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My first post on Data Visualization based on the Tokyo Olympics dataset on Kaggle. I look at three salient things: Number of disciplines played by each country, Number of medals won, and the Number of Olympic gold medals won. 

As you can see, USA tops the list of disciplines participated, medals won, and Olympic golds followed closely by China. India is at the lower end of each metric. 

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Bounded Rationality: The secret sauce of Behavioural Economics

In the year 1957, a Professor of Computer Science and Psychology at the Carnegie Mellon University wrote a book called Models of Man: Social and Rational. It was there that he introduced a term which would go on to redefine the way we understand human rationality. Bounded Rationality is simply the idea that the rationality of human beings is bound by the limitations of their cognitive capacities, time constraints, and the computational difficulty of the decision problem. Decision-making is also guided by the structure of the environment one is in ( not necessarily a physical environment).

Herbert Simon was one of the first who brought attention to the problem of cognitive demands of Subjective Expected Utility. Simon gave the problem of chess to demonstrate how human beings could possibly not behave as Subjective Expected utility theory assumes they do. A game-theoretic minimax algorithm for the game of chess would require evaluating more chess positions than the number of molecules in the universe. Simon posed two questions which have since been the subject of research for cognitive scientists and economists. On the question of how human beings make decisions in uncertainty, Simon asked the following questions: 

1. How do human beings make decisions in the 'wild' ( in their natural environments)?  

2. How can the principles of Global rationality ( the normative theory of Rationality) be simplified so that they can be integrated into the decision-making by humans? Imagine that you are searching for a job, you apply to a number of places and get interview calls from several places. Since interview rounds and hiring process takes a fair amount of time, you are concerned about an increasing employment gap. You cannot afford to evaluate all the options for as long as will take because you do not have enough. Now suppose you get a job offer from a company, the job excites you but the salary is just a fraction above your previous CTC, you are expecting a higher number. You decide to decline the offer. Fortunately, 5 days later you get another job offer. This time the job is respectable enough and the salary is above your expected CTC. Even though you have other interviews, you decide to take up this job. Sounds familiar? Turns out that you if you had done something similar, you were using something which Simon termed as the satisficing heuristic.

Herbert Simon proposed the Satisficing heuristic as an alternative to the optimization problem in Expected utility theory. The Satisficing heuristic is a simple yet robust mechanism with simple stoppage rules. The idea is that one should decide on the decision criterion beforehand and also decide on a threshold level below which one cannot take up a choice and then evaluate different options. Once an option is found that fulfils the decision criterion above the threshold level, one stops the search and takes the option. Therefore, a choice is made which both satisfies and suffices, it satisfices. This heuristic has been used in the context of mate selection, business decisions, and even sequential choice problems. According to Simon, human beings satisfice because they did not have the computational ability nor the time to maximize. 

Bounded Rationality has gone on to inspire researchers in Cognitive Science and Economics. One of the most recognizable works is that of the Heuristics and Biases program led by the famous Daniel Kahneman and Amos Tversky. Based on the idea that there are two systems of thinking: System 1: The Automatic, Fast, and unconscious system of thinking and System 2: The Deliberate,Slow and conscious mode of thinking. According to Kahneman and Tversky, the System 1 mode of thinking was responsible for heuristics that turned to be biases in decision-making like the Conjunction fallacy, Base rate fallacy, Gambler’s fallacy,Sunk cost fallacy etc. These biases led to deviations from the normative idea of rationality which Simon had called Global Rationality and were termed ‘irrational’. The System 2 mode was something which made us deliberate and think over our decisions and was less prone to errors in decision-making. Kahneman got his Nobel Prize in Economics for Prospect theory in 2002, a theory which gave a behavioural alternative to the subjective expected utility model incorporating ideas such as Loss Aversion, Reference point, and Framing. The ideas of Kahneman and Tversky were built on by Richard Thaler who pioneered the field of Behavioural Economics and who introduced the concept of ‘Libertarian Paternalism’. If human beings were irrational, they could be given nudges for their own good so that they  

The Fast and Frugal heuristics program was developed by the famous German psychologist Gerd Gigerenzer. The program  is considered to be the main intellectual rival to the Heuristics and Biases program and there has been a long-drawn intellectual duel between the two programs. The main idea behind the Fast and Frugal heuristics program is the idea that heuristics are not irrational. They are fast and frugal and in situations of uncertainty perform better than other competing models of decision-making. Imagine doctors using surgical intuition to perform complicated operations in a limited time or firefighters making snap judgement and decisions in a dangerous and unpredictable environment.

Heuristics are fast and frugal and they get the job done. Fast and frugal heuristics are ‘ecologically rational’  which means that their rationality is dependent on their environment. Trust in doctor as a heuristic would be rational if say your doctor is experienced, has a medical degree, has no conflict of interests. On the other hand, it will not be rational if your doctor has some conflict of interest, does not have enough experience, or is just not the right doctor for the illness. My Master’s dissertation in the Palaj and Basan villages in Gandhinagar looked at the question of the conditionality of trust. I found evidence that the trust was built primarily on the doctor’s ability to prescribe medicines that could cure in short periods of time and that the trust was conditional in nature. Examples of other fast and frugal heuristics are the Recognition heuristic, Take the best heuristic, Tallying, 1/N rule etc. 

