It’s Monday, so you know what that means — cognitive bias! When I write that, I sort of imagine a “live television audience shouting in chorus: cognitive bias!” Wouldn’t that be fun? Well, maybe it wouldn’t, but it’s kind of funny to think about. I’ve only got a couple of more biases that I’d like to mention, so let’s get right to today’s — the status quo bias.
The status quo bias, like many of the previous biases we’ve talked about, is exactly what it sounds like: a preference for the how things currently are. You may even look at this bias as some people’s inability to accept change or a fear of change, but that probably wouldn’t be completely accurate. Let’s go back to one of those journal articles we looked at in previous biases — Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias:
A large-scale experiment on status quo bias is now being conducted (inadvertently) by the states of New Jersey and Pennsylvania. Both states now offer a choice between two types of automobile insurance: a cheaper policy that restricts the right to sue, and a more expensive one that maintains the unrestricted right. Motorists in New Jersey are offered the cheaper policy as the default option, with an opportunity to acquire an unrestricted right to sue at a higher price. Since this option was made available in 1988, 83 percent of the drivers have elected the default option. In Pennsylvania’s 1990 law, however, the default option is the expensive policy, with an opportunity to opt for the cheaper kind. The potential effect of this legislative framing manipulation was studied by Hershey, Johnson, Meszaros, and Robinson (1990). They asked two groups to choose between alternative policies. One group was presented with the New Jersey plan while the other was presented with the Pennsylvania plan. Of those subjects offered the New Jersey plan, only 23 percent elected to buy the right to sue whereas 53 percent of the subjects offered the Pennsylvania plan retained that right. On the basis of this research, the authors predict that more Pennsylvanians will elect the right to sue than New Jerseyans. Time will tell.
One final example of a presumed status quo bias comes courtesy of the Journal of Economic Perspectives staff. Among Carl Shapiro’s comments on this column was this gem: “You may be interested to know that when the AEA was considering letting members elect to drop one of the three Association journals and get a credit, prominent economists involved in that decision clearly took the view that fewer members would choose to drop a journal if the default was presented as all three journals (rather than the default being 2 journals with an extra charge for getting all three). We’re talking economists here.”
You can see how important this bias would be for your life in making decisions. Should I sell my house (when the market’s hot) or should I hold onto it? You might be more liable to hold onto your house, even though there are economic gains to be had by selling it and, in fact, there are economic losses by keeping it!
As we’ve mentioned with some of the other biases, this bias can operate in tandem with other biases. For instance, think about the scenario I just mentioned and how that might also be similar to the endowment effect or loss aversion.
Ways for Avoiding the Status Quo Bias
1) Independent Evaluation
It really can be as easy as this. Have someone (or do it yourself) do a cost-benefit analysis on the situation/decision. In this way, you’ll be able to see the pros/cons of your decision in a new light. Of course, you may still succumb to the status quo bias, but you might be less likely to do so.
2) Role Reversal
While the independent evaluation makes “good sense” in trying to avoid this bias, doing some sort of role reversal will probably be the most effective. That is, look at the decision/situation from the other perspective. If it’s a negotiation, imagine that you’re in your negotiating partner’s shoes and you’re actually doing the trade from that side. Evaluate the deal. This may help to shake loose the status quo bias.
If you liked this post, you might like one of the other posts in this series:
- Ignore Sunk Costs
- Loss Aversion and the Big Picture
- The Endowment Effect – Yours Isn’t Always Better
- Get a Second Opinion Before You Succumb to the Planning Fallacy
- Perspective and the Framing Effect
- The Confirmation Bias — What Do You Really Know
- Don’t Fall for the Gambler’s Fallacy
- Situations Dictate Behavior
- When 99% Confident Leads to Wrongness 40% of the Time
- He’s Not as Bad as it Seems and She’s Not as Good as it Seems
- Neither the Beginning nor the End — Remember the Middle
- If All You Have is a Hammer…
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