DECISION MAKING UNDER
UNCERTAINTY: AN
ANALYSIS OF COGNITIVE
BIASES
John Arul Phillips
INTRODUCTION
Whether one is a principal, senior
assistant, panitia,
head of department or teacher, one has to make decisions
each
day. Decision making
is perhaps one of the most
important
activities
humans indulge in daily. The housewife decides
what is to
be prepared for
the family meal,
the doctor
decides on
the kinds of medicines to be
prescribed for a
patient, the
teacher decides on the content to be taught,
while the
principal decides whether to buy more computers for
the computer
laboratory or to upgrade the library.
These are
examples of
decisions individuals make in their daily
lives.
It has
been suggested that the decisions of most people are
made on impulse, or
from habit, or by intuition. For some
intuitive choices are
sufficient especially in relation to
many everyday
situations.
However, the complexity of
modern life and
the
increasing availability of choices has complicated decision
making. People are called upon more often to make decisions
at a
personal and public level in situations they are not
familiar with
and at times the
judgements they make
may
affect the
daily lives of other people. A
conscious effort
in decision
making presupposes involvement in a very
complex
process and
has been the focus of study by many different
disciplines. Mathematicians and statisticians have
attempted
to develop
comprehensive decision-making
models. Industrial
psychologists and
organisational analysts have
focussed on
the processes
which executives should go through in order
to
make
effective decisions.
The purpose of this article is to briefly examine
the
decision making
process and to discuss research evidence on
the cognitive
constraints of the process. In other
words,
how humans at times fail to make better
decisions because of
cognitive
limitations.
THE DECISION MAKING PROCESS
Decision making can be defined as
the making of reasoned
choices from
among several alternatives. Numerous models have
been proposed to
describe the decision
making process.
Cassidy and Kurfman
(1977) in attempting to trace the process
by which
people make decisions identified three phases.
Each
of the
phases are further
subdivided into nine
distinguishable
steps. However, it should be kept in
mind
that incorporated in
the nine steps
are numerous "mini"
decisions made by the decision maker.
F
IDENTIFY DECISION
OCCASIONS AND ALTERNATIVES
A
A
a. define the decision to be made T
C b. identify the goals of
the decision maker
T
T c. identify available alternatives I
S T
/
EXAMINE AND
EVALUATE DECISION ALTERNATIVES U
K a. examine the probable outcomes of
each D
N alternative E
O b. evaluate and rank
the alternatives /
W
V
L
SELECT, IMPLEMENT AND REFLECT ON THE DECISION A
E a. select an
alternative
L
D
b. implement the
plan of action U
G c. assess the results of action E
E d. consider recycling the process S
Figure 1: The Decision Making
Process
(Cassidy and Kurfman,1977)
(I) Identify Decision Occasions and Alternatives
The first
phase of the decision making
process begins
with the
individual defining the decisions to be made. Take
the example of
the principal having to decide
whether the
school should
purchase a photocopying machine. The decision
maker
identifies his or her goal in relation to the decision.
It is
at this point in the decision making process that the
values of
those involved come into focus and
influences the
whole process.
Here, the principal
feels that the
photocopying
machine would be of great help to both
teachers
and students. However, the
principal is also aware that
funds are
limited and whether maintenance of
the equipment
would be too
expensive. It is important for the
principal to
be aware
of the necessity for stating explicitly his or her
goals in
objective terms. This specificity will
eliminate
any internal
confusion later in the process.
With clear goals, the decision
maker can now identify as
many alternatives as
possible so as to provide choices and
options for
action. However, in many situations identifying
alternatives is a difficult task and they have to be created
by the decision maker. In such instances, brainstorming may
be a useful
method for coming up with as many alternatives as
possible. At this point, creative thinking is needed
wherein
novel and new
ideas or alternatives are encouraged
while an
attitude of
openness to the unique and unusual is needed.
Every attempt should be made to
avoid evaluation of the
alternatives until
all have been considered.
(II) Examine and Evaluate
Decision Alternatives
After all
the possible alternatives have been
identified, the second phase of the decision making process
is to
examine and evaluate
each alternative. Each
alternative
is thoroughly examined by determining
what the
likely
consequences may be if that course of action is taken.
At this point of the process, critical thinking
is needed
whereby the
individual evaluates each
alternative based on
criteria
previously determined and
its consistency with
one's values. In the
example, the principal examines
the
brands of
photocopying machines available and evaluates
their
consequences
(see Figure 2).
