Tuesday, March 04, 2008

Gotta keep those options open!

Jeff Blaustein points out that one of the rational reasons we might want to spend money on something (like War Memorial pool) is to keep our options open-- if we don't take care of our "stuff", even when we're not using it, then one day, when we need or want that "stuff", we'll find that it's broken beyond repair.

That's a compelling argument... but Chapter 8 of Predictably Irrational, "Keeping Doors Open -- Why Options Distract Us from Our Main Objectives," describes some fascinating experiments which show that people will go to great lengths to keep their options open.

The experiments were pretty simple: You sit down in front of a computer which shows you three doors. Click on a door and you're shown a room where you can click and earn (real) money. The rooms give out different amounts of money for each click-- for example, one might give a random amount from 2-6 cents, another 1-4, and the third 4-10. You're told that the rooms are programmed this way (but you're not told what the payouts are). You have 200 clicks to try to make as much money as you can.

Just given that setup, people were rational-- they quickly found the room that seemed to give the most money, and then spent all the rest of their time clicking there.

But make one little change and people become irrational: make a door disappear if it hasn't been visited in the last 12 clicks, and people spend lots of time visiting those lower-paying doors, just to keep their options open.

It looks like we're hard-wired to keep doors open. "I'll keep these pants because maybe one day I'll be able to fit into them again..." After all, the cost of keeping them is small (they only take up a small fraction of your closet space), and, who knows, maybe one of these years I'll actually spend more time exercising and my waist will stop its slow inflation.

So how can we trick ourselves into being more rational? For pants, I apply a rule: If I haven't worn something in over a year, it gets donated to charity. I empty out my closet, save time not trying on pants that don't fit, and make the world a tiny bit better.

For "price anchoring" irrationality, I ask myself "How much am I willing to pay? How much is this worth to me?" before I look at something's price tag. If it costs more, I don't buy it.

Could we come up with similar tricks for thinking about budget issues at Town Meeting? I wonder; if we surveyed Town Meeting members (or, even, everybody in Amherst) and asked "How much money should the Town pay to provide entertainment to one kid for four hours during the summer?" ... what people would say? $5? $10? $50?

I don't know how much a kid's 4-hour visit to the pool costs the Town, but it seems to me that if it costs more than about $10 there's something wrong. Am I a cheapskate?


Mary E.Carey said...

I don't know if you're a cheapskate but I look with awe upon people who clean out their closets and get rid of things that they don't wear or don't fit them every year.

Larry Kelley said...

Not to beat a dead horse but one of the rationales we hear (even from the diffident Finance Committee) for continuing to squander tax money at Cherry Hill is that if we close it down--even for a season--then it will instantly overgrow into a useless jungle rivaling the Amazon Forest.