Thinking ahead to my friend’s birthday celebrations I suggested that I take her out for a meal at McDonalds. She seemed a little underwhelmed by my generous offer, so I set about trying to persuade her of the benefits of celebrating her birthday at MD’s.
“the food is consistent, you’ll know what you’re getting, and the menu is not complicated”.
she still didn’t seem impressed, so I tried again,
“the restaurants are very clean, so you won’t get food poisoning. They serve us really quickly, and we won’t have that frustrating wait to pay at the end of the meal. And, on top of all that it’s really good value for money. Essentially, it’s the same as going to an expensive restaurant without any of the hassles”.
In response she mentioned the words “thought” and “investment”.
However, if we were to apply conventional economic theory to birthday meals we would all be celebrating our birthdays at fast food restaurants. Essentially, the utility derived (measured by satiation of hunger) is the same in fast food restaurants as it is in expensive restaurants, the price differential between fast-food restaurants & Michelin star restaurants would see us making the rational decision based on opportunity cost to go with the places with yellow plastic chairs, the comparatively small increase in marginal returns to money spent in posh restaurants would also see us going to fast food joints. Rational economic theory would see us celebrating in a fast food restaurant.
Now, you may think that I’m being silly. You may think that it just wouldn’t be very nice to go to a fast food restaurant if we could afford to go somewhere with a wine list and chairs that can be moved independently. And, you would be right, but then what does that tell us about conventional economic theory that sees us as rational actors (who seek to maximise benefit) within a price based market environment ?
Satisficers / Maximisers.
(Economists call this “Bounded Rationality Theory”…,)
In this scenario we see a fascinating process which is affecting our decisions everyday, namely the process of Satisficing vs Maximising. Herbert Simon observed that in many decisions people would take the option which was both satisfying and sufficient, as opposed to taking the option which maximises benefits (“Maximising”). We ‘satisfice’ for many reasons including the presence of too many options to take all variables into account, incomplete information, lack of time, and sometimes the best is just not required.
- we might satisfice when choosing work clothes but we would maximise when choosing our wedding dress/suit.
- I would satisfice when deciding where to sit on the bus, but would maximise when choosing which house to buy.
Satisficing and Happiness.
Researchers (e.g. Schwartz 2000) have shown that people faced with increased options find it harder to make a choice than those with fewer options, and those with increased options are often less likely to make a decision. As the range of options increases the possibility of making a wrong decision increases, which in turn increases the likelihood of regret when we are seeking to maximise. As such satisficing decreases the likelihood of regret, and therefore can actually increase our happiness.
Satisficing behaviours can optimise happiness. What a surprising finding, and rather depressing in some ways. This research would therefore imply that we should settle for “good enough”, we should, to use a well worn phrase, “be happy with second best”.
(Obviously, there are many variables associated with satsificing behaviour and happiness, some of which I will explore in later posts).
I don’t find the “settle for second best” thrust of satisficing dispiriting because I think that we should maximise all the time. I just think that there’s an underlying process of competition here which has sad connotations for the nature of humanity. Further, it seems to negate striving for holistic and authentic experiences. This is what I call the home cinema experience.
Home Cinema Surround Sound Systems.
I don’t own a home cinema surround sound system, I don’t even own a flat screen TV, and I don’t think I would ever buy a Home Cinema Surround Sound System even if I could afford one. This tells us something about my choice architecture – I maximise in the experience of going to the cinema.
Why would I want a “cinema experience” at home ? Surely, by it’s very definition I would only want such an experience at the actual cinema (apparently a Maximising the experience), but if all I want to do is to watch a film at home then a home cinema surround sound system will be both sufficient and satisfying, it’s a satisficer. However, it’s not a holistic and authentic experience of going to the cinema, an uninterrupted film, a collective experience of audience . It’s sort of like those Bath soaps which promise to recreate the smell of summer meadows, what would that be – the authentic smell of silage and burning crop stubble ?
I could take my friend for dinner at McDonalds, and we would be both rational economic actors and irrational regret aversive satisficer. Or we could maximise by risking regret and going to an expensive restaurant. However, on the other hand we could decide that the food and setting are not actually important, acknowledge that it’s actually time spent together which is important. She suggests that we take a picnic to the beach. In this setting we would have a holistic and authentic experience which would make us far happier than the restaurant dilemmas ever will.
Schwartz, B (2000) The Tyranny of Freedom, American Psychologist 55.