Going beyond System 1/2 – the many flavours and layers of decision-making psychology

03 Jun 2021 | Research & Business Knowledge

ICG member Elina Halonen, Square Peg Insight, writes:

Although well-known, System 1/2 theory is not the only perspective on decision making – there are several differing views in the behavioural science community, each with slightly different assumptions about human nature.

Much of the discourse in the applied behavioural science world and, to some extent, the spark for the global behavioural insights “movement” rests on the concept of System 1 and System 2. However, we need to keep in mind it’s not the only view on how people make decisions.

Nudging and bounded rationality

The basic premise of the influential nudge approach is the concept of bounded rationality – that human beings are fallible, poorly informed as well as suffering from myopia, inertia and self-control issues. In other words, human decision making is full of somewhat predictable flaws and consequently the scientific field should focus on studying them (and the applied world on fixing them).

Over the past 40 years, the heuristics and biases program (H&B) has uncovered a lot of systematic violations of reasoning and decision making which have led to a loose consensus that humans have innate cognitive limitations which lead us to instinctively rely on heuristics – and occasionally bias us to make predictable error, at least compared to the rational homo economicus benchmark.

This insight was originally the core idea of nudging: that the policy makers could leverage people’s cognitive and motivational inadequacies as a way to steering them to better decisions for their own long-term welfare – ones that are aligned with their ultimate goals.

However, it’s not the only view on how humans behave and decide – it has received plenty of criticism like everything in academia – something that is often missed in the conversations on the applied side of practitioners. In fact, the research on heuristics and biases was criticized early on in the 80s as the “psychology of first impressions” and that there is more to human decision making and problem solving than their first response in a given situation.

Cognitive misers in social psychology

Around the same time in the 80s, another research program emerged in social psychology focused on the dynamics of social influence and persuasion. It also viewed humans as cognitive misers but proposed that we can be persuaded to allocate more resources to engage with arguments.

This gave rise to the early persuasion models: the heuristic-systematic model and the elaboration-likelihood model (ELM), both of which broadly propose that information is processed more systematically only if it is highly relevant or the listener is highly motivated.

These are by no means the only dual-processing theories. Contrary to what many people think, Kahneman did not come up with System 1/2 and in Thinking Fast & Slow he credits it to Stanovich and West* – whenever you see people attributing S1/2 to Kahneman, you should be skeptical of their depth of knowledge (although it would be accurate to say he popularised the terms). Moreover, the debate over the exact nature of the dual processes is not settled – in the book In Two Minds you can find 15 chapters devoted to these debates.

Anyway, back to the 80s!

Lab vs real world decision-making

Another research program that started in the late 80s is naturalistic decision-making (NDM) – the study of how people make decisions in complex, high-stakes, real-world settings such as firefighting, nursing or aviation. In contrast to the H&B program, the premise was that norms of rational choice are not the right benchmark for challenging, complex decision-making required from e.g. firefighters in situations where high uncertainty and time pressure mean it’s not realistic to even expect the kind of effort required for a comprehensive evaluation of options. There is an interesting joint article by Daniel Kahneman and a prominent NDM researcher Gary Klein if you want to read more – reference at the end!

Design flaws or design features?

A little bit later in the mid-90s, yet another research program started in Europe (note that all of the previous ones originated in the US). Instead of seeing human decision-making as fundamentally prone to errors, the so-called fast and frugal heuristics (F&F) school studied which simple heuristics people use to make decisions and how good those decisions ultimately were. In essence, they viewed heuristics as design features of the mind – things that mostly get us to the right answer as quickly as efficiently as possible, but occasionally lead us down the wrong path. They view the cognitive system in our minds an “adaptive toolbox” of simple strategies and the key to good decisions lies in our ability to choose the right tools to the environment we find ourselves in.

There is, of course, much more to the history of decision-making psychology, but this short summary forms a background for future discussion on nudges and nudging – remember these schools of thought as we move forward!

Part of Squared Away newsletter series on nudging.

If you want to read other articles in this series:

  1. A peek under the bonnet – when and where are nudges effective?
  2. Are nudges always good and sludges always evil?
  3. Nudge, boost, budge and shove – what do they all mean?
  4. All that glitters is not gold – 8 ways behaviour change can fail
  5. If context is king, why has nudging ignored it so much?

Want to read more?

* In their book In Two Minds, Evans and Frankish attribute S1/2 terminology to this paper: Stanovich, K. E. (1999). Who is rational?: Studies of individual differences in reasoning. Psychology Press.

You can find more details and references in:

Hertwig, R., & Grüne-Yanoff, T. (2017). Nudging and boosting: Steering or empowering good decisions. Perspectives on Psychological Science, 12(6), 973-986.