# framing effect

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 pages: 254 words: 72,929 The Age of the Infovore: Succeeding in the Information Economy by Tyler Cowen Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr The web is strengthening the aspects of your identity that are fact-based and easy to spell out in very direct language. Finally, framing effects are more important than ever before. Some experiences, and some goods and services, are more subject to framing effects than others. If someone shoots you in the heart with a bullet, framing effects probably don’t much matter. You’re going to die, and if you survive the immediate impact it’s going to be unpleasant, no matter what your attitude. If you give a hungry man food, he is going to enjoy it no matter how it is framed; Cicero wrote, “Hunger is the best sauce.” The more visceral the experience, the less likely it is that framing effects will make a big difference for your pain or enjoyment. This means that wealthy, secure societies offer greater scope for framing effects, and in particular they offer greater scope for beneficial framing effects. Competition gives you the chance to construct the whirlwind of influences that you most prefer. … When Rhapsody announced a total reorganization of its service in June 2008, it pointed in the direction of the iTunes/iPod experience. Behavioral economists sometimes write of human beings as subject to “framing effects,” meaning that the presentation of the alternatives influences our choices. For instance we often choose more conservatively if the very same opportunity is described to us as a gain of something rather than as a loss of something. Or the presence of a very-high-calorie item on a menu—which we don’t order—makes us feel less guilty about later getting dessert. Usually the presumption is that framing effects are to be avoided. To be sure, many framing effects are irrational but framing effects help put the guts into our lives. We spend time and energy framing things in the right way so that we can enjoy them more or learn more from them. … You can follow only your five dearest friends on Twitter or send text messages to only your immediate family. Facebook isn’t the only framing device out there and you can direct your attention elsewhere to offset any unwanted biases of Facebook. Framing effects are not just one-off influences but rather we choose them from a broad portfolio of options. We mix and match framing effects as we see fit, and so it is again a mistake to focus on the cognitive biases uncovered in stand-alone experiments under lab conditions. If there is any important bias in human affairs, it is again the überbias of choosing which framing effects to enjoy. When it comes to friendship, I’m not so worried that people will choose the framing effects that make all their close friends go away. Again, a networked world is very often an intimate world. I once met a guy who had so many “friending” services (it seemed he had as many services as some people have friends) that he constructed an entire web page to organize them. pages: 339 words: 105,938 The Skeptical Economist: Revealing the Ethics Inside Economics by Jonathan Aldred Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr For example, the options between which we choose are not as clear-cut or objective as economic theory implies. Essentially the same set of options can be perceived very differently, leading to completely different choices, due to framing effects, so-called because they concern the context or frame through which a person perceives a decision. A box of Razzle Dazzle can be perceived as expensive (if we remember that it cost less a month ago) or cheap (if the retailer displays it as being on ‘special offer’). You may feel confident that you are not fooled by such simple retailing ploys (you always ignore ‘special offer’ claims when assessing price) but framing effects are pervasive and not always so obvious. Framing effects: Two examples Merely because an option is framed as the default option - one that will be selected unless the chooser actively decides otherwise - it is much more likely to be ‘chosen', even when the decision is important. … We all know the danger of buying more food than intended when shopping on an empty stomach, a danger confirmed by psychological evidence.10 Similarly, catalogue shoppers ordering by telephone seem overly influenced by the current weather: warm clothes ordered on cold days are more likely to be returned later.11 And many people join gyms and health clubs which they subsequently rarely use, because at the time of joining they focus on the health benefits, rather than how they will feel in the future when visiting the gym.12 A form of framing effect also distorts our predictions of future satisfaction. Suppose you are trying to decide between two equally expensive pairs of stereo speakers. In the audio shop, you will probably put great weight on which sounds better, and purchase on that basis, even though the differences are likely to be small. Unfortunately, at home you realize that you care more about the speakers’ appearance, because the marginally superior sound quality is undetectable in isolation.13 The context of choice in the shop leads us to put too much weight on an attribute which we later find less important. … Suppose I had a choice: should I minimize the pain experienced during the colonoscopy procedure itself, or should I choose the option which, although it involves additional discomfort at the time, will make me feel happier about the whole experience shortly afterwards, and less fearful of follow-up operations? Self-interest is also far from clear in the theatre example discussed earlier. Economic theory prescribes that we should reach the same decision about whether to see the