. However, Expected Utility Theory, which assumes that people will be emotionally neutral about their current wealth, was flawed. In 1979, psychologists Daniel Kahneman and Amos Tyversky pointed out that people would not be neutral about their current wealth if they used to be wealthier. The emotional feeling of loss will distort their view of their current status. Likewise, those who achieved recent gains will have a fonder and prideful perspective of their current wealth. Otherwise reasonable people do not anchor their risky decisions specifically to their current wealth, but to their perceptions of gains and losses. People are loss averse. If they have perceived a significant loss, they will be willing to take risks to recoup the loss. If they perceive a gain in wealth, they will avoid risks to protect the gain. They showed that our choices are highly influenced by ‘framing’. We can feel good about a glass that is half full, and bad about a glass that is half empty. We act one way when a situation is presented as a loss, and another way when the same situation is presented as a gain. We can and do make contradictory choices about identical situations according the framing effect. Kahneman and Tyversky also pointed out that weights we place on decisions are not linear with actual probabilities. We weigh very low probabilities higher than we should. We weigh higher probabilities lower than we should. They called their theory of decision-making Prospect Theory. From this, skeptical doctors should accept some fundamental points about human decision making. We are not rational deciders. - We think in terms of gains and losses with respect to our perceived and expected status quo. - We fear losses more than we like gains. - We distort probability according to how a prospect is framed (in terms of gains and losses). - Our choices are highly dependant on how scenarios are framed. - We overvalue probability (risk) when thinking in terms of loss (risk seeking). - We undervalue probability when thinking in terms of gains (risk averse). - These heuristics may lead to irrational health choices by patients and doctors alike. ## Prospect Theory ExamplesWe can use examples of money gambles to illustrate these quirks in human decision making. Their expected values are easy to calculate. Kahneman and Tyversky confirmed experimentally that people actually do make choices according to prospect theory with scenarios such as these.In the following scenarios, choose A. or B. In other words, which choice is more desirable. 1. A. 80% chance to win $1000. B. $700 for sure This choice is framed in terms of high chance of significant gains. Most people will favor risk aversion. Most choose B. However, the mathematical expected value of A is $800 (80% x $1000). An “econ” would choose A. 2. A. 80% chance to lose $1000 (and 20% chance of losing nothing). B. Lose $700 for sure. This is framed in terms high risk of significant loss. Most would favors risk seeking. Most take A. However the expected value of A is to lose $800 ( -$1000 x 80%). B is the better economical choice. 3. A. Bet $10 on a .1% chance to win $9,000. B. Do nothing. This scenario is framed in terms of small chance for significant gain. Many will favor risk seeking and choose A. The economical choice is B because the expected value of A. is to lose $1 ([.1% x $9,000] -$10). 4. A. 1% chance to lose $100,000. B. Pay $1,100 for insurance against a 1% chance to lose $100,000. This choice is framed in terms of a small chance for significant loss. Most will favor risk aversion and choose B. By now we can see that the economical choice is A because its expected value is $1,000. However, most of us would sleep better with choice B. ## Why?We overvalue loss. We tend to overweight risk when faced with possible loss of a perceived gain. That is, when we are afraid of losing what we have gained, we are prone to type 1 errors (believing a risk is greater than it really is). We also undervalue risk when faced with certain loss. We are willing to risk losing more in small hopes of recouping losses. That is, when faced with certain loss, we are prone to type 2 errors (believing a risk to be less than it really is). The distorted perception of risk probability has been quantified experimentally by Kahneman and Tyversky. The table below represents the relationship between real and “weighted” probabilities. The “weighted” probability (wp) is the probability that we tend to actually assign in our thought process, as opposed to the actual probability, p. Weighted probabilities for gains and losses follow similar lines. For real probabilities of about 35% or less, we tend to weigh risks higher than they actually are. For real probabilities over 35%, we tend to weigh risks higher than the actual numbers. As we approach the extremes of 0% and 100%, most rational people weigh these risks fairly. ## Fourfold Pattern and Medical Decision MakingSo, most ‘normal’ people overestimate small risks and underestimate larger risks except for the extremes.For our purposes, the ‘normal’ people that we are concerned with are average patients and average doctors. These concepts can be applied to decision making in medicine, for both doctors and patients alike. The situations described below are quite common. Medical decision making often does not follow utilitarian, logical and economic rules (in which everyone behaves rationally and is not subject to human heuristics, biases and faulty logic). Many undesirable medical decisions can be predicted, however, when thought of with respect to Prospect Theory. In his excellent book, “Thinking Fast and Slow”, Kahneman described a “fourfold pattern” for the predictions of Prospect Theory. We can adapt this for decisions relevant to medicine. ## - |