Author Archives: Jeremiah Stanghini

Jeremiah's primary aim is to provide readers with a new perspective. In the same vein as the "Blind Men and the Elephant," it can be difficult to know when one is looking at the big picture or if one is simply looking at a 'tusk' or a 'leg.' He writes on a variety of topics: psychology, business, science, entertainment, politics, history, etc.

Solutions to Externalities: Social Entrepreneurship and Externalities, Part 3

In the first post in this series, we looked at the definition of social entrepreneurship. In the second post in this series, we looked at the definition of externalities. In today’s post, we’ll look at some solutions to externalities.

Solutions to Externalities

There are a number of different ways to solve the problem of externalities. More generally speaking, these different ways of solving the problem of externalities fall into one of two categories: public or private. Under the category of public solutions to externalities, we have things like government provisions, subsidies, or Pigovian taxes. Pigovian taxes (the name comes from Pigou) are those taxes that are intended to influence a party away (disincentivize) from creating the negative externality. One kind of Pigovian tax is a ‘sin tax,’ which are those taxes that are applied to things like alcohol and tobacco. One of the main arguments for allowing for private sector solutions to externalities is internalization. What is meant by internalization? Consider an example where a fisherman owns a river and a steel plant pollutes the river. The fisherman would demand that the steel plant cease polluting because the fisherman had property rights of the river.[1] The fisherman internalizes the externality of pollution because the fisherman owns the river. The pollution is not an externality to the fisherman; it is a very real and present part of the equation. One of the problems with a solution like this is when the problem is scaled up. Consider the Atlantic Ocean. Who owns it? While property rights may work for some situations, it is most definitely not a viable solution to all issues involving externalities.

Recently, there was a very interesting proposal put forth that, “externalities seem destined to rattle forth from the grave.”[2] In other words, these authors felt that ‘externalities’ was no longer a relevant term in the lexicon nor as a concept to study. Instead, these authors feel that, “externalities do not differ in any substantive way from any other kind of inefficiency.”[3] The argument is quite compelling. They cite two main axioms regarding inefficiencies, “(1) All inefficiencies, including Pareto relevant externalities, represent unexploited gains from trade and (2) When free exchange is allowed and transactions are costless, all Pareto relevant inefficiencies will be negotiated away.”[4] When the argument is phrased in this way, it is hard to disagree. The authors are trumpeting the horns of the free market. In the concluding remarks by the authors, they make it clear that the aim of their article was to highlight the number of policies passed in the name of externalities. To their credit, they are absolutely right. There are a number of laws and regulations put into place in the name of externalities. Now that we have discussed some of the general theories regarding the solutions to externalities, we can dive deeper into the discussion around externalities and social entrepreneurship. Specifically, we can begin to answer some questions about the cross-section of the two concepts.

[1] Gruber, J. (2010). Public finance and public policy (3rd ed.). New York: Worth Publishers.

[2] Barnett, A. H., & Yandle, B. (2009). The end of the externality revolution. Social Philosophy and Policy, 26(2), 130-150.

[3] Ibid.

[4] Ibid.

The Top Ways For Avoiding Cognitive Biases: List of Biases in Judgment and Decision-Making, Part 17

Last Monday I wrote that my cognitive bias series had come to an end. However, several of you emailed me asking for a more concise summary (as you’ll recall, the last post was over 3000 words). So, I thought I’d aggregate the most frequent suggestions of ways for avoiding cognitive biases. It’s in the same vein as a post in this series I don’t often link to: WRAP — An Acronym from Decisive.

Today, I’ve gone back through the post I wrote last week and categorized the different ways for avoiding the cognitive biases that I’ve listed. I’ll list the ways in descending order of their most frequent occurrence on the lists, along with the biases that they helped to counteract:

Alternatives (6): Sunk Cost Fallacy, Endowment Effect, Planning Fallacy, Framing Effect, Confirmation Bias, The Contrast Effect

Assumptions (5): Sunk Cost Fallacy, Framing Effect, Overconfidence Effect, Halo Effect, Functional Fixedness,

Data (5): Planning Fallacy, Gambler’s Fallacy, Primacy/Recency Effect(s), Status Quo Bias, The Contrast Effect

Empathy (3): Endowment Effect, Framing Effect, Fundamental Attribution Error,

Big Picture (3): Loss Aversion, Fundamental Attribution Error, The Contrast Effect

Emotional (2): Loss Aversion, Endowment Effect,

Self-Awareness (2): Overconfidence Effect, Hindsight Bias,

Expectations (1): Loss Aversion,

As you might expect, assumptions plays a big part in our decision-making, so naturally, uncovering our assumptions (or recognizing them) is an important way for avoiding the traps of cognitive biases in decision-making. Similarly, it’s important to consider and/or develop alternatives. On an important related note, one of the most important things you’ll learn about negotiating is BATNA. This stands for: the Best Alternative to a Negotiation Agreement. Alternative. It’s also not surprising to see the frequency with which “data” appears, too. Data are a really important part of making a “cognitive bias”-free decision. I’ve written about the virtues of empathy, so I won’t review it.

Lastly, I wanted to highlight that “big picture” appeared on this list a couple of times. I was surprised that it only appeared a couple of times, but that could be a result of the way I was thinking (or my biases!) when I was writing these series. For instance, two of the categories here on this site are Perspective and Fresh Perspective. Meaning, I think it’s really important that we learn how to view things from a wider scope. “Big Picture” probably coud have fallen under “Alternatives,” but I believe there’s an important distinction. With alternatives, it’s still possible to only be considering things from a micro-level, but with the big picture, there’s a necessity for seeing things from the macro-level.

PS: Happy Canada Day!

~

If you liked this paper/series, you might want to check out some of the other papers/series I’ve posted.

Defining Externalities: Social Entrepreneurship and Externalities, Part 2

In the first post in this series, we looked at the definition of social entrepreneurship. In this post, we’ll look at the definition of externalities. Before we get into the post, I wanted to let you know that when I copied part of the paper into this post, the footnