How Temporal Immediacy explains Behavioral Economics Findings

Behavioral economics research is an important source for Two Minds Theory.  Behavioral economics is notable for its proposal of bounded rationality, meaning that people do not always think logically because the Narrative System has limited capacity. Therefore, the Intuitive System makes many decisions (although in TMT we argue that the Intuitive system makes all decisions, behavioral economics suggests only that it makes many of them). To explain the operations of the Intuitive System, behavioral economics researchers have proposed a list of heuristics (mental shortcuts) and biases (perceptual errors). The exact content of this list varies depending on who is summarizing the literature.

Occam's razor is a thinking tool, which suggests that the simplest explanation for any phenomenon is usually the best. Simplicity is evident in many scientific advances, such as Mendelev's periodic table which reduced a long list of elements to just 2 basic principles — atomic weight and electron valence — that can be used to predict how any element interacts with any other. In this blog post, we argue that the long list of heuristics and biases can be reduced to a simpler principle, that of immediacy. The higher the level of immediacy in a given situation the more likely it is to elicit an Intuitive-System response, which will predictably focus on immediate stimuli and ignore abstract rules. The lower the level of immediacy the more likely the situation will produce a Narrative-System response, which will utilize logical reasoning to produce a response based on long-term goals and beliefs.

Here are a selection of biases and heuristics, explained based on TMT:

• Optimistic biases or self-serving biases occur when people rate their chances of future success much higher than the evidence would suggest. For instance, many people think that they can beat the average rate of return in the stock market by picking individual stocks, when they would be better off investing in an index fund with an average rate of return. Another example of optimistic bias is the planning fallacy, in which people predict that they will be able to exercise, diet, stop smoking, or otherwise control their behavior in the future to a much higher degree than they have in the past. TMT has a simple explanation for optimistic biases, which is that the Narrative System produces statements about the future (I will be able to diet, I will outperform the market), while the Intuitive System produces behavior in the moment that is influenced strongly by perceptions and emotions (that cupcake looks great right now, stocks are down and I'm going to sell to cut my losses). In TMT's view, optimistic biases are just another example of the intention-behavior gap that occurs when we look to the Narrative System for answers about how the Intuitive System is likely to behave.
• The affect heuristic is a tendency to estimate risks based on feelings rather than on data. If we dislike a behavior we tend to see it as very risky (e.g., people rate flying as riskier than driving when statistically the reverse is true). Conversely, when we like a behavior we see it as lower-risk (e.g., people tend to minimize the risks of behaviors that feel good, like smoking or having unprotected sex). What's interesting in this line of research is that the affect heuristic emerges only when we ask people to imagine actually performing the behavior -- putting them in a state where it feels more immediate. In a "cooler", more emotionally distant, less immediate formulation, people are much more able to state the correct levels of risk associated with each behavior. The affect heuristic is in fact just another way of saying that in situations with high immediacy people's behavior is determined by the Intuitive System, while in lower-immediacy situations involving abstract judgments they give a Narrative response. 
• The present-future empathy gap goes by various names, such as the intertemporal choice paradox, projection bias, or dynamic inconsistency. All of these terms mean that people make different choices in the moment than what they predict or wish that they would choose in the future. A similar concept is the hot-cold empathy gap in which people make different decisions when feeling emotional ("hot") than when feeling more relaxed and detached from the situation ("cool"). A good example of present-future gaps in health care is that people sometimes express preferences for end-of-life care in advance (e.g., "do everything you can for me") that are different from what they actually want in the moment (e.g., "I just want to be comfortable"). Similarly, people predict that some future consequence would be unendurable ("I couldn't live without the ability to see") but find when the event actually happens that there is a way to manage ("my life is different now, but mostly I feel OK"). Health care workers see these changes in perception and expectation constantly. They occur because the expectation of future events (less immediate, more abstract) is produced by the Narrative System, while immediate experiences and behaviors are generated by the Intuitive System.
• Status quo biases (also called the endowment effect or the preference for default options) are a way of saying that people find a bird in the hand to be worth two in the bush. The most commonly cited example of this paradox is that when students are given a $5 mug and a $5 bill, which were previously rated about equal in value, one would expect about half of the students to exchange one for the other. But in practice, almost no one actually does this -- students given a mug usually decide to keep the mug, and students given cash usually put in right into their wallet. Behavioral economists describe the overall pattern as one of "loss aversion," meaning that people prefer to keep what they have, but again this term is descriptive rather than explanatory. TMT suggests that this surprising finding occurs because the abstract preference (would you like a mug versus cash?) is generated by the Narrative System, but actually giving someone a mug or cash makes the situation much more immediate and engages the Intuitive System instead. The Intuitive System doesn't like change, and doesn't care that the Narrative System thought the theoretical values of the two items were the same. The actual behavior of “keep what’s yours” is produced by the Intuitive System.
• Perceived social norms are a component of many theories of health behavior, but are particularly highlighted in behavioral economics. This type of bias means simply that it's important to us that we do what other people are doing -- keeping up with the Joneses, not being the odd man out. The classic example of an intervention based on perceived social norms is a study of hotel towels. It found that the best way to get people to reuse their towels was not to tell them how much water it would save or how it would help the environment, but to tell them instead how many other hotel guests were re-using their towels. In this situation, the Narrative System is engaged earlier in the process -- we read an explanation about why we should re-use, before the actual decision point occurs. Even though the Intuitive System still makes the actual decision to hang up or drop the towel, the previously-established narrative becomes part of the data that the Intuitive System considers. It turns out that social imagination is one of the things our Narrative System is best at, so the narrative in this case is likely to be a particularly convincing one. The Intuitive System therefore weights the possible social rejection associated with not reusing towels to be more serious than the small inconvenience of hanging them up, and more often generates the desired towel-hanging response.

In our view, behavioral economists' lists of heuristics and biases describe what happens when people make unexpected decisions, but TMT explains why. Mendeleev was able to use his concepts of atomic weight and valence to predict the existence of new elements not previously discovered, and the principle of immediacy may have some of the same benefits. For instance, we would predict that people are more likely to study for a test immediately after an initial quiz calls their attention to how much they don't know, and less likely to study when simply told what content will be on the test. The initial quiz makes their lack of knowledge more immediate, and engages the Intuitive System to produce the desired behavior, while the less-immediate content list engages the Narrative System. This might make them more likely to say that they intend to study, but not lead to as many hours of actual studying. This specific example fits with our experience and ought to be empirically testable, but is not tied to any specific behavioral economics rule that we know of. If proven, it could be called the quiz effect or prior failure heuristic. 

A behavioral economist could argue that the proposed “quiz effect” is simply another instance of a known behavioral economic principle, like the affect heuristic. This seems reasonable, and is in fact the same argument as the one we propose above. Many phenomena that look different on the surface and have different labels are really the same phenomenon in different guises. From TMT’s point of view, it’s all about immediacy and whether a situation pulls for a Narrative or Intuitive response.