Kluge: The Haphazard Construction of the Human Mind (Houghton Mifflin; 2008)

The psychologist Robert Cialdini tells a story of a shopkeeper friend of his who was having trouble moving a certain set of necklaces. About to go away for vacation, this shopkeeper left a note for her employees, intending to tell them to cut the price in half. Her employees, who apparently had trouble reading the note, instead doubled the price. If the necklaces didn't budge at $100, you'd scarcely expect them to sell at $200. But that's exactly what happened; by the time the shopkeeper had returned, the whole inventory was gone. Customers were more likely to buy a particular necklace if it had a high price than if it had a low price — apparently because they were using list price (rather than intrinsic worth) as a proxy for value. From the perspective of economics, this is madness.

What's going on here? These last few examples should remind you of something we saw in the previous chapter: anchoring. When the value we set depends on irrelevancies like a shopkeeper's starting price as much as it does on an object's intrinsic value, anchoring has clearly cluttered our head.

Anchoring is such a basic part of human cognition that it extends not just to how we value puppies or material goods, but even to intangibles like life itself. One recent study, for example, asked people how much they would pay for safety improvements that would reduce the annual risk of automobile fatalities. Interviewers would start by asking interviewees whether they would be willing to pay some fairly low price, either £25 or £75. Perhaps because nobody wished to appear to be a selfish lout, answers were always in the affirmative. The fun came after: the experimenter would just keep pushing and pushing until he (or she) found a given subject's upper limit. When the experimenter started with £25 per year, subjects could be driven up to, on average, £149. In contrast, when the experimenter started at £75 per year, subjects tended to go up almost 40 percent higher to an average maximum of £232.

Indeed, virtually every choice that we make, economic or not, is, in some way or another, influenced by how the problem is posed. Consider, for example, the following scenario:

Imagine that the nation is preparing for the outbreak of an unusual disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimates of the consequences of the programs are as follows:

If Program A is adopted, 200 people will be saved.

If Program B is adopted, there is a one-third probability that 600 people will be saved and a two-thirds probability that no people will be saved.

Most people would choose Program A, not wanting to put all the lives at risk. But people's preferences flip if the same choices are instead posed this way:

If Program A is adopted, 400 people will die.

If Program B is adopted, there is a one-third probability that nobody will die and a two-thirds probability that 600 people will die.

"Saving 200 lives" for certain (out of 600) somehow seems like a good idea, whereas letting 400 die (out of the same 600) seems bad

— even though they represent exactly the same outcome. Only the wording of the question, what psychologists call framing, has been changed.

Politicians and advertisers take advantage of our susceptibility to framing all the time. A death tax sounds far more ominous than an inheritance tax, and a community that is described as having a crime rate of 3.7 percent is likely to get more resources than one that is described as 96.3 percent crime free.

Framing has the power that it does because choice, like belief, is inevitably mediated by memory. And, as we have already seen, the memory that evolution equipped us with is inherently and inevitably shaped by momentary contextual details. Change the context (here, the actual words used), and you often change the choice. "Death tax" summons thoughts of death, a fate that we all fear, whereas "inheritance tax" may make us think only of the truly wealthy, suggesting a tax scarcely relevant to the average taxpayer. "Crime rates" makes us think of crime; "crime-free rates" triggers thoughts of safety. What we think of — what we summon into memory as we come to a decision — often makes all the difference.

Indeed, the whole field of advertising is based on that premise: if a product brings pleasant associations to mind, no matter how irrelevant, you're more likely to buy it.*

One Chicago law firm recently put the power of memory and suggestion to the ultimate test, flogging not potato chips or beer but the dissolution of marriage. Their tool? A 48-foot-wide billboard made of three panels — the torso of an exceptionally attractive woman, breasts all but bursting out of her lacy black bra; the torso of a man no less handsome, shirtless, with his well-oiled muscles bulging; and, just above the law firm's name and contact information, a slogan containing just five words: LIFE's SHORT — GET A DIVORCE.