Homo Weirdos – What Design can Learn from Behavioral Economics
In design, everything we do brings about a change in human behavior – whether we like it or not. Our decisions influence people’s behaviour; everything that is designed will (hopefully) be part of our living environment later on. Design today is a transdisciplinary field in which we are concerned with creating values. One of the most important dimensions we deal with is the human context, our daily experience, living and working, thinking and feeling. If one wants to understand the human phenomenon better, the world of behavioral economics is an ideal destination for an excursion.
From Homo economicus to behavioural economics
The economic model of Homo economicus assumes that people are self-interested rational actors who make decisions based on the principle of maximizing utility and profit. In this sense, it is an extremely reduced characterization of the human being that is used to describe and explain processes in society. However, despite its popularity, the model is only partially suitable for explaining or even predicting human behavior.
Behavioral economics offer a different approach. In this area of economics, psychological patterns are investigated in order to explain individual behavior that does not exactly correspond to the model of the rationally acting homo economicus. It explores unreasonable, illogical patterns of thought and behaviour that people display all too willingly and often.
Nudging: Influencing people without their knowledge
Behavioural economics not only explores the causes of irrational behavior, but also the possibilities of using them specifically to influence human behavior patterns. Nudging is what we call this today; a term coined by the American economists Cass Sunstean and Richard Thaler, who are regarded as important representatives of behavioral economics.
Since our brain is designed to work as efficiently as possible, it will fall into recurring patterns when dealing with information. In everyday life, we rarely actively think about what exactly is happening in these cases. Our procedural memory is often used as an example that comes into play. For example, after enough practice driving a car or a bicycle becomes somewhat of an automatic process for humans – and then have time to think about our tax returns or the last Bundesliga match day while we make a turn at the intersection.
Our brain falls into similar automatisms when it is confronted with new impulses. It classifies them as efficiently as possible into existing constructs, draws on previous knowledge in order to evaluate them, and uses already “learned” ways of thinking in order to deal with them. Due to these learned, unconscious mechanisms, it is then possible to “nudge” our behavior in a desired direction by providing the “right” impulses – without us being aware of it.
Human beings are weird
How weird a human being actually is, we can already tell from our own actions. We are constantly in a conflict between short-term gratification of needs and what would be good for our well-being in the long term. Do we invest our money for our pension or do we buy the new iPhone for 1.000 Euros? Are we too lazy to brush our teeth today and accept the long-term consequences? How much do we want to eat that the ice cream even though we are trying to lose some weight? Are there smokers in the room?
People act irrationally. And not even intentionally at that. In psychology, cognitive biases are “erroneous” rules that systematically govern human thought and action. On the Wikipedia you can find 186(!) entries for Cognitive Biases. They cluster around the way we perceive ourselves, how we perceive others, how we react to communication, classify information, make decisions or evaluate them afterwards.
This chart on Wikimedia shows that we can be unreasonable in even more ways than we think.
Some of the items from the list you might already know:
Rhyme as Reason Effect
Rhyme as Reason Effect: We tend to believe things just because they rhyme, even when it comes to questionable sayings about how drinking wine every day will keep the doctor away.
Just World Hypothesis & Gambler’s Fallacy
Just World Hypothesis and Gambler’s Fallacy: The former is the widespread belief that “everything somehow balances out” in our world. Anyone who is a victim of Gambler’s Fallacy also claims that he will definitely win in the future if he is unlucky at the slot machine today. There is absolutely no evidence, however, that past events will affect the future probability of winning.
IKEA-Effect: The name is derived from the fact that people tend to attach more value to things in which they have invested their own work. The well-known Swedish furniture retailer has made this a concept, saving costs for delivery, assembly and storage space – and, instead of protesting this “service,” its customers actually find it “hygge”.
Behavioural economics in practice
The example of IKEA shows how small phenomena can scale in order to create economic benefits or even cause problems. Consider how the following examples might simultaneously influence the decisions of all IKEA customers worldwide:
Trading, buying and deciding
Decoy effect: When people have to choose between two options, they often have a clear preference. However, this can shift if further options are introduced to the situation – even though the original two options do not actually change. This can be illustrated simply by the price of goods: Suppose you see two products in front of you, one for 5 and one for 15 Euros – in comparison, the latter seems quite expensive. But when we add a third product for 30 Euros as a “decoy”, the 15 Euros suddenly don’t seem so unreasonable anymore.
