Schoolteachers, Sumo Wrestlers, and Choice & Happiness

Incentives: Day Care & Prostitution An incentive (negative or positive) is simply a means of urging people to do more of a good thing and less of a bad thing. Three basic flavors: (1) economic, (2) social, and (3) moral Economic : day care center in Haifa, Israel and fining tardy parents. After the $3 fine went into effect, the number of late child pickups promptly went…? Also, $3-per-pack “sin tax” for cigarettes. Social : banning of cigarettes in restaurants, prostitution busts Moral : parental guilt over late child pick-ups at day care center

Moral/Social Incentives and Modern Life The Chicago Police Department in conjunction with the Mayor's office have now made prostitution solicitors' information available online. By using this website, you will be able to view public records on individuals who have been arrested for soliciting prostitutes or other related arrests. The following individuals were arrested and charged for either patronizing or soliciting for prostitution. It is not a comprehensive list of all individuals arrested by the Chicago Police Department for patronizing or soliciting for prostitution. The names, identities and citations appear here as they were provided to police officers in the field at the time of arrests. DOE/SMITH, JOSE M/37 54XX S ROCKWELL ST CHICAGO 1102 N CICERO AVE 2005/10/ ILCS 5.0/11-15-A-1 DOE/SMITH, CARLOS M/31 165XX BRENDEN LN. OAKPARK 1102 N CICERO AVE 2005/10/ ILCS 5.0/11-15-A-1 DOE/SMITH, JOHN M/54 28XX W 38TH PL CHICAGO 2500 S CALIFORNIA BLVD 2005/09/ ILCS 5.0/11-15-A-1 DOE/SMITH, ALEX M/28 22XX MAGNOLIA CT WEST BUFFALO GROVE 1102 N CICERO AVE 2005/10/ ILCS 5.0/11-15-A-1

Economic Incentives and Modern Life - Australian prison ships in the early 1900s - April 15, 1987 and the disappearance of of 7 million American children - frequent flyer miles (“loyalty programs”)

Incentives & Cheating Teachers cheating and “high stakes” testing: - How did the teachers cheat? - How was their cheating discovered? - How did administrators confirm their discovery? Do Sumo wrestlers cheat? - When? Why? 15 bouts per tournament and 7-7 wrestlers

Cheating and the “Bagel Man” Paul F.’s bagel business is essentially an “honor- system commerce scheme” Not paying for a bagel (or doughnut) is a form of white-collar crime, for which it is much harder to collect data than street crime. Why? In his own research business, payment rates averaged 95%

What the Bagel Man Saw Payment rate among all of his clients is approximately 87-89% 87% before 9/11 (89% after; 15% reduction in theft) What has Paul F. learned about honesty?

What the Bagel Man Saw Telecoms companies and law firms? Executives vs. administrative workers? Places where security clearance was required? Two great predictors of a company’s honesty?

What the Bagel Man Saw Relationship between payment rates and local unemployment rate? Effect of weather? High-cheating holidays vs. Low-cheating holidays? Paul F.’s sobering belief: “Honest people are honest, and cheaters will cheat regardless of the circumstance.” Based on his data, is that accurate? England’s toll-collector strike

The Paradox of Choice & the Futile Pursuit of Happiness food samples at grocery stores, Medicare+Choice for seniors, 401k plans for retirement – “law of diminishing marginal utility” (key) applying to college today, 1997 DTC ruling regarding the advertising of prescription drugs choosing a major (or majors and minors) with cross-listed courses “paralysis of choice” – A majority of people want more control over the details of their lives, but a majority of people also want to simplify their lives. There you have it—the paradox of our times. As the number of choices for individuals increase, so too does the responsibility for and regret over failure. Nothing is ever settled! 30-somethings struggling, not to find a career and/or a mate, but to “choose” one

“If Only…”: The Problem of Regret “Choices” follow similar utility principles as chocolate bars and increases in wealth: the utility—the increase in happiness—from the first couple is large and infinitely better than no choices, but... Excessive Choice is often burdensome. Why? (1)Increases burden of information gathering to make a wise decision (2)Doing all the “cost-benefit/expected utility” calculations is exhausting (3)Increases expectations about how good the decision will be (4)People often assemble an idealistic composite of all the options foregone (5)Which increases the likelihood that they will regret the decision they make (6)And increases the chance that they will blame themselves when a decision fails to live up to expectations. Perhaps colleges/universities offer too many choices now, which might help explain double-, triple-majoring, etc. (e.g., Spiderbytes) “Maximizers” are uniquely prone to excessive “anticipated” and “postdecision” regret.

