Behavioral Economics And Covid-19

Check this out. What you will see is a fascinating little piece on how cognitive “Biases” (Remember Kahneman’s Thinking, Fast And Slow?) have screwed up our response to the pandemic. Not just one bias mind you. Four!  

The first is the identifiable victims effect. Quite simply, decision makers are more likely to act to save a life if they can put a face to it. If they can imagine the person in peril as their spouse or child. The story of the pandemic has been one of depersonalization. Huge numbers. No faces. No action!

Then there is the optimism bias. Not much explanation is required here. Human beings are wired to predict better outcomes (See the President’s prediction that the pandemic will “magically disappear by Easter” for reference!) than could possibly be legitimated by observable facts.  

Third is present bias. We are all hardwired to place greater emphasis on effects in the here and now than on long term outcomes. Immediate gratification makes up a lot of who we are and what we do.  

And last but not least there is omission bias. Decision makers would rather let people try to figure out whose fault something left undone was than have fingers pointed at them specifically for having done something wrong. 

And there you have it. The story of COVID-19 in America, 2020.  

Bottom Line. A problem I have always had with Behavioral Economics is that, at the end of the day, that “science” is just a bunch of labels. Kahneman’s “heuristics” and “biases” don’t really cause anything. They are just descriptions of human decision-making propensities that are the result of thousands of years of psychological evolution.  

So, what is their value here? Awareness! Hopefully, as decisions continue to be made that have major influences on the impact of COVID-19 on the U.S. population, simply making decision makers aware of these biases will help them to avoid some of the bad decisions that can result from yielding to them.

Maybe!

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