A1 A2 A3
C1
C2 C3 C1 C2
C1 C2
Figure 2: Each alternative(A) and their
consequences(C)
(Cassidy and Kurfman, 1977,p.11)
(III) Select, Implement and
Reflect on the Decision
The third phase of the process involves
selecting an
alternative,
putting it into action and assessing the results
of the
action. The decision maker chooses an alternative that
is predicted to have the highest
probability of success when
implemented. This calls
for the ability
to collect,
synthesise and
order data. Then the chosen alternative or
course
of action is
implemented and a
strong sense of
commitment to
see through the decision is imperative.
After the
decision has been implemented,
the decision
maker
reflects both on the process and the product or outcome
of that process. Did the alternative
chosen achieve its
intended results? Besides assessing the
outcomes of a
decision, the decision maker also reflects on the
stages of
the total
process to assess each step.
The decision making process seldom follows
a linear and
predictable
manner in the real world. The
uncertainty of the
process is
evident; that as
humans make choices,
subjectivity and
individuality are introduced
and the
involvement
of values affects all aspects of
the process.
COGNITIVE PERSPECTIVE OF DECISION
MAKING
Everyday reasoning and decision
making is much more
than
drawing
deductions from premises known to be true.
One often
has to
make decisions in
the face of uncertainty, with
sketchy information and
inconclusive evidence about
the
situation. Since the
70's research has
been prolific in
identifying
the decision making processes and strategies that
people use to
cope with uncertainty. People use a
variety of
judgement
heuristics and strategies that is applied in a wide
variety of
decision making situations.
_____________________
DEFINE THE DECISON/
TASK ENVIRONMENT
_____________________ G
O
A
_____________________ L
F ACQUISITION OF S
E INFORMATION /
E _____________________ S
D C
B H
A E
C _____________________ M
K PROCESSING OF A
INFORMATION
_____________________
_____________________
OUTPUT
_____________________
Figure 3: Cognitive Perspective
of the
Decision Making Process
(Hogarth,
1980,p.46).
Hogarth
(1980) conceptualised the decision making process
from a
cognitive perspective, particularly
focussing on the
mental operations involved at each stage of
the process (see
Figure 3).
Schematically, the stages of the process appear to
be
distinct, but in
practice it would
be difficult to
separate
them. Associated with each stage of the
process are
many
cognitive biases that influences the
decision making
process.
COGNITIVE BIASES IN DECISION MAKING
Humans have been credited with
having a mind that
has
immense
capabilities and capacity. However, research during
the last
three decades hold this view with some reservations.
Simon (1957) argued that the
"capacity of the human mind for
formulating and
solving complex problems
is very small
compared with
the size of the problems
whose solution is
required for
objectively rational behaviour" (p.198). He
introduced
the theory of `bounded rationality' asserting that
cognitive
limitations force decision
makers to construct
simplified models
to deal with
the real world. Slovic,
Fischhoff and Lichtenstein
(1976) added that
"people
systematically violate the
principles of rational decision
making when
judging probabilities, making
predictions, or
otherwise attempting
to cope with
probabilistic tasks"
(p.169). These violations can be traced to the
strategies or
heuristics
used in order to reduce mental
effort which are
valid procedures in
some instances, while also
leading to
biases that
affect decision making.
I. Acquisition of Information
The `availability' heuristic
proposes that an individual
evaluates the
probability of an event by judging the ease
with which
relevant instances can be recalled (Tversky and
Kahneman,1973). For example, an individual may conclude that
events that
are well publicised, such as
accidents, cancer,
botulism and
AIDS are the main causes of death, whereas death
related to
pleurisy, stroke and diabetes which receive
less
media coverage are
underestimated (Slovic, Fischhoff and
Lichtenstein, 1976). However,
availability is "an
ecologically valid
clue for the
judgement of frequency
because in
general frequent events are
easier to recall"
(Tversky and
Kahneman,1973,p.209).
In other words, when availability is highly correlated
with actual
frequency, then one's estimate may be
correct.
But the
danger is when circumstances increases the saliency
of certain
events and makes them `more available'
than they
should be,
then bias sets in. For example, one may assess the
divorce rate
in a given community by recalling divorces among
one's
acquaintances. If these are unusually
high, it may be
generalised
to the whole community and
may be inaccurate
(Reed, 1982).
A related bias in cognition is
the handling of
concrete
and abstract
information. Concrete information, that is vivid
or based
on experience dominates over
abstract information
such as
summaries or statistical base-rates.