“If Only…”: The Problem of Regret Omission bias: “The belief that we will regret actions that don’t turn out well MORE than we will regret failures to take actions that would have turned out well.” e.g., switching toll lanes or grocery store aisles that turn out to be worse than if we had stayed where we were Depends on the timeframe… short timeframes: actions that did not turn out well are often the ones people report regretting the most (e.g., breaking up with boyfriends and girlfriends) long timeframes: non-actions are often the ones that people report regretting the most (e.g., not studying abroad)

The Paradox of Choice Utility “maximizing” vs. “satisficing”: e.g., graduate school experience Harvard photography class experiment and telecommuting B. Schwartz: “In the past, the ‘default’ options were so powerful (career, spouse, home) that few perceived themselves to be making choices.” Choosing our identities: “As with marriage, choice of identity has been moving from a state in which the default option was extremely powerful and the fact of choice had little psychological reality to a state in which choice is very real and salient.” [e.g., school shootings] “Every second of every day, we are choosing, and there are always alternatives. Think about what you do when you wake up in the morning…your routine. During the week, you’re an automaton. This is a very good thing.” Areas of everyday life that don’t need intense analysis and evaluation every day free up areas that do. But it is the cumulative effect of these added choices that … is causing substantial distress.” We are increasingly trapped to varying degrees in “the tyranny of small decisions.”

Why Decisions Sometimes Disappoint key role of “hedonic adaptation” to good things and “resilience” to bad things: - our “psychological immune system” (a sort of emotional “thermostat”) e.g., remember when you got your first dial-up 14,400 baud modem? - standards of comfort change (e.g., A/C in the dorms), and study abroad Winning the lottery and “hedonic thermometers”:

“If Only…”: The Problem of Regret Near Misses Responsibility: “Who chose this movie/restaurant, etc.?” Importance of “downward counterfactuals” e.g., internships at local hospitals, at-risk schools, etc. As hard as it often is, let “sunk costs” go when making new decisions: e.g, President Bush on Iraq (Aug. 22, 2005): “We owe them something [fallen soldiers]. We will finish the task they gave their lives for," the president said. We will honor their sacrifice by staying on the offensive.” (not primarily WMD, national security, Iraq-Al Qaeda/911 ties, etc.)

Why Decisions Sometimes Disappoint How does happiness vary with income? Studies show that when incomes rise for everybody, well-being doesn’t change much. Consider the example of Japan… Or take the U.S.: GDP per person (capita) since 1946— when formal surveys of happiness started—has tripled with former luxuries (jet-travel, long-distance phone calls, etc.) now necessities, but Americans no “happier.” One exception: the Amish report some of the highest levels of happiness Mispredicting Satisfaction: utility estimation errors made in “hot” and “cold” states of rationality e.g., Rick James’ “Super Freak” dance experiment, unsafe sex, angry s e.g., college students in California and Midwest and the weather e.g., college tours for prospective students *Almost every decision involves a prediction about future emotional responses, which are much harder to get exactly right than we usually expect.

Combating the “Paralysis of Choice” Helpful countermeasures: (1.) Group Decision-Making Political Scientist Paul Johnson’s research: - He asks his classes of roughly 25 students to predict who will win the Academy Award in several leading categories. - He has consistently found that the group predictions are better than the predictions of any one individual. In 1998, the group picked 11 of 12 winners, while the average individual in the group picked only 5 of 12 winners (and the single best individual picked only 9 winners). (2.) Pro-Actively Limit Choices to “1 st order,” “2 nd order,” “3 rd order,” etc. (3.) Counterfactual Downward (4.) Make Some Decisions Nonreversible (e.g., Harvard photography class) (5.) Anticipate Adaptation (6.) Learn to Love Constraints (Say “No”) and to Move On w/a Distraction (7.) Consider the value of “Choosing the Right Pond” [relative position] e.g., $100,000 NYTimes reporter in NYC vs. $100,000 attorney or even $75,000 professor in Richmond (8.) Satisfice More and Maximize Less (limit the areas of “maximization”)