How much does context matter in decision-making and social inclusion?

Traditional economic analysis relies on the assumption that humans are self-interested and behave rationally, that is agents can analyze all the different outcomes of their choices and that they will always decide on the one that brings them the most benefit.

As we have all experienced, our decision-making process is not always methodical, but could, for instance, follow so called “rules of thumb”, or is heavily influenced by our social environment, rather than just our individual preferences.

Current behavioral findings show that much of our thinking is automatic, that it takes into account social preferences and norms and that it relies on mental models – e.g., stereotypes, worldviews shared by our communities. In other words, our decisions are influenced by our context and not only by economic factors.

For example, research shows that there are important differences whether our decisions are taken in a context of abundance or scarcity. Considering “brain power” as a finite resource, evidence suggests that disadvantaged individuals need to use a large part of their cognitive function to face everyday poverty-related difficulties, such as making ends meet.

While disadvantaged individuals can be more efficient in the use of their assets than those who are better-off, they also have fewer “mental resources” available for education or other areas of life that could help them to improve their situation.

For this reason, poverty has been considered a “cognitive tax ». In some experiments it has been estimated that being under financial pressure entails an average loss of 13 points in IQ, which is equivalent to loosing a full night sleep.

In addition, in the face of significant pressure, disadvantaged agents can be more prone to make decisions with long-run adverse consequences. This is known as “tunnelling”, as the individuals focus only on finding an immediate solution to their problem. For instance, removing kids from school if a parent happens to lose their job.

Furthermore, research suggests that context is so important that even if we could remove all the different structural barriers to education, employment, healthcare, etc. for traditionally marginalized groups, it might not be enough to counteract social exclusion.

In most social sciences it is considered that institutions have a “schematizing power”, that is they shape the mental models of our communities, which affects not only how we see others but also how we see ourselves.

Carrying a particular expectation about ourselves influences the way we behave and can perpetuate the previous social establishment. For instance, researchers found that in India, boys from different castes were equally good at solving mazes when their caste was not revealed, but the results differed when their caste was made public. Likewise, the role of expectations is also useful to understand some gender dynamics, for instance, why women are more prone than men to volunteer to task with low promotability.

While it is becoming increasingly clear that behavioral insights can enhance the effectiveness of different policies and interventions, it is also important to socialize the previous findings, so that we can all reflect on our own mental models and collectively start promoting models that are fairer to all members of the society.

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