I recently discovered a delightful little book ‘The art of thinking clearly’ by the Swiss author, Rolf Dobelli. The name may be unfamiliar to you, but for anyone who has even a passing familiarity with the books of Nassim Nicholas Taleb (of ‘Black Swan’ fame) the content will not be.
Dobelli explores what are called ‘cognitive baises’. Simply, these are the systematic (and systemic) flaws in human reasoning and perception which prevent all of us from acting as the rational decision makers so beloved of current economic orthodoxy. Some biases are rules of thumb approaches to problems (sometimes called ‘heuristics’) which through repetition have become firmly embedded in our day to day lives and colour the way in which we see the world.
The book is not some weighty tome, but an A5 size collection of short (2 pages or so) essays on a particular flaw in human thinking. So far, so interesting – but so what?
Well, what particularly caught my eye was the exploration of what is called the ‘Availability bias’. This bias operates in such a way that we construct our picture, and understanding, of the world using the information or data which most easily comes to hand – not using the most relevant or appropriate data.
It can be seen in the doctor’s consulting rooms where favourite treatments might be prescribed for a particular condition (and become even more established in the doctor’s mind the more they use them) where there may be more appropriate, but more obscure, ones available.
As Dobelli points out, this bias also is very much alive and well in the business world – where boards of directors will spend much time and money in analysing historical performance, when the real challenges facing the business arise not from what has gone but from what is to come. This will bring a smile to the faces of those who criticise the accountancy profession as being obsessed with the past.
And, of course, the availability bias is fundamental to the way in which we discuss the economy. In particular our obsession with GDP data and its relevance to an assessment of the economic health of a nation. As regular readers will know, this is a favourite topic of this column. GDP is not some scientifically deduced absolute measure (-of something). It is run through with estimation and supposition. It first emerged in WW2 for the very specific use of measuring war production in the USA.
Now I know that some of you will see such criticisms of prevailing economic wisdom as not so very far from so much tree-hugging. But be careful in reaching such a snap decision (- another example of a bias). The ICAEW (not really regarded as a bastion of radical economic thought or ideology) has recently launched a consultation exercise on the very topic of the totemic status of GDP as a measure of progress:
|So what is Economic Success? Join the debate|
|ICAEW’s new project encourages us to go beyond GDP and profit, and consider the social and environmental dimensions of economic success.|
Perhaps we are slowly coming to realise what Bobby Kennedy pointed out in the mid-1960s, that GDP “.. measures everything, in short, except that which makes life worthwhile.”
(Oh. Why the title of Wrong Map? Because the availability bias suggests a metaphor of dropping any one of us in a strange city – we would prefer to have a clearly wrong map than none at all)