Good Frames

GOOD FRAMES

Not all frames are equal, and some frames are clearly better than alternative ways to describe (or to think about) the same thing. Consider the following pair of problems:

A woman has bought two $80 tickets to the theater. When she arrives at the theater, she opens her wallet and discovers that the tickets are missing. Will she buy two more tickets to see the play?

A woman goes to the theater, intending to buy two tickets that cost $80 each. She arrives at the theater, opens her wallet, and discovers to her dismay that the $160 with which she was going to make the purchase is missing. She could use her credit card. Will she buy the tickets?

Respondents who see only one version of this problem reach different conclusions, depending on the frame. Most believe that the woman in the first story will go home without seeing the show if she has lost tickets, and most believe that she will charge tickets for the show if she has lost money.

The explanation should already be familiar—this problem involves mental accounting and the sunk-cost fallacy. The different frames evoke different mental accounts, and the significance of the loss depends on the account to which it is posted. When tickets to a particular show are lost, it is natural to post them to the account associated with that play. The cost appears to have doubled and may now be more than the experience is worth. In contrast, a loss of cash is charged to a “general revenue” account—the theater patron is slightly poorer than she had thought she was, and the question she is likely to ask herself is whether the small reduction in her disposable wealth will change her decision about paying for tickets. Most respondents thought it would not.

The version in which cash was lost leads to more reasonable decisions. It is a better frame because the loss, even if tickets were lost, is “sunk,” and sunk costs should be ignored. History is irrelevant and the only issue that matters is the set of options the theater patron has now, and their likely consequences. Whatever she lost, the relevant fact is that she is less wealthy than she was before she opened her wallet. If the person who lost tickets were to ask for my advice, this is what I would say: “Would you have bought tickets if you had lost the equivalent amount of cash? If yes, go ahead and buy new ones.” Broader frames and inclusive accounts generally lead to more rational decisions.

In the next example, two alternative frames evoke different mathematical intuitions, and one is much superior to the other. In an article titled “The MPG Illusion,” which appeared in Science magazine in 2008, the psychologists Richard Larrick and Jack Soll identified a case in which passive acceptance of a misleading frame has substantial costs and serious policy consequences. Most car buyers list gas mileage as one of the factors that determine their choice; they know that high-mileage cars have lower operating costs. But the frame that has traditionally been used in the United States—miles per gallon—provides very poor guidance to the decisions of both individuals and policy makers. Consider two car owners who seek to reduce their costs:

Adam switches from a gas-guzzler of 12 mpg to a slightly less voracious guzzler that runs at 14 mpg.

The environmentally virtuous Beth switches from a 30 mpg car to one that runs at 40 mpg.

Suppose both drivers travel equal distances over a year. Who will save more gas by switching? You almost certainly share the widespread intuition that Beth’s action is more significant than Adam’s: she increased mpg by 10 miles rather than 2, and by a third (from 30 to 40) rather than a sixth (from 12 to 14). Now engage your System 2 and work it out. If the two car owners both drive 10,000 miles, Adam will reduce his consumption from a scandalous 833 gallons to a still shocking 714 gallons, for a saving of 119 gallons. Beth’s use of fuel will drop from 333 gallons to 250, saving only 83 gallons. The mpg frame is wrong, and it should be replaced by the gallons-per-mile frame (or liters-per-100 kilometers, which is used in most other countries). As Larrick and Soll point out, the misleading intuitions fostered by the mpg frame are likely to mislead policy makers as well as car buyers.

Under President Obama, Cass Sunstein served as administrator of the Office of Information and Regulatory Affairs. With Richard Thaler, Sunstein coauthored Nudge, which is the basic manual for applying behavioral economics to policy. The book describes a “fuel economy and environment” sticker announced for new cars starting in 2013, including fuel-consumption information in the United States. It notes that this information was to appear in small print alongside the more familiar mpg figure in large print. The five-year interval between the publication of “The MPG Illusion” and the implementation of a partial correction is probably a speed record for a significant application of psychological science to public policy.

A directive about organ donation in case of accidental death is noted on an individual’s driver license in many countries. The formulation of that directive is another case in which one frame is clearly superior to the other. Few people would argue that the decision of whether or not to donate one’s organs is unimportant, but there is strong evidence that most people make their choice thoughtlessly. The evidence discussed here concerns donor consent, rather than the rate at which organs are actually donated. An article published in 2003 reported consent figures close to 100% in Austria but only 12% in Germany, 86% in Sweden but only 4% in Denmark.

The authors link these differences to the format of the consent question. The high-consent countries have an opt-out form, where individuals who wish not to donate must check an appropriate box. Unless they take this simple action, they are considered willing donors. The low-consent countries have an opt-in form: you must check a box to become a donor. That is all. In this comparison, the default strongly predicts recorded consent. Consent is only one factor affecting whether a donation ultimately takes place.

Unlike other framing effects that have been traced to features of System 1, the organ donation effect is best explained by the laziness of System 2. People will check the box if they have already decided what they wish to do. If they are unprepared for the question, they have to make the effort of thinking whether they want to check the box. I imagine an organ donation form in which people are required to solve a mathematical problem in the box that corresponds to their decision. One of the boxes contains the problem 2 + 2 = ? The problem in the other box is 13 × 37 = ? The recorded consent rate might be swayed.

When the role of formulation is acknowledged, a policy question arises: Which formulation should be adopted? In this case, the answer is straightforward. If you believe that a large supply of donated organs is good for society, you will not be neutral between a formulation associated with almost 100% consent and another associated with consent from 4% of drivers.

As we have seen again and again, an important choice is controlled by an utterly inconsequential feature of the situation. This is embarrassing—it is not how we would wish to make important decisions. Furthermore, it is not how we experience the workings of our mind, but the evidence for these cognitive illusions is undeniable.

Count that as a point against the rational-agent theory. A theory that is worthy of the name asserts that certain events are impossible—they will not happen if the theory is true. When an “impossible” event is observed, the theory is falsified. Theories can survive for a long time after conclusive evidence falsifies them, and the rational-agent model certainly survived the evidence we have seen, and much other evidence as well.

The case of organ donation shows that the debate about human rationality can have a large effect in the real world. A significant difference between believers in the rational-agent model and the skeptics who question it is that the believers simply take it for granted that the formulation of a choice cannot determine preferences on significant problems. They will not even be interested in investigating the problem—and so we are often left with inferior outcomes.

Skeptics about rationality are not surprised. They are trained to be sensitive to the power of inconsequential factors as determinants of preference—my hope is that readers of this book have acquired this sensitivity.