The rise of Behavioural Economics and its poster boy, Nudge has in many ways energized the Economics discipline and brought renewed interest in it. But at times you do feel that commentators face a blackout when it comes to the foundations of the discipline and the foundations are much older than the 1970s when the famous Heuristics and Biases program was taking root. The foundations rather take root in the 1950s in the aftermath of the Second World War in the laboratories of Carnegie Mellon University. Simon’s ideas have found place in fields as diverse as AI, Cognitive Psychology, Design, and Administrative behaviour. While reading his book, the Sciences of the Artificial, I was struck by the intuitive nature of his arguments. Its time that we give him his due as much as any pioneering behavioural economist. 

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Overton Window and the Psychology of Framing

"​ No force on earth can stop an idea whose time has come"​ - Victor Hugo

The Overton Window was a theory proposed by an American policy analyst named Joseph P Overton who surmised that at any point, an idea's political viability falls under a certain section or a 'window'​ beyond which that idea would not be politically acceptable to the mainstream public. A politician, no matter what his ideological affiliation, cannot make an idea into reality unless his idea falls within the Overton window. The window has certain ideas both on the left wing and the right wing which are not too 'shocking'​ to the general public but which can get implemented given certain things are done correctly. This is because parties on the left and the right are usually in an arm-wrestle on which ideas to implement. Overton wanted to explain to his potential donors that investing in public think tanks can help them lobby not the politicians but the voters directly. This would create the necessary shift in the window of public perception which would allow politicians to enact laws which were previously thought unthinkable ( because of widespread acceptance of such ideas). Politicians, despite their ideological affiliations would not be able to enact anything which is beyond the window's purview at a given time. In that sense, the Overton window was never a tactic to be used but a description of the realpolitik. So how do politicians/political parties, think tanks, grassroots movements influence the general public? Even a layman might guess that the answer is effective propaganda but how does propaganda actually help shift attitudes and as a result shift the Overton Window? The answer can be found in a psychological mechanism commonly referred to as framing.

Say you have gone to a fancy restaurant with your family. You intend to spend but also to spend wisely. The lighting is mellow, the music is soft. You feel at peace and you are ready to order. The waiter in a crisp white shirt comes to you solemnly and places the menu on your table. You open the menu. Being a sworn non-vegetarian, you quickly move to the non-veg section. What follows is a realization that the food is really expensive! It is filled with exotic dishes with exorbitant prices. But you are hungry and so is your family, what do you do? You search for the cheapest dishes and you order 2-3 of that. Your family won't be hungry and you can go home with your belly full. You feel you have saved the day with your quick thinking. But what just happened? Did you really avoid paying very high prices? The chances are that the dish you ordered and its price once examined without the others would have seemed to be expensive for you. But since the other dishes were much more expensive, the restaurant shifted your frame of reference. Now an otherwise expensive dish seemed a bargain.

So why is the above relevant to the Overton Window? Well the restaurant shifted the reference point to a higher average price which forced you to settle with a price which, the chances are when seen in isolation would have looked very exorbitant. By forcing you to think in terms of higher prices, the restaurant makes you feel that the dish you buy is actually a bargain. Now think about politics, say there are grassroots movements and think tanks which are regularly advocating for a radical idea. At first the idea seems preposterous to you but with regular propaganda and advocacy, you come to start seeing the logic behind their arguments and start feeling that this is something which is now an acceptable idea. In other words, they have successfully shifted your frame of reference. Think about the Green New Deal, it proposes some very radical reforms in the American economy which may have seemed unthinkable for the broader American populace a few years back ( or even now) or the idea of Medicare for All which was pretty much unthinkable in the US a few years back but is now being debated in the mainstream. This did not happen in a day, in fact it took years for policy think tanks and radical congressmen to lead grassroots movements with people who advocate these positions. Slowly and gradually, there was a shift in the way people thought about these proposals. By proposing this and by pushing for it, the radical Congressmen in the Democratic party were forcing the American public to shift their frame of reference which would not have necessarily happened if the deal was not proposed. Not just the Democrats, think about Trump when he proposed to ban all muslims trying to enter the US. He ultimately did not ban all muslims but was able to successfully ban muslims from many nations. He was able to say and do the things he did because of years of conservative groundwork during the Obama years filled with misinformation, racism, and conspiracy theories. He knew he could do just about anything and not lose votes in 2016. He knew there was a shift in the window. Its not just an American phenomenon, think about Brexit, even 30 years back this would have seemed like a very fringe idea spoken about by drunk euroskeptics in English pubs. Now, for the staunch leave faction of the Conservative party, only a no-deal brexit will do. In our country, it can be argued that the ruling party with systemic and sustained campaigns have shifted the window which was reflected by their ability to enact previously unthinkable ideas like the Abolition of Article 370 and the construction of the Ram Mandir. In the past Indira Gandhi made equally radical leftward leaps like amending the preamble and nationalizing banks, thanks to the prevailing window during that time. This is why public attention is so valuable, it gives you a chance to shift people's frame of reference and as a result shift the Overton window.

It is interesting to note that the concept of Overton Window is nowadays incorrectly being interpreted as a political tactic where you suggest extreme proposals in order to shift public perceptions. But Overton never meant the concept to become a political maneuver, instead it was meant to be a description of something that exists in the real world and the understanding of it was vital for policy officials to enact real change. The psychology of framing enables us to understand how exactly the shift in the window happens and what mechanisms can be employed to make it shift.

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