show, regardless of whether we discover outside that we have lost $40 cash or a$40 ticket. We are supposed to choose solely on the basis of the material benefits and costs involved, and not be influenced by framing effects, the context of the choice. Does our self-interest demand this type of ‘consistency’? Context matters. Even if the net financial impacts in two situations are identical, most of us distinguish them. Losing $40 cash is seen as one of life’s minor misfortunes that inevitably befall us, with no implications for whether we see the show. But having to buy a replacement for a lost$40 ticket means that it will effectively cost $80 to go in, a price that may deter us. pages: 190 words: 53,409 Success and Luck: Good Fortune and the Myth of Meritocracy by Robert H. Frank Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr EACH PERSON’S SPENDING DEPENDS IN PART ON WHAT OTHERS SPEND. Standard economic models assume that each person’s spending is completely independent of what others spend. But if framing effects matter, that can’t be right. People spend more when their friends and neighbors spend more. This isn’t some fantastic new discovery. It’s a dynamic we’ve known about since the dawn of time. Many have called it “keeping up with the Joneses.” But I’ve never liked that expression, because it summons images of insecure people trying to appear wealthier than they are. Peer influences would in fact be just as strong in a world completely free of jealousy and envy. Rising inequality has made framing effects stronger. The median new house in the United States is now 50 percent larger than it was in 1980, even though the median income has grown only slightly in real terms. … Few behavioral scientists would deny that our surroundings shape what we feel we need. But the profound implications of that simple fact have largely escaped the attention of economists and have not yet been fully grasped by behavioral scientists in other disciplines. If those implications are any clearer to me, it’s only because having lived for two years in one of the world’s poorest countries led me to focus so intently on these “framing effects” during the ensuing decades. Sticking with my write-what-you-know theme, the most striking lesson of my experience in Nepal was that despite the dramatically lower material living standards there, my experience of day-to-day life was astonishingly similar to what I’d been used to. When I write, for example, that the same two-room house with no plumbing or electricity that seemed completely satisfactory to me there would seem shamefully inadequate in any American middle-class neighborhood, I’m merely writing what I know. … Similarly, the fact that the average American wedding now costs more than$30,000,10 almost three times as much as in 1980, doesn’t appear to have made today’s marrying couples any happier. According to one recent study, however, it appears to have made them more likely to divorce.11 The economists Andrew Francis and Hugo Mialon estimated, for example, that couples who spent more than $20,000 on their weddings were more than 12 percent more likely to divorce during any given year than were those who spent between$5,000 and $10,000. Framing effects have spawned waste in a second way by creating a powerful bias in favor of private consumption over public investment. The basic idea is captured in a simple example involving cars and highways. Everyone agrees that cars would be of little use without roads and that roads would be of little use without cars. What’s harder is to identify the best mix of the two categories. It’s fairly easy, however, to see that the current mix in the United States is far from optimal, at least from the perspective of wealthy drivers. pages: 654 words: 191,864 Thinking, Fast and Slow by Daniel Kahneman Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr An article published in 2003 noted that the rate of organ donation was close to 100% in Austria but only 12% in Germany, 86% in Sweden but only 4% in Denmark. These enormous differences are a framing effect, which is caused by the format of the critical question. The high-donation countries have an opt out form, where individuals who wish not to donate must check an appropriate box. Unless they take this simple action, they are considered willing donors. The low-contribution countries have an opt-in form: you must check a box to become a donor. That is all. The best single predictor of whether or not people will donate their organs is the designation of the default option that will be adopted without having to check a box. Unlike other framing effects that have been traced to features of System 1, the organ donation effect is best explained by the laziness of System 2. … The focus of part 4 is a conversation with the discipline of economics on the nature of decision making and on the assumption that economic agents are rational. This section of the book provides a current view, informed by the two-system model, of the key concepts of prospect theory, the model of choice that Amos and I published in 1979. Subsequent chapters address several ways human choices deviate from the rules of rationality. I deal with the unfortunate tendency to treat problems in isolation, and with framing effects, where decisions are shaped by inconsequential features of choice problems. These observations, which are readily explained by the features of System 1, present a deep challenge to the rationality assumption favored in standard economics. Part 5 describes recent research that has introduced a distinction between two selves, the experiencing self and the remembering self, which do not have the same interests. … I return to the virtues of educating gossip and to what organizations might do to improve the quality of judgments and decisions that are made