For example,
some principals deciding to certain office
equipment for the
school; the positive or negative
experience of a
single
person he or
she knows, is liable to influence judgement than
available and
more valid statistical
information, such as
that found in
catalogues or comparative
reports. However,
people do not
always ignore abstract or base-rate information
(Bar-Hillel, 1973).
Another characteristic of some
decision makers is to seek
for `causality' when
presented with information.
Ajzen
(1979)
suggests that
people's intuitive notion of causality
play an
important part in their decision
strategies. When
examining information "people
look for factors that would
cause the
behaviour or event
under consideration.
Information that provides evidence
concerning the presence or
absence of
such caused factors
is therefore likely
to
influence
prediction" (p.309). Even if there is information
that states
otherwise, it is neglected if it does
not appear
to provide
causal information to the decision maker.
People have also been found to
structure problems on the
basis of
their own experience or `selective
perception'. In
other words,
people seek information
consistent with their
own views or
hypotheses and downplay or disregard conflicting
evidence. For example, a student who plays truant
may be
seen by the discipline teacher as a
discipline problem which
requires
immediate action whereas the counselling teacher may
view the
issue as a student having personal problems. In
forming
impressions, people will underweight information that
does not
yield to a consistent profile or belief system.
The way data is presented may also influence
decision
making. One such influence is the primacy and recency effect
wherein sometimes
the initial events
in a sequential
presentation assume undue
importance (`primacy') and
sometimes the
latter events (`recency') dominate
the
individual's
decision. The tendency is for the middle of a
series of
informational inputs to
receive less attention
(Rundus, 1971).
Finally, when examining information, another
probable
cognitive bias
is the phenomenon of `illusory correlation'.
Chapman and Chapman (1969) found that
the association between
two pieces of
information is strengthened whenever
they co-
occur. This may be due to frequency of co-occurrence
or prior
association. This illusion about
the associative bonds
between
pieces of information may lead to misinterpretation
and to
ineffective decisions, especially if
there is no such
relationship.
II. Processing of Information
At the processing stage the
individual applies a
series
of mental
operations to the
information that has
been
accessed. People have
the tendency to
adopt processing
strategies
that reduce mental effort and these
may lead to
biasness. Generally,
people prefer the
path of least
resistance. In other
words, when
faced with various tasks,
they select
those approaches which will allow them to reach
their goals
with the least
amount of mental
effort
(Simon,1957). All things
being equal, most people will do
the least
amount of mental work they can get away
with in
most situations. In other
words, people are
`cognitive
misers', who are unwilling to expend more than the
minimum
amount of
cognitive effort required in a given situation.
Though this may not be always true, it has been
argued that
individuals who
engage in effortful forms of thinking are
more likely to
be the exception
than the rule.
Usually
people tend
to minimise cognitive effort
wherever feasible
using mental
shortcuts.
One such shortcut is the `representative' heuristic
when people "select or order outcomes
by the degree to which
the outcomes
represent the essential features of the evidence
with no
regard for prior
probabilities (Kahneman and
Tversky,1973,p.237-238). For example, an individual
meets
this woman
for the first time and on the basis of
a brief
conversation determines that she is very neat in
her habits,
is very
articulate, widely read, is somewhat shy
and dresses
conservatively. But he does not know her occupation. Is she
a waitress, a
librarian, a policewoman,
a dancer or a
lawyer?. How does he decide what
is her occupation?
One
quick way
would be to
make a guess by comparing her with
typical
members of each of these occupations.
In other words her occupation is
estimated by evaluating
how
similar it is to the
essential properties of its
population or
origin. The decision maker presumably matches
what he
knows about the woman against what he knows about
waitresses,
librarians, policewomen, dancers and
lawyers and
comes to
the conclusion that
the women is a more typical
instance of a
librarian (Tversky and Kahneman,1974). It is
this kind of
thinking that gives rise to stereotyping.
People have
also been found
to be `conservative
information
processors' in that they are reluctant to
revise
their opinions on
issues upon receiving new information.
Edwards (1968) contends that the major
cause of conservatism
in some
people is because
they "perceive each
datum
accurately
and are well aware of its diagnostic meaning,
but
are unable
to combine its diagnostic meaning
well with the
diagnostic meaning of
other data when
revising their
opinions"
(p.18). Conservatism results in an
underestimation
of high
probabilities and an
overestimation of low
probabilities.
