“Irrational” may be a dirty word, but Leslie K. John wants to change that.
“ ‘Irrational’ has such a negative connotation,” she said. “It’s called irrational because it strays from a standard economic model, but who’s to say that is what is right?”
John, assistant professor of business administration at Harvard Business School, will talk at 10:45 a.m. today in the Amphitheater about how individuals can leverage irrational behavior to their benefit.
John acknowledges people make all sorts of irrational decisions each day, and those behaviors are often deeply entrenched. This is partially why smokers continue to smoke and why overweight and obese individuals maintain unhealthy diets. These behaviors are so entrenched, she said, that traditional economic factors like information (the fact that smoking can lead to cancer) and taxes (punitive excise tax on cigarette purchases) do little to curb the behavior in question.
“There’s a trade-off between [making people angryand effectiveness,” she said. “If you are able to raise the prices, you’re going to change behavior. But it’s a really strong-armed, hard, paternalistic way of changing behavior.”
In other words, if Congress were to raise taxes on tobacco so cigarettes were akin to caviar, the United States might have fewer smokers. But in that situation, politicians might also find themselves out of a job. This is where behavioral economics and John’s particular research provides a more palatable alternative.
Her approach is founded on a simple truth: People hate to lose. In fact, people hate losing so much, John said, that it’s irrational. According to John, if faced with the prospect of either losing or gaining a million dollars, a person is going to be more upset about the loss than they would be happy about the gain.
The only exception to this rule of loss-aversion is perhaps weight loss — a perennial thorn in the irrational dieter’s side. Presented with either gaining a doughnut or losing a pound, many people will make the hedonistic choice.
John’s research attempts to embrace individuals’ irrational biases to make better choices. She observed particular success by having people to bet against themselves on weight loss. If people bet $50 on them losing weight, John found people are more likely to lose weight because the prospect of losing money sufficiently motivates individuals to put in the work.
“That provides the extra kick in the pants to really get that weight loss going,” she said.
John said her work mainly focuses on health-based decisions because she is a fitness buff herself. It’s another example of research starting as “me-search,” she said — she is interested in the topic because she is a self-described bad decision-maker herself. But she was also quick to note her findings apply to a wide range of situations beyond weight loss. Her work can help people make better decisions in a variety of contexts.
Some of humans’ irrationalities might be instinctual, she said, but individuals can intentionally make better decisions if they take advantage of those instincts.
“Instead of going against the bias, you can go with it,” John said. “Instead of trying to fight your instinct, you can actually go with it.”