on their behalf. Two articles I wrote with Amos are reproduced as appendixes to the book. The first is the review of judgment under uncertainty that I described earlier. The second, published in 1984, summarizes prospect theory as well as our studies of framing effects. The articles present the contributions that were cited by the Nobel committee—and you may be surprised by how simple they are. Reading them will give you a sense of how much we knew a long time ago, and also of how much we have learned in recent decades. Part 1 Two Systems The Characters of the Story To observe your mind in automatic mode, glance at the image below. Figure 1 Your experience as you look at the woman’s face seamlessly combines what we normally call seeing and intuitive thinking. Infotopia: How Many Minds Produce Knowledge by Cass R. Sunstein Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr Use of the availability heuristic is not irrational, but it can easily lead to serious errors of fact. After the 2005 disaster produced by Hurricane Katrina in the United States, it was predictable that significant steps would be taken to prepare for hurricanes—and also predictable that before that disaster, such steps would be quite inadequate. 76 / Infotopia Most people are also strikingly vulnerable to framing effects, making different decisions depending on the wording of the problem. Consider the question whether to undergo a risky medical procedure. When people are told, “Of those who have this procedure, 90 percent are alive after five years,” they are far more likely to agree to the procedure than when they are told, “Of those who have this procedure, 10 percent are dead after five years.”5 People also follow the representativeness heuristic, in accordance with which our judgments of probability are influenced by assessments of resemblance: the extent to which A “looks like” B.6 If A does indeed look like B, we are more likely to think that A causes B, or vice versa. … by placing him at the scene of the crime; perhaps the jury’s bias is a product of the unappealing physical appearance of the defendant (not a famous movie star). If so, the many minds on the jury are likely to amplify rather than to correct those biases.9 Deliberating groups have also been found to amplify, rather than to attenuate, reliance on the representativeness heuristic.10 Such groups fall prey to even larger framing effects than individuals, so that when the same situation is described in different terms, groups are especially likely to be affected by the redescriptions.11 Groups show more overconfidence than group members;12 78 / Infotopia they are even more affected by the biasing effect of bad arguments from lawyers.13 In an especially revealing finding, groups have been found to make more, rather than fewer, conjunction errors (believing that A and B are more likely to be true than A alone) than individuals when individual error rates are high—though fewer when individual error rates are low.14 Groups do demonstrate a decreased level of reliance on the availability heuristic, but the decrease is slight, even when use of that heuristic leads to clear errors.15 Here’s a disturbing finding, one with great relevance to group behavior in both politics and business: Groups are more likely than individuals to escalate their commitment to a course of action that is failing—and all the more so if members identify strongly with the groups of which they are a part.16 There is a clue here about why companies, states, and even nations often continue with projects and plans that are clearly going awry. … See Amos Tversky and Daniel Kahneman, “Availability: A Heuristic for Judging Frequency and Probability,” Cognitive Psychology 5 (1973): 208 (discussing availability heuristic). 3. Paul Slovic, The Perception of Risk (London: Earthscan Publications, 2000), 37–48. Notes to Pages 70–76 / 241 4. Ibid., 40. 5. See Donald A. Redelmeier et al., “Understanding Patients’ Decisions: Cognitive and Emotional Perspectives,” Journal of the American Medical Association 270 (1993): 73 (discussing framing effects in medical context). 6. Amos Tversky and Daniel Kahneman, “Extensional versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment,” in Gilovich et al., Heuristics and Biases, 19, 22–25 (discussing representativeness). 7. See Amos Tversky and Daniel Kahneman, “Judgment under Uncertainty: Heuristics and Biases,” in Judgment under Uncertainty: Heuristics and Biases, ed. Daniel Kahneman, Paul Slovic, and Amos Tversky (Cambridge, UK: Cambridge University Press, 1982), 11–12; Barbara Mellers et al., “Do Frequency Representations Eliminate Conjunction Effects? pages: 168 words: 46,194 Why Nudge?: The Politics of Libertarian Paternalism by Cass R. Sunstein Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr If people face a five-cent tax for using a plastic bag (a loss), they are much more likely to be affected than if they are given a five-cent bonus (a gain) for bringing their own bag.8 In response to questions, people persistently show both framing effects and loss aversion. (There is a nice lesson here for policymakers. If you want to have an impact, choose effective frames and enlist loss aversion. Is it paternalistic for policymakers to heed that lesson? Before you answer “yes,” note that some kind of framing is inevitable.) Now assume that people are answering those same questions in a foreign language—that is, a language that they speak, but in which they are not entirely comfortable. Here is the key finding: It turns out that they do not show either framing effects or loss aversion.9 Asked to resolve problems in a language that is not their own, people are less likely to depart from standard accounts of rationality. pages: 247 words: 62,845 VoIP Telephony with Asterisk by Unknown Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr Signals are sent with a"Robbed Bit" bit:8 of each channel's time slot is "robbed" to indicate a signaling state in the 6th and 12th frames. Effective throughput for the A signaling bit (Frame Â 6) is 666.66 BPS. Effective throughput for the B signaling bit (Frame 12) is the same (666.66 BPS). An Extended Superframe consists of twenty-four 193-bit frames. There are three types of framing bits; Frame Pattern Sync (FPS), Datalink (DL), and CyclicRedundancy Check (CRC) bits. Of the 8 kbs framing bit bandwidth 4 kbs is allocated to the Datalink, 2 kbs is allocated to the CRC-6 characte and 2 kbs is used for synchronization purpose ESF (Extended Superframe Signaling) uses a "Robbed Bit" Each channel's timeslot is "robbed" to create a signaling in the 6th, 12th, 18th, and 24th frames. Effective throughput for the A signaling bit (Frame 6) is 333.33 BPS. Effective throughput for the B, C and D bits is the same (333.33 BPS) Using T Carrier Channels for Telephone Calls After your T1 provider drops the T1 into your premises, they may then hand you a CSU/DSU or a router. pages: 310 words: 82,592 Never Split the Difference: Negotiating as if Your Life Depended on It by Chris Voss, Tahl Raz Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr This mentality baffled Kahneman, who from years in psychology knew that, in his words, “[I]t is self-evident that people are neither fully rational nor completely selfish, and that their tastes are anything but stable.” Through decades of research with Tversky, Kahneman proved that humans all suffer from Cognitive Bias, that is, unconscious—and irrational—brain processes that literally distort the way we see the world. Kahneman and Tversky discovered more than 150 of them. There’s the Framing Effect, which demonstrates that people respond differently to the same choice depending on how it is framed (people place greater value on moving from 90 percent to 100 percent—high probability to certainty—than from 45 percent to 55 percent, even though they’re both ten percentage points). Prospect Theory explains why we take unwarranted risks in the face of uncertain losses. And the most famous is Loss Aversion, which shows how people are statistically more likely to act to avert a loss than to achieve an equal gain. … Martin Parish, Louisiana, 162–63 Rule of Three and, 177–78 fairness, 20, 139 compromise as a bad deal, 115–16, 139 contract for Robin Williams in Aladdin and, 123 error in using, 183 Iranian sanctions and, 123–24 NFL lockout and, 125 Ultimatum Game, 120–23 Voss’s use of, 125–26 when and how to use in negotiation, 124–26 why it’s powerful, 122–24 falsehoods and liars, 172, 173, 176 number of words used, 178 Pinocchio effect, 178 Rule of Three and, 177–78, 186 use of pronouns, 178 fear amygdala and, 55, 61, 62, 243 labeling and calming, 61, 63, 64, 67, 73 of negotiating, 242 Federal Bureau of Investigation (FBI) Ackerman system, 21 “country clearance,” 58 Crisis Negotiation Teams, 49–51, 76–77, 86–87 crisis negotiation techniques, 4–5, 13–16, 141, 149, 165, 166, 167, 170, 174 Crisis Negotiation Unit (CNU), 96–97, 170 Critical Incident Response Group (CIRG), 14 Giffe hijacking hostages, mishandling of, 9–10 Hostage Rescue Team (HRT), 96 Joint Terrorism Task Force (JTTF), 24, 76, 77–78, 98 kidnapping negotiations, 141 number of agents, 1 Quantico, 96, 164, 173, 216 Ruby Ridge, Waco, and negotiation approach, 13–14 Supervisory Special Agent (SSA), 96 SWAT teams, 49, 76 Voss as a SSA with the CNU, 96 Voss as international kidnapping negotiator, 1, 98, 164 Voss begins career with, 76 Voss begins negotiator career at, 85 Voss on the JTTF, New York, 76, 77–78, 98 Fields, W. C., 178 financial negotiations. See also bargaining car-buying, 119, 188–90, 243 Chris discount, 180 getting a rent cut, 208–11 getting your counterparts to bid against themselves and, 181–85 MBA student and soliciting funds, 200–201 Fisher, Roger, 10–11, 252 Fooled by Randomness (Taleb), 215 framing effect, 12, 20 Freeh, Louis, 14 fundraising, 89–91 Gaddafi, Muammar, 99–100 Getting to Yes (Fisher and Ury), 11, 13, 14, 16, 20, 80, 98, 252 Giffe, George, Jr., 9–10 goals/outcome goals, 12, 52, 81, 95, 112, 160, 170, 174, 201, 211, 240, 242, 243 Ackerman model and, 206, 208 agreement or “yes” as, 94 ascertaining counterpart’s, 28, 231 bargaining styles and, 193, 195, 196 BATNA and, 252 best/worst range, 69, 253 extracting information as, 25, 47, 110, 147 four steps for setting, 253–54 human connection as, 72 Negotiation One Sheet, 252–54 win-win or compromise, 115, 116, 253 Griffin, William, 213–14, 216–17, 235, 244 Haiti as kidnap capital, 113–14 kidnapping case, 113–15, 133–35, 207–8 Harvard Negotiation Research Project, 2, 10–11 Harvard University, 4 executive negotiating course, 1, 5–8 Heen, Sheila, 5–6, 7 HelpLine, 81 “CareFronting,” 82, 84 Voss answering phones for, 81–84, 85 Heymann, Philip B., 14 hostage mentality, 159 hostage negotiation. pages: 412 words: 115,266 The Moral Landscape: How Science Can Determine Human Values by Sam Harris Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr But we do not merely fail—we fail reliably. We can, in other words, use reason to understand, quantify, and predict our violations of its norms. This has moral implications. We know, for instance, that the choice to undergo a risky medical procedure will be heavily influenced by whether its possible outcomes are framed in terms of survival rates or mortality rates. We know, in fact, that this framing effect is no less pronounced among doctors than among patients.74 Given this knowledge, physicians have a moral obligation to handle medical statistics in ways that minimize unconscious bias. Otherwise, they cannot help but inadvertently manipulate both their patients and one another, guaranteeing that some of the most important decisions