Why it's impossible to be rational about anything: measuring decision-making factors' potential for rational analysis

One of the problems with making decisions rationally is that it's conceptually impossible. Behavioral economist Dan Ariely highlights this by examining the decision-making process of someone faced with two coffee shops across the street from each other, one featuring handcrafted roasts and the other a standard chain where the coffee is $1.75 cheaper:

What you should do (if you wanted to be rational about it) is consider all of the things that you could buy with that $1.75, now as well as in the future, and decide to buy the expensive coffee only if the difference between the two coffees is more valuable than all of those other possibilities. But of course this computation would take hours, it is incredibly complex, and who even knows all the possible options to consider? [The Psychology of Money and Habits]

If you spend some time thinking on the factors that influence the direction of any decision, what you find is that every factor somewhere on a scale from high potential for rational analysis to low potential for rational analysis. Consider, for example, that a puppy's markings have a very low potential for rational analysis when deciding between one of two puppies to take home.

The problem is that even factors like price that fall relatively high compared to puppy spots are still far from being accurate tools for rational decision making. In this case it's because we can't help but make decisions based on context, relying on a memory that's spotty at best to judge the relative value of any monetary amount at any given time (see: How relativity affects every decision we make: an experiment in making $20K worth more than $20K). This is just one rule of human decision-making among a host of others.

Even if one were to accurately measure the various potentials for rational analysis of every factor at hand (impossible), one would then have to accurately compare factors within the overwhelming matrix of results (also impossible).

Our entire complex of heuristics and cognitive shortcuts exists entirely because being rational is simply far too difficult (see: this list of all the ways you could be completely wrong about everything).

How relativity affects every decision we make: an experiment in making $20K worth more than $20K

In the video above and in the his other works, the first point behavioral economist Dan Ariely is always quick to make is that we're horrendously bad at knowing what we want, and when it comes to decision-making we always always always make comparisons, relying heavily on relative context as a way to deal with the overwhelming complexity of most decisions we're faced with (see also: Barry Schwartz's The Paradox of Choice).

The idea behind relative context explains why the highest priced items on a menu boost revenue (even if they are never ordered), and why we're drawn to mid-level options among groups of three or more, using the more extreme alternatives as guides to narrow down 'what we're really looking for.'

As for supporting the idea that we use context to deal with complexity, Ariely points to examples that illustrate the principle "when given the choice between option A, option B, and option -A (similar to A but easily determined to be worse), we choose option A," demonstrating that we tend to focus on things that are easily comparable.  When deciding upon purchasing a colonial home, a contemporary home of the same value, or a contemporary home of the same value with the price lowered because of a roof that needs to be fixed, we forego the more abstract decision between colonial and contemporary for a decision based on the roof instead. The 'Rome vs France vs Rome Without Coffee' and the 'Tom vs Jerry vs Slightly Less Attractive Tom (or Jerry)' examples reiterate the point, illustrated below.

It occurred to me to play on the impressionability of our decision-making with an experiment of my own. My goal was to observe the different decisions made when people were posed with the hypothetical choice between staying in a city they loved (let's say a 9 on a 10 scale) with a job paying a particular salary, or to move to another, less-than-ideal city (7 on a scale of 10) for the same job paying an increased salary. The idea is that given all other things equal, the decision would (read: should) be made based on the increase in salary alone.

To illustrate the importance of local relativity, half of the college students I approached were asked to make the above decision while imagining their first job offer, at salaries of $40,000 for the 9-on-a-scale-of-10 city, and $60,000 for the less-than-ideal city; the other half were to imagine they were well established in their career, deciding between $110,000 and $130,000.

Final result? People are far more likely to stick with their current city when presented with the decision between the two larger sums of money. Why? Relatively, the jump from $40K to $60K is a 150% increase in salary, while the 'established career' decision only yields an increase of less than 20%. Although the difference in salary is objectively the same ($20,000 should be worth $20,000 no matter what, right?), the responses illustrate just how seriously we take relativity.

What I like most about these kinds of experiments is that they can be clearly likened to the 'irrationality as cognitive illusion' metaphor,  bridging the gap between cognitive and visual illusion. Just looking at the graphic representation of the results above you can see it works in the exact same way as the 'which table is longer?' illusion Ariely touches on briefly.

Certainly there are a lot of other factors that naturally influence a person's decision here (both consciously and unconsciously) but really that's kind of the point. Salary and location are the only objective factors on which to support 'rationality' in this scenario; when it comes down to it, we're absurdly horrible at being objective and rational, despite how strongly we might think the opposite.