Monday 24 June 2013

Loss aversion

"There's no map, and a compass wouldn't help at all." Funnily enough, this isn't actually the punch-line to a one-cyclist-says-to-another-cyclist joke, but rather a line from a Bj√∂rk song entitled 'Human Behaviour'. You may recall from the song's lyrics that there is definitely, definitely, definitely no logic to human behaviour, but as it happens, whilst it is true that people can deviate—often wildly—from rationality, they tend to do so in ways which are not entirely unexpected.

According to an article in this week's issue of New Scientist by Graham Lawton ('A nudge in the right direction'), "Our minds are biased and flawed, but in a systematic way. Human behaviour is irrational, but predictably so." This predictability has led to a new way of thinking called behavioural economics.

In 1999, economist Aad Kieboom had the idea to etch a picture of a fly into
the urinals at Schipol Airport. As a result, the cost of cleaning the men's
toilets reportedly fell by 80%. Image from the econ-behavioural blogspot.

One of the most important aspects of behavioural economics is the idea is that we have two systems of thought: System 1 is fast, automatic and emotional; System 2 is slow, effortful and logical. The coexistence of these two systems is the key concept of a dual process theory, for which Daniel Kahneman of Princeton University won a Nobel Prize in 2002.

System 1 has been likened to an inner Homer Simpson. It doesn't stop to think—it just does. It reacts on the fly and jumps to conclusions.

System 2 is the opposite, and has been likened to an inner Mr Spock. In terms of decision-making, System 2 generally produces better outcomes.

Lawton explains that numerous other biases and flaws are also at play. "We are swayed by social pressures," he points out, "and will often follow the herd instead of making decisions to suit ourselves. We procrastinate and tend to choose the path of least resistance. We are "loss averse", meaning the pain of losing something is greater than the pleasure of gaining it. We favour the status quo, even if it is not in our best interests, and we are easily influenced by irrelevant information."

This ragbag of flawed thinking is responsible for all sorts of poor choices in life, such as failing to save for retirement, sending angry emails and making ill-advised purchases. It is why well-laid plans to eat more healthily, exercise more and drink less often come to naught. It is, in short, what makes us human.

Residents in the Hurlingham Conservation Area believe there are better locations
for a proposed hire-bike station than the one being imposed on them.
Image from Fulham & Hammersmith Chronicle *

"Real humans are not coldly rational," Lawton explains. "Although we are motivated by money, we are also motivated by other things such as social norms, and the concept of fairness."

* * *

Loss aversion was first proposed as an explanation for the endowment effect—the fact that people place a higher value on a good that they own than on an identical good that they do not own. In short, loss aversion refers to people's tendency to strongly prefer avoiding losses than to acquiring gains.
The message from the cycling community is that using a bicycle in the built-up area is of such value as to offset any feeling of "loss" that might arise from a policy which seeks the creation of infrastructures that are intended to make cycling a more attractive option, to more people. Even so, as Cycling: the way ahead notes, the fact remains that some towns and cities are short of space, even on the major routes. That is to say, any losses are likely to be felt, particularly in the short-term.

Cycling: the way ahead continues: "Taking a political decision to reduce the space allotted to cars (whether for traffic or for parking) in order to create facilities for cyclists requires a certain amount of skill, entails explanations for the population and has to be implemented gradually."

Has to be implemented gradually? What do they mean, has to be? Isn't it the case that in the Netherlands, most of what they achieved there was done within about eight years? Yes, I believe that to be the case. However, as Matthew Wright pointed out in this comment on the Voleospeed website:

"In 1970s, when the Dutch began [developing] their cycling infrastructure, modal share across the country was approx 25%. It had come down from over 50% in the previous 20 years. So, there was a massive voting population of active and recently active cyclists who could see the benefit of, and vote for, improvements in facilities."

Okay, but isn't it also the case that Roelof Wittink told the GLA's Investigation into Cycling that if we are able to accelerate the development of an amenable cycling environment, mainstream, then we should do it? Yes, that's true. But he also said, "Do not underestimate that you have to come a long way."

Leo Tolstoy: "The two most powerful warriors are time and patience."
Image from The Daily Telegraph

Two months to the day after a campaign launched by one of this country's most distinguished newspapers, we are still only about two-thirds of the way to the point whereby a Backbench Business Committee may consider debating a petition request. This is not a criticism, by the way, but a point of fact.

* Many thanks to George Johnston at Two Wheels Good for posting the story about disgruntled Fulham residents.

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