In anchoring and
adjustment, cues as to what
is
available is
taken as a starting point or `anchor',
and then
adjustments are
made to those
cues according to possible
changes in
conditions (Tversky and
Kahneman,1974). For
example, forecasting
teacher needs by
taking last year's
figures and
then making adjustments
by taking into
consideration student
population increase and
classroom
space.
In the law of small numbers, characteristics of
small
samples are
deemed by some individuals to be representative
of the
populations from which they are drawn.
Interpretation
of data
whereby too much weight is given
to small sampel
results which may be misleading. At times extreme values of
a variable
are used to predict extreme values of
the next
observation
of the
variable, thus failing
to allow for
regression to
the mean, leading to `regression bias'. In
other
words, the decision maker tends to
ignore the nature of
random
fluctuations around the mean or cut-ff point.
At times
the decision environment
may affect the
decision making process. For example, the pressure of time
and information overload leads to
reduced consistency of
judgement because information
processing may become quite
superficial. Emotional stress also reduces the
care with
which people
select and process information, sometimes termed
as `panic
judgements'. Social pressures such
as group
pressure cause
people to distort
their judgements. For
example, the
majority in a group can unduly influence the
judgement of
minority members.
III. Output
Given a
list of possible alternatives,
the individual
has to make a
choice. Some strategies decision makers
may
employ when selecting an alternative are the
`wish' strategy
where the
alternative chosen is desired most regardless
of
the
consequences; the `safe' strategy
wherein the individual
plays it safe
and selects an alternative which is most likely
to succeed
even though undesirable; and the `escape' strategy
is where an
alternative is selected based on what
it avoids
rather than
for what it
can bring. Among the specific
procedures
adopted by some decision
maker when making
a
choice is described in the theory of `elimination by
aspects'
proposed by Tversky (1972). Here the
decision maker
sequentially evaluates attributes
or aspects of
each
alternative and gradually eliminates those
alternatives that
do not
satisfy some set criterion.
IV. Feedback
After an
alternative is selected and put
into action,
the
individual would like to know the
extent to which
the
decision made
was a appropriate
one. People have great
difficulty in
distinguishing whether a particular outcome
of
the
decision is due to a
specific cause or to
chance
(Hogarth,1980). For example, the
decision to hold
extra
classes for
weak students and
the subsequent increase in
performance
is attributed to chance because in that year
the
examination
was relatively easy.
Furthermore, people
have the tendency
to attribute
`good' outcomes
to skill and `bad' outcomes to chance.
For
example, successes in one's job as a principal is
attributed
to one's
skill whereas failures are blamed on `bad luck'.
Also there is a tendency among some individuals experiencing
successful outcomes to
have the impression of having
more
control over
outcomes than is justified by the situation;
in
other words
an `illusion of control' (Langer,1975).
In some
instances, the `gambler's
fallacy' operates
wherein after
seeing a sequence of successes or failures in a
situation
known to be of a random nature,
people tend to
believe that
the event that has not appeared is more likely
to
occur. After a decision is
made, the individual
also
examines the
choice in retrospect. If the decision is
a poor
one, he
or she either
with hindsight accepts it as being
inevitable or
examines the relationship between the events or
`cues' and
what actually happened. Hindsight bias occurs when
decision
maker ignore non-occurrence when trying
to infer
what went wrong. Our memory "of the past is not a memory
of
the
uncertainties of the past, rather it is
a reconstruction
of past
events in terms of what actually
occurred (Hogarth,
1980, p.102).
IMPLICATIONS
Cognitive research during
the last three decades has
provided empirical insights
into human decision
making.
Though there
is still more to be known, current evidence
suggest
exciting possibilities in terms
of training. Can
people be
trained to improve their decision making skills?
With the knowledge one has about the psychology of decision
making and
cognition, improving decision making
skills is an
exciting
prospect. Numerous books and
articles have been
written on decision making and suggestions on
how to improve
decision
making skills.
Decision making
would be an integral component of
any
training programme for educational leaders. Research
evidence
into the
process provide useful information in
understanding
the cognitive
limitations and biases of human decision making
and its
subsequent utilisation in improving the skills of
school
principals, senior assistants, and
teachers. Perhaps
if individuals are made aware of their
cognitive limitations
and biases,
they may be more effective decision makers.
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---------------------------------------------------------
Jurnal Pengurusan Pendidikan
(Journal of Educational
Management). 3(2). 1993. 37-45.