Getting educated

I'm currently taking Dan Ariely's Coursera course on Irrationality (link). I'd been waiting for the course since last year and I have to say it was worth the wait. The production values for his videos are pretty high, he's funny and there's a lot to do on the site once you sign up. There is a lot of readings, and you get tested for reading comprehension and retention - apart from the lecture video quizzes. I don't mind though, since a lot of the information is eye-opening. The thing that's really jumping out at me is the concept of "coherent arbitrariness." The idea is that while we're very good at judging the relative value of things, we kind of suck sometimes when trying to construct the baseline on which those relative value judgements are based on. In fact, they could even be influenced by completely unrelated and inconsequential factors - think the weather when you're visiting a prospective college you're thinking of joining, for example. And the scary fact is once that first choice is set, we tend to base future decisions that share a connection with that first choice on the thing that we chose. In my case, I had the choice when applying for my first JLPT exam to go for the N5 or N4 level; N5 was a cakewalk while N4 would be substantially harder. I chose the N4 level and failed that exam, and I again failed the N4 exam the next year. All that grief and wasted resources and no certificate to show for it - I remember rationalizing to myself before all this started that N5 was common since most people in my school were going to go for it, so I should go for N4. Except now that I'm taking the Irrationality class I realize that since the level had a "4" in it and 4 is my favorite number, it may be that I chose the N4 because there was a four in the title.

Week 1 also had a discussion on defaults and how this can change how we perceive things as well as the decisions that we make. It resonates with me since when I passed the entrance exam for the college I took I managed to qualify for two scholarships. Taking them came with the restriction that I had to choose my major from a list of subjects. I'd initially wanted Psychology, but it wasn't in the list. Not taking the scholarship would have been a financial blow, not to mention the phone calls and notifications that would need to be sent. There was also an appeal to being chosen as a scholar, and giving up the scholarship would have meant turning my back on that state of being "special." Plus there were so many discussions and arguments with my parents since they wanted me to take a course in the approved list. I eventually capitulated and went for the default. Let me just say that was the worst decision of my life so far, and I think my life would be very different today if it hadn't been for that first choice.

This is why I recommend everybody take this course - and while we're at it, study rationality and decision theory and game theory and scientific thinking and mathematical thinking as well. Why this isn't being taught in grade school is beyond me.

By the way, below are some summaries of the takeaways from two papers in the required readings for the course's first week that I made. Just to whet people's appetite, and to make sure that I have a handy place to  get them from in case my computer croaks.

How actions create – not just reveal – preferences
People do not have on-demand knowledge of their preferences; these preferences have to be constructed every time one makes a decision. The construction process is not perfect. The mind takes in contextual information, it might rely on memories of actions that are devoid of their initial context. The present state of mind of the person, any consequential event that occurs that may trigger any of the mind's heuristics can derail the proper accounting of a decision's benefits and costs. And once this decision is made, it becomes a precedent for decisions that run along the same lines. We then have a situation where a person's life may be influenced by entirely unsound judgments. An example lies in how people do not deviate much from an   arbitrarily assigned number when placing bids for items in an auction.

Tom Sawyer and the construction of value
Although individuals have the intuition that more of a good means that they either must pay more or be paid more for it, they do not have a fundamental grasp on the value of the good in question. The perceived value of the good changes depending on how it is presented - a good that is to be paid for suddenly becoming free will be seen as valuable by more people than if the same good was initially paying off others then suddenly becoming free. There is great uncertainty about the value of something, and people tend to act sensibly instead of according to a grasp of that value. This raises serious problems with mainstream economic models. In coherent arbitrariness, coherence depends on whether the value to be changed is quantifiable, the closeness of the decision to the first decision, and whether the current decision is overtly similar to the initial decision. Arbitrariness depends on the ambiguity of value.