Why the Pendulum Swings – How Behavioral Economics plays a role in politics and what we can do about it

The seismic wave of the midterm elections has made impact. The question now is if Democrats will interpret this victory as a mandate to oppose (or oust) President Trump or to demonstrate that Congress can govern effectively. Regardless, the direction they choose will tell us something about human behavior that extends beyond politics.

Behavioral economics offers insights into how people make decisions, particularly when emotions, identity, and deeply held beliefs are involved. And if there is one place where all three are on full display, it’s American politics – both in the behavior of the electorate and in the people they elect.

What’s Loss Got to Do with It

One of the main principles in behavioral economics is loss aversion. Research by psychologists Daniel Kahneman and Amos Tversky showed that people generally experience losses more intensely than gains and this drives their behavior. This tendency can defy logic. A good example is people’s reluctance to take advantage of their company’s retirement match. By deferring (losing) a portion of each monthly paycheck, they stand to gain significantly more in the long run. But most people did not do this until companies began making it the default, requiring people to opt out.

It is easy to see how this plays out in politics. Fear of losing economic insecurity, personal freedom, identity or power motivates action. And rightfully so in many cases. However, it is just as often that these initial reactions mirror the retirement example. Are we asking for something now that robs of more later?

Mental Shortcuts

Another fundamental construct within behavioral economics is based on human beings’ bias toward action. This tendency melds our minds in ways that make taking action more efficient. We form identities, organize into groups, and use those affiliations as our source of information. Taken together, this forms our worldview, our lens through which we evaluate issues and make decisions.

This is all great except that it leaves out a lot of data that doesn’t fit into our mental model. And when we are presented with that data, it feels like a threat. This is where confirmation bias, another mental shortcut, comes into play. We pay more attention to information that supports what we already believe and discount information that challenges it. The same policy proposal can be viewed favorably or unfavorably depending on which political party introduces it.

Framing Matters

Behavioral economics also exposes how information can be framed, manipulated or built around rewards to drive decision making. Basic marketing techniques like marking down prices on sale, is one example. When we see that red sticker with the word “Sale” our mind says “Yes!” Had the same product been listed at the sale price with no fanfare, we might walk right by it.

Similarly, politicians operate within a system of rewards and consequences. Media attention, campaign contributions, primary elections, party platforms, and voter approval all influence their behavior. What is troubling is the extent to which we are unaware of how these external influences are driving our thinking and behavior.

Mind the Gap

Between an event and our reaction is an opportunity to pause and consider how we will choose to act. Unfortunately, research into human behavior tells us that this is rare. Again, in an effort to be efficient, the typical human response is automatic and based on established mental models.

This is not only because of our bias toward action but even more prevalent when we are under stress. When we perceive something as a threat, even something as minor as a disagreement about who to invite for Thanksgiving dinner, our attention narrows. We become more focused on defending our position than on entertaining information challenging that position. This happens from the kitchen table to Washington D.C. and everywhere in between.

Awareness of this pattern creates the opportunity for a new response. This does not require abandoning one’s personal or political principles, simply a pause before reacting to or blindly following some preordained platform or agenda.

Tell Me What You Want, What You Really, Really Want

By examining what drives our thinking and actions with curiosity and objectivity, we see a bigger picture. It’s like taking our focus from one brush stroke in a painting and expanding it to see the whole picture. There is usually so much more information available that we do not yet see or are not yet taking into account.

This expanded awareness can make us more discerning voters. Rather than simply rewarding politicians for defending our positions or attacking the opposition, we can evaluate their decisions based on the outcomes they produce. Are we investing in something of enduring value or just getting a quick fix? Are we really factoring in all of the rewards and consequences that will influence those outcomes?

Ultimately, we cannot expect our elected officials to demonstrate better judgment if we are not doing so ourselves. The political pendulum will continue to swing. How far it swings depends in part on our willingness to recognize what is taking us on this ride. The more aware we become of our own behavior, the better equipped we are to make prudent choices and expect the same from those we elect.

It can be difficult to break through ingrained patterns and the forces driving them. The next time you find yourself reacting strongly to a political issue, pause and ask yourself these questions.

A Behavioral Economics Self-Check

1. What am I reacting to? Is my response based on facts, fear, frustration, or a perceived threat to something I value? (Loss aversion)
2. Am I considering the whole picture? Have I sought out information that challenges my position, or am I relying primarily on sources that reinforce what I already believe? (Confirmation bias)
3. Would I feel differently if the other party proposed this? Am I evaluating the merits of the idea or reacting to who is presenting it? (In-group bias)
4. How is this information being presented? Would I reach the same conclusion if the message were framed differently? (Framing effect)
5. What outcome do I actually want? Will the action or policy I’m supporting move us closer to that outcome, or does it simply provide the immediate satisfaction of winning an argument? (Present bias)
6. What behavior am I rewarding? Am I encouraging thoughtful leadership and problem-solving, or rewarding outrage, division, and political theater? (Incentives and reinforcement)