Some topics we covered include:
- What are heuristics?
- Why do they exist?
- Are they good or bad?
- How do they apply in the real world?
- How were they discovered?
Julian: Let’s start with the basics. What are heuristics?
Sekoul: A heuristic is a simple rule that we use to solve more complex problems. They are mental shortcuts that allow us to make a decision about something without having to take a quasi-infinite amount of time to consider every single aspect of it.
Julian: Can you give an example?
Sekoul: A common example of a heuristic in the decision-making literature is the availability heuristic. The availability heuristic is the tendency to view events or instances that are more salient as representative of an entire group. For example, if you’re thinking about the likelihood of dying on a plane due to a plane crash, you might think about all the times you’ve seen plane crashes appear in the news.
Now, plane crashes are very unlikely to happen. By some statistics, it would take 15,000 to 30,000 years of flying once a day to be in a fatal plane crash. Nevertheless, when you think about the likelihood of your plane crashing, you won’t recall all the flights that had ever been successful; instead, you will likely focus on the ones that did crash.
This is the availability heuristic. It means that the events that are easiest to recall, and in this case, those that are emotionally salient, replace the process of forming a statistic about the likelihood of something happening.
Julian: Would we be better off without heuristics?
Sekoul: Heuristics are often talked about in the context of behavioral economics as irrational or biased ways of thinking or making decisions. Without heuristics, however, it would be very difficult for us to make any kind of decision or to function at all.
Take the example of deciding between buying apples versus oranges at the supermarket. You might have a heuristic that you always buy oranges. That might be a habit that you’ve developed. Now, if you were to pull away from that and actually analyze the situation and think about every single factor that should go into that decision, it’s likely that you would never actually reach a decision.
You might think about the prices of the two, the macronutrients, every single experience you’ve ever had with apples, every single experience you’ve ever had with oranges, et cetera. In order to avoid wasting resources or potentially having to face a problem that is completely unsolvable, the brain takes shortcuts. It basically uses heuristics in order to save us time and energy and to make the world simpler for us so that we can make more complex decisions faster.
Julian: What makes heuristics so important? When do they have the greatest impact?
Sekoul: What makes heuristics impactful is how useful they are in our decision-making process. At the same time, heuristics can sometimes lead to suboptimal decisions. So because they’re imperfect shortcuts to solving problems, they do sometimes lead us to make mistakes.