in life will be unprincipled.75 Admittedly, it is difficult to know how we should treat all of the variables that influence our judgment about ethical norms. … If my next drive down the highway were guaranteed to deliver a cure for cancer, I would consider it the most ethically important act of my life. No doubt the role that probability is playing here could be experimentally calibrated. We could ask subjects whether they would impose a 50 percent chance of death upon two innocent people, a 10 percent chance on ten innocent people, etc. How we should view the role that probability plays in our moral judgments is not clear, however. It seems difficult to imagine ever fully escaping such framing effects. Science has long been in the values business. Despite a widespread belief to the contrary, scientific validity is not the result of scientists abstaining from making value judgments; rather, scientific validity is the result of scientists making their best effort to value principles of reasoning that link their beliefs to reality, through reliable chains of evidence and argument. This is how norms of rational thought are made effective. pages: 311 words: 130,761 Framing Class: Media Representations of Wealth and Poverty in America by Diana Elizabeth Kendall Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr VH1’s The Fabulous Life is an excellent example; in it the prices of a celebrity’s lavish possessions pop up on the TV screen as the story of the well-known individual’s life unfolds. Viewers get the “inside scoop” on the cost of birthday celebrations, clothes, residences, and private jet travel. The price of each item is carefully put into perspective for middle- and lower-class viewers. THE TWENTY-FOUR-KARAT GOLD FRAME: EFFECTS OF FRAMING THE WEALTHY The media’s framing of stories about the wealthy influences the opinions of people in other classes. Lacking personal encounters with extremely wealthy individuals, people in the middle, working, and poor classes look to the media for an insider’s view of how the “other half” lives. Television programs such as E!, Entertainment Tonight, Inside Edition, and Access Hollywood promise to take viewers behind the scenes to learn what goes on in the lives of the rich and famous. … If, however, the media present these middle-class problems as a form of victimization, the blame shifts to corporations and government officials. Even the poor and homeless may be portrayed as infringing on the rights and property of the middle class. As political scientist Shanto Iyengar states with regard to the media framing of poverty, “While there is as yet no well-developed theory of framing effects, it seems quite likely that these effects occur because the terms or ‘frames’ embodied by a stimulus subtly direct attention to particular reference points or considerations.”144 Similarly, 9781442202238.print.indb 206 2/10/11 10:47 AM Splintered Wooden Frames 207 media framing of stories about the middle class also directs audiences’ attention to particular reference points and considerations. pages: 199 words: 43,653 Hooked: How to Build Habit-Forming Products by Nir Eyal Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr For an example of how perception of a limited supply can increase sales, look no further than Amazon.com. My recent search for a DVD revealed there were “only 14 left in stock” (figure 18), while a search for a book I’ve had my eye on says only three copies remain. Is the world’s largest online retailer almost sold out of nearly everything I want to buy or are they using the scarcity heuristic to influence my buying behavior? Figure 18 - “Only 14 left in stock”? The Framing Effect Context also shapes perception. In a social experiment, world-class violinist Joshua Bell decided to play a free impromptu concert in a Washington, DC subway station. [lxiv] Bell regularly sells out venues such as the Kennedy Center and Carnegie Hall for hundreds of dollars per ticket, but when placed in the context of the DC subway, his music fell upon deaf ears. Almost nobody knew they were walking past one of the most talented musicians in the world. pages: 241 words: 75,516 The Paradox of Choice: Why More Is Less by Barry Schwartz Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr Call this effect framing The classic paper on framing is D. Kahneman and A. Tversky, “Choices, Values, and Frames,” American Psychologist, 1984, 39, 341–350. Many other examples are collected in D. Kahneman and A. Tversky (eds.), Choices, Values, and Frames (New York: Cambridge University Press, 2000). In sum, just how well The relation between framing and subjective experience is well discussed by D. Frisch, “Reasons for Framing Effects,” Organizational Behavior and Human Decision Processes, 1993, 54, 399–429. we give disproportionate weight A.J. Sanford, N. Fay, A. Stewart, and L. Moxey, “Perspective in Statements of Quantity, with Implications for Consumer Psychology,” Psychological Science, 2002, 13, 130–134. Or suppose you are Many examples of phenomena discussed in this section can be found in articles collected in D. pages: 252 words: 73,131 The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr Ross’s innovation was to reframe the prisoners’ dilemma as either the Wall Street game or the community game. The payoffs—and so the incentives to defect or cooperate—were identical. All that differed was that subjects were cued to think they were either Wall Street traders or community builders. Outside observers of the experiment predicted that the defection rates would be virtually identical for both versions of the game.6 But the framing effect was shockingly large. Those randomly assigned to play the Wall Street game defected nearly 70 percent of the time, more than twice as often as those in the community game. Ross and his colleagues also recorded what participants expected their partners would do, and in the Wall Street game, subjects defected in large part because they expected their partners were about to do the same. More than we ever imagined, the situation trumped the individual. pages: 580 words: 168,476 The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr Know Your Values and Frame the Debate (White River Junction, VT: Chelsea Green, 2004). 