In this blog post I will summarize how cognitive scientists and economists understand the components involved in making a decision. In subsequent blogs we will explore how to make good (and bad) decisions, using this framework.
Actions
To make a decision requires a choice, and different choices depend on different actions: marry or not marry, book an activity holiday in South Africa or a beach holiday in Cyprus, start making a coconut curry or – alternatively – a spaghetti bolognaise. Making a decision involves taking an action.
Outcomes
Second, the actions taken in making a decision result in different outcomes – either positive (gains) or negative (costs). If we choose one job over another (decide to accept job X rather than job Y), the action of signing a contract has real consequences in terms of income, location, career development, and so on.
‘Fateful moments’
Anthony Giddens (Modernity and Self Identity), has called those decisions that have the most profound consequences on our lives ‘fateful moments’.
Fateful moments are times when events come together in such a way that an individual stands, as it were, at a crossroads in his existence…
Gidden’s examples of decisions that are ‘fateful’ in this way include: the decision to get married, the decision to separate, giving up one job in favour of another, or investing a life’s savings into starting a business.
Risk and Uncertainty
Giddens also identifies and important relationship between important decisions and risk:
fateful moments… stand in a particular relation to risk. They are moments when the appeal of fortuna is strong, moments at which in more traditional settings oracles might have been consulted…
Both fateful choices and more run of the mill choices typically occur in conditions of uncertainty – where the outcomes are not entirely predictable, and where an action taken may involve risk – the chance of loss.
Commitment
To this extent, when you are fully conscious of what is at stake in making a consequential choice, your chosen action involves a commitment – to act in one way rather than another. Signing a contract requires a commitment. Being able to fully commit – and not be choked by doubt and irresolution – seems to be a requirement of effective decision making – although I’m not aware of any scientific study looking at this directly.
The Desirability of the Outcome: Gains and Costs
There are gains and costs associated with the outcomes of decisions you make. Gains are what you desire or value, costs the opposite. Gains and costs motivate our decision making. If there was nothing to lose or gain in making a decision there would be little point in making it. There are many different types of gains that can result from our decisions – for example: sensual pleasure, monetary gain, a positive relationship, being recognized for an achievement, a new skill acquired or something learned, an improved strategic position, and so on. Similarly for costs – ranging from physical pain to loss of face to financial hardship to strategic weakness.
For good decision making it is important to be able to rank different types of gains and costs in terms of degrees of desirability or aversiveness – in a single metric as it were. In choosing a holiday it is useful, for example, to be able to convert into a single ‘desirability scale’ the sensual pleasure of relaxing on a sunny beach, with the sense of accomplishment of climbing a mountain, and rank one over the other – even though these two types of gains are very different., the physical pain, sense of failure, embarrassment, and so on, that may result from an action all need to be ranked in a single ‘loss scale’, such that it makes sense to say ‘the embarrassment that might result from action x is worse to me than the personal sense of failure that might result from action y’.
The positive or negative ‘desirability’ of an outcome is called the outcomes’ utility by scientists in the field of decision-making.
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