When Irrational Biases Are Smart: A Fuzzy-Trace Theory of Complex Decision Making

Abstract

I take a decision-making approach to consider ways of addressing the "unresolved and dramatic problems in the world". Traditional approaches to good decision-making are reviewed. These approaches reduce complex decisions to tradeoffs between magnitudes of probabilities, and outcomes in which the quantity and precision of information are key to making good decisions. I discuss a contrasting framework, called "fuzzy-trace theory", which emphasizes understanding the simple gist of options and applying core social and moral values. Importantly, the tendency to rely on meaningful but simple gist increases from childhood to adulthood (or, in adulthood, as people gain experience in a domain), so that specific irrational biases grow with knowledge and experience. As predicted theoretically, these violations of rationality in the traditional sense are associated empirically with healthier and more adaptive outcomes. Thus, interventions that help decision makers understand the essential gist of their options and how it connects to core values are practical approaches to reducing "unresolved and dramatic problems in the world" one decision at a time.

Keywords: Allais paradox; biases; framing effects; gist; heuristics; rationality; wisdom.