11. This is called the anchoring effect. See discussions of anchoring and framing effects on judgments and preferences in Daniel Kahneman, Paul Slovic, and Amos Tversky, eds., Judgment under Uncertainty: Heuristics and Biases (Cambridge: Cambridge University Press, 1982); and Daniel Kahneman and Amos Tversky, eds., Choices, Values and Frames (New York: Cambridge University Press, 2000). For a popular and recent discussion, see Daniel Kahneman, Thinking, Fast and Slow (New York: Farrar, Straus and Giroux, 2011); and Richard Thaler and Cass Sunstein, Nudge: Improving Decisions about Health, Wealth, and Happiness (New Haven and London: Yale University Press, 2008). 12. See the discussion of framing effects in the case of the introduction of lifecycle funds in U.S. 401(k) plans in Ning Tang, Olivia S. pages: 1,088 words: 228,743 Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr The authors stress that investors only overweight salient low-probability events—a point that may resolve the tension between PT and the idea that blackswan-type low-probability events, events that investors think are nigh impossible or do not think about at all, are underweighted. PT itself does not generate many testable predictions. It needs to be combined with other assumptions, such as narrow framing or the house money effect (as discussed below). Figure 6.1. Prospect theory’s value function and probability-weighting function (stylized forms). Framing effects One feature of PT preferences is that people derive decision utility from the gains and losses of a single trade. Ignoring the rest of wealth implies narrow framing. Narrow framing involves analyzing problems in too isolated a fashion. It can be caused by the fact that our cognitive resources are limited. Evaluating each trade on a standalone basis is easier and may be more natural than assessing it by its contribution to our total portfolio, as modern portfolio theory prescribes. … forward premium puzzle forward rate bias forward rate curve (C-P BRP) forward-looking asset return measures building block approaches carry strategies value strategies forward-looking indicators asset class real yields carry strategies contrarian approach historical records market mispricing shortcomings time-varying risk premia value strategies forward-looking measures asset returns carry strategies DDM ERP long-term returns value measures framing effects, PT French, Kenneth R. see also Fama—French front-end trading fund of funds (FoF) fundamental indices funding liquidity funding rate spreads, CRP future trends rise of China deflation effect of 2007—2008 crisis emerging markets inflation nextyears risky assets sovereign creditworthiness futures, commodity FX see foreign exchange G10 currencies cross-asset selection models currency carry FX markets see also currency . . . pages: 304 words: 22,886 Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler, Cass R. Sunstein Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr If you’re like most people, the doctor’s statement will sound pretty alarming, and you might not have the operation. The Automatic System thinks: “A significant number of people are dead, and I might be one of them!” In numerous experiments, people react very differently to the information that “ninety of one hundred are alive” than to the information that “ten of one hundred are dead”—even though the content of the two statements is exactly the same. Even experts are subject to framing effects. When doctors are told that “ninety of one hundred are alive,” they are more likely to recommend the operation than if told that “ten of one hundred are dead.”14 Framing matters in many domains. When credit cards started to become popular forms of payment in the 1970s, some retail merchants wanted to charge different prices to their cash and credit card customers. (Credit card companies typically charge retailers 1 percent of each sale.) pages: 327 words: 103,336 Everything Is Obvious: *Once You Know the Answer by Duncan J. Watts Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr See North et al. (1997) for details on the wine study, Berger and Fitzsimons (2008) for the study on Gatorade, and Mandel and Johnson (2002) for the online shopping study. See Bargh et al. (1996) for other examples of priming. 12. For more details and examples of anchoring and adjustment, see Chapman and Johnson (1994), Ariely et al. (2003), and Tversky and Kahneman (1974). 13. See Griffin et al. (2005) and Bettman et al. (1998) for examples of framing effects on consumer behavior. See Payne, Bettman, and Johnson (1992) for a discussion of what they call constructive preferences, including preference reversal. 14. See Tversky and Kahneman (1974) for a discussion of “availability bias.” See Gilbert (2006) for a discussion of what he calls “presentism.” See Bargh and Chartrand (1999) and Schwarz (2004) for more on the importance of “fluency.” 