Choice overload: People have a harder time deciding when they are faced with too many choices. One study that explained this more in-depth was calle “When Choice is Demotivating: Can One Desire Too Much of a Good Thing?” by psychologists Sheena Iyengar and Mark Lepper.
Anchoring effect: This cognitive bias refers to the fact that we rely too much on the first information we encounter concerning a topic when making decisions. This first information acts as an “anchor” on the basis of which we evaluate all new information. Psychologists led by the American Brian Wansink undertook a field experiment on buying decisions in the supermarket. They put reduced soup cans on offer – in one case without any further measures, in the second with the express restriction: “Maximum 12 cans per person”. While customers bought an average of 3.3 cans without the restriction, in the second case the number twelve served as an anchor: on average, about seven cans were now sold.
Default Effect: When people are confronted with several options, they tend to select the option that is already preset as “default”. This is popular in online trading, for example, so that the payment or delivery method preferred by the merchant is chosen in as many cases as possible.
Working with Informationen
In the digitized world, people are constantly confronted with information. Search engines and social media complement our “conventional” communication and give it a proactive element: today we gather our knowledge ourselves when we do research online, but our success in this endeavour might be a mixed bag.
For example, there is the well-known Confirmation Bias, according to which we are primarily looking for information that specifically confirms our already existing views. In addition, this reinforces the Illusion of Validity: when we know about a lot of ” fitting” pieces information, we think that they are probably correct, and we do not consider paying attention to the fact that there might be contradicting information that we do not know about. Last but not least, our brains try to find patterns in our available information, even if there are none (Illusory Correlation).
These distortions are further amplified by fact that people tend to believe information just because it is often repeated (Availability Cascade), and more readily agree with claims when they are uncomplicated (Illusory Truth Effect). Now it is up to the individual to cope not only with the flood of information but also with their own blind spots.
Communication, Marketing and advertising
Framing Effect: People can be confronted with the same information – but depending on how it is presented, they can make different decisions based on it. This is known from a psychological experiment by Tversky and Kahneman, which was about human willingness to take risks in hypothetical crisis situations. In the market economy, frames are used, among other things, for brand communication: one product can be much more attractive than another with the same characteristics if it is accompanied by a stronger brand promise.
Bandwagon Effect: As social beings, people often make decisions just because they are popular in society. On this basis, trends, Internet memes and pop cultural phenomena often seem to emerge as if on their own. The analyses on the diffusion of innovations deal in depth with how, for example, innovations spread in society. In communication, to exploit the bandwagon effect, it is often claimed that something is popular, because if many people use or buy something, it can be trusted and is probably of a high quality, right?
Authority Bias: Known from the Milgram experiment, people tend to listen to authority figures, even if they critically question their instructions and the resulting actions have clearly visible negative consequences. In the experiment, the subjects were supposed to repeatedly administer supposed electric shocks to a third person (an actor) – and most of them were willing to do so. Pop stars, influencers, politicians, athletes, brands and many others use your authority in very different ways.
Dr. Fox Effect
Dr. Fox Effect: In an experiment, actor Michael Fox (though not the one from Back to the Future) was hired to give incorrect lectures to various expert groups. Although some of these lectures were contradictory, Dr. Fox was a charismatic and effective public speaker – and received outstanding reviews from his specialist audiences. This shows that even one’s own expertise does not protect against “wrongly” evaluating information on rather unreasonable grounds.
As a proverbial “creature of habit”, it tends to be difficult for many people to get used to new things. For example, the Mere Exposure Effect says that people tend to like things just because they are familiar with them. This is exactly what justifies the large advertising and marketing budgets of well-known brands, which invest a lot and also accept a large loss of dispersion in order to remain as ubiquitous as possible. People also have a Status quo Bias and tend to welcome a stable living environment that doesn’t change too much over time. This can go as far as simply ignoring an obvious negative situation they find themselves in (Ostrich effect) or rejecting information that contradicts their view of the world without having a logical reason to do so (Semmelweis Reflex). Sometimes such contradictory impulses even encourage humans to stick to their existing view even more than before (Backfire Effect). It sure takes sensitivity to prepare people for something new.
Design for Experiencing
We see one thing quite clearly: Man is not a Homo economicus, but rather we are probably “homo weirdos” and in the end we are not in a purely rational or functional relationship with the world. Rather, our experience is characterized by a complex structure of functional, emotional and social aspects, and rarely by “pure reason”. We can and should also worry about our level of information at any time. Human-centered design may now help explore this “great unknown” in order to unravel aspects and effects of our actions.