Behavior: Decision Theory: Guide to Choice-Making

• Share

TO beleaguered man, life is an uphill obstacle course. Between the cradle and the grave stretches an endless multitude of problems, every one of which cries out for decision. At what moment is it safe for the pedestrian to challenge the hazards of wheeled traffic? If a picnic is scheduled for tomorrow, what are the odds against rain? By what mysterious standards does a man pick a friend, a pastime, a profession or a wife?

More often than not, human intelligence seeks to resolve these and a host of similar riddles by intuition alone. And intuition makes an excellent guide. But it is the cardinal premise of a division of social science called decision theory that intuition is often not enough. Decision theory is based on the premise that man's capacity to solve life's problems correctly is limited by two factors: in extremely complex situations, he is not always capable of mastering all the information, and he does not always decide as logic and reason tell him he should. Beyond human intuition, says Psychologist Ward Edwards, lies an individual's personal calculation of the odds in favor or against. This personal factor, which measures the individual's will to win rather than the mathematical probabilities, must be counted into the risk and the odds.

Money Game. Edwards, 42, is head of the University of Michigan's Engineering Psychology Laboratory. Since last July, he has been operating an ingenious gambling experiment called "Stakes & Odds" at the Four Queens Hotel in Las Vegas. With the full encouragement of the house and the Nevada State Gaming Commission, a computer has recorded the decision-making patterns of some 250 volunteers. The game that they are asked to play (with real money) has two parts: in the first, a player must select two bets, one good and one bad, from four that are offered him; in the second, he has the option to keep or get rid of a bet, depending upon how he judges its value to him.

From the computer's carefully recorded data, Edwards has learned that people on the whole make remarkably rational decisions. Nevertheless, more than a third of the participants become befogged by superstitions, biases and logical incoherences. Most people, for example, regard an event as more likely to occur if they stand to lose by its occurrence rather than gain by it. Also, they tend to inflate the value of the money they stand to win—that is, a $10 bet means more to them emotionally than five $2 bets.

Unaffected by such emotional factors, a computer does better at the game than people do—which does not mean that decision theorists have contempt for man. In fact, Edwards has a profound respect for the logical abilities of the human mind. One of the inexplicable wonders of life is that a normal man can, with almost ridiculous ease, solve in an instant problems of theoretically great complexity. Take for example, ticktacktoe. Theoretically, in five moves alone this childishly simple game can be played 15,120 different ways. Nonetheless, man easily cuts his way through these impenetrable thickets of choice to make X's and O's in the right combinations in order to win.