15. pages: 353 words: 101,130 Schild's Ladder by Greg Egan Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr "I don't think it's one creature," Tchicaya said. "I think we've found an oasis in the desert." The shadow now dominated the view completely, a sight as overwhelming as the border from Pachner, but its exact form remained elusive. "We have to get those probes to go faster," Mariama complained. A tiny patch of color and detail appeared suddenly at the center of the object, spreading slowly through the grayness. The framing effect was confusing; Tchicaya found it harder than ever to interpret the probe image. Things that might have been xennobes were moving around on a roughly spherical surface; the scape labeled them as being hundreds of times larger than the rabbits, but they looked like mites crawling over an elephant. The scale of the structure was extraordinary; if an airflower was the size of a daisy, this was a floating mountain, an asteroid. pages: 324 words: 87,064 Learning Ext Js by Shea Frederick Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr The simplest way of using it is without arguments: Ext.get('target').frame(); This causes the target element to radiate a single light blue ping to draw attention to the element, which may be useful in some scenarios. However, to make sure that the user knows about a more important event, we could use something like this: Ext.get('target').frame('ff0000', 3); The first argument is the hexadecimal color of the framing effect, in this case, an angry red. The second argument specifies the number of times the ping is to be repeated. So here, we're using three red pulses to indicate that something pretty bad is about to happen. These are the real strengths of the frame method: repetition, and the ability to use different colors to represent different situations and priorities. Woooo: ghosting Ghosts!-or rather ghosting—this is the term Ext JS gives to fading an element while it moves in a specified direction. pages: 292 words: 94,324 How Doctors Think by Jerome Groopman Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr is now the question you or your loved one should ask the physician. The cognitive mistakes that account for most misdiagnoses are not recognized by physicians; they largely reside below the level of conscious thinking. When you or your loved one asks simply, "What else could it be?" you help bring closer to the surface the reality of uncertainty in medicine. "What else could it be?" is a key safeguard against these errors in thinking: premature closure, framing effect, availability from recent experience, the bias that the hoofbeats are horses and not zebras. Each cognitive error constrains the pursuit of answers, and correcting the error helps the doctor think of a test or procedure that he didn't previously consider and can make the diagnosis. "Is there anything that doesn't fit?" may be your next question. This follow-up should further prompt the physician to pause and let his mind roam more broadly. pages: 336 words: 113,519 The Undoing Project: A Friendship That Changed Our Minds by Michael Lewis Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr There he oversaw the Office of Information and Regulatory Affairs and made scores of small changes that had big effects on the daily lives of all Americans. The changes Sunstein made had a unifying theme: They sprang directly or indirectly from the work of Danny and Amos. You couldn’t say that Danny and Amos’s work led President Obama to ban federal employees from texting while driving, but it wasn’t hard to draw a line from their work to that act. The federal government now became sensitive to both loss aversion and framing effects: People didn’t choose between things, they chose between descriptions of things. The fuel labels on new automobiles went from listing only miles per gallon to including the number of gallons a car consumed every hundred miles. What used to be called the food pyramid became MyPlate, a graphic of a dinner plate with divisions for each of the five food groups, and it was suddenly easier for Americans to see what made for a healthy diet. pages: 416 words: 118,592 A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr A sure loss of$750. 2. A 75% chance to lose $1,000 and a 25% chance to lose nothing. Note that the expected values of the two alternatives are the same—that is, a loss of$750. But almost 90 percent of the subjects tested chose alternative (2), the gamble. In the face of sure losses, people seem to exhibit risk-seeking behavior. Kahneman and Tversky also discovered a related and important “framing” effect. The way choices are framed to the decision maker can lead to quite different outcomes. They posed the following problem. Imagine that the U.S. is preparing for the outbreak of an unusual Asian 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. pages: 402 words: 129,876 Bad Pharma: How Medicine Is Broken, and How We Can Fix It by Ben Goldacre Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr Study of Neurontin: Titrate to Effect, Profile of Safety (STEPS) Trial: A Narrative Account of a Gabapentin Seeding Trial. Arch Intern Med. 2011 Jun 27;171(12):1100–7. 35 I recommend this book as an introduction to ‘shared decision making’ (I helped on one chapter): Gigerenzer G, Muir G. Better Doctors, Better Patients, Better Decisions: Envisioning Health Care 2020. 1st ed. MIT Press; 2011. 36 Malenka DJ, Baron JA, Johansen S, Wahrenberger JW, Ross JM. The framing effect of relative and absolute risk. J Gen Intern Med. 1993 Oct;8(10):543–8. 37 Bucher HC, Weinbacher M, Gyr K. Influence of method of reporting study results on decision of physicians to prescribe drugs to lower cholesterol concentration. BMJ. 1994 Sep 24;309(6957):761–4. 38 Fahey T, Griffiths S, Peters TJ. Evidence based purchasing: understanding results of clinical trials and systematic reviews. pages: 401 words: 119,488 Smarter Faster Better: The Secrets of Being Productive in Life and Business by Charles Duhigg Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr question was framed In an email sent in response to fact-checking questions, the author of this study, Stephen Hoch, wrote: “The only other thing that I might add is that old ideas can get in the way of new ideas, creating interference and essentially blocking the thought process. One way to overcome the interference is to take a break so that the old ideas die down in terms of their salience.” hard to dislodge Irwin P. Levin, Sandra L. Schneider, and Gary J. Gaeth, “All Frames Are Not Created Equal: A Typology and Critical Analysis of Framing Effects,” Organizational Behavior and Human Decision Processes 76, no. 2 (1998): 149–88; Hilary A. Llewellyn-Thomas, M. June McGreal, and Elaine C. Thiel, “Cancer Patients’ Decision Making and Trial-Entry Preferences: The Effects of ‘Framing’ Information About Short-Term Toxicity and Long-Term Survival,” Medical Decision Making 15, no. 1 (1995): 4–12; David E. Bell, Howard Raiffa, and Amos Tversky, Decision Making: Descriptive, Normative, and Prescriptive Interactions (Cambridge: Cambridge University Press, 1988); Amos Tversky and Daniel Kahneman, “Rational Choice and the Framing of Decisions,” The Journal of Business 59, no. 4, part 2 (1986): S251–78. pages: 577 words: 149,554 The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey by Michael Huemer Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr For instance, whether I should break a promise depends upon whether my available alternatives would violate duties more stringent than the duty to keep that promise. 2 Courtois et al. 1999, part 1. 3 See Caplan n.d. for discussion of varieties of anarchism. For defenses of socialist anarchism, see Bakunin 1972; Kropotkin 2002. 4 See Tetlock 2005 on the difficulty of political prediction; but see also Caplan 2007a for a qualified defense of political experts. 5 For a sampling, see Tversky and Kahnemann 1986 on framing effects; Arkes and Blumer 1985 on the influence of sunk costs; Tversky 1969 on intransitive preferences; and the various papers in Kahneman et al. 1982 and Gilovich et al. 2002. 6 Philosophers often understand the principle of charity as the principle that, in interpreting others, one must ascribe mostly true beliefs to them (Davidson 1990, 129–30). In my view, the more fundamental principle is that one must ascribe mostly rational beliefs to others (see Huemer 2005, 159–61). Guide to LaTeX by Helmut Kopka, Patrick W. Daly Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr The opposite, a parbox within an LR box, is also possible, and is easy to visualize if one keeps in mind that every box is a unit, treated by LATEX as a single character of the corresponding size. A parbox inside an \fbox command has the effect that the entire parbox is framed. The present structure was made with \fbox{\fbox{\parbox{10cm}{A parbox...}}} This is a parbox of width 10 cm inside a framebox inside a second framebox, which thus produces the double framing effect. Enclosing a parbox inside a \raisebox allows vertical displacements of any desired amount. The two boxes here both have positioning [b], but the one at the right has been produced with: abcdefghi jklmnopqr \raisebox{1cm}{\begin{minipage}[b]{2.5cm} stuvwxyz a b c d e ... x y z\\ baseline \underline{baseline} \end{minipage} } which displaces it upwards by 1 cm. baseline A very useful structure is one in which minipage environments are positioned relative to one another inside an enclosing minipage. pages: 685 words: 203,949 The Organized Mind: Thinking Straight in the Age of Information Overload by Daniel J. Levitin Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr People are more likely to choose surgery in the first case and radiation in the second. In the first pair of scenarios, our attention is apparently drawn to the difference in five-year outcomes, where 34% are alive from surgery but only 22% from radiation. The framing of the second pair of scenarios apparently draws our attention to the difference in risk of the procedure itself: Radiation reduces the risk of immediate death from 10% to 0%. The framing effect was observed not just in patients but in experienced physicians and statistically sophisticated businesspeople. Another aspect of framing is that most of us are better with pictures than with raw numbers, one of the motivations for changing the university calculus curriculum to use graphic-based presentations of difficult material. One way that has been tried by doctors to help patients better understand risks is to display visually the various outcomes for a hypothetical group of 100 patients. pages: 687 words: 189,243 A Culture of Growth: The Origins of the Modern Economy by Joel Mokyr Amazon: amazon.com — amazon.co.uk — amazon.de — amazon.fr The historical evidence that coercion actually works at the level of values, based on the experience of political revolutions from the French to the Russian to the Iranian, is rather mixed. But clearly government-controlled entities, such as schools and the military, can reproduce certain elements of socialization including a belief in punctuality, discipline, temperance, and the virtuousness of obedience, hard work, and technology.9 Salient events bias: Highly dramatic and traumatic events can have a discontinuous effect on culture through powerful framing effects. Such catastrophes as the Black Death, the Holocaust, or 9/11 changed ideology and beliefs through their powerful challenge to existing beliefs. Such salient events are especially important for political ideology and the area of social “values” that pertain to the role of the state. Major and dramatic failures of the free market create more support for a regulated and managed economy (as happened in the industrialized West during the Great Depression of the 1930s), whereas major failures of a managed economy such as the former Soviet bloc increased ideological support for a free market economy both in the affected areas and in those competing with them.10 Biases should not be regarded as parametrically given; they are time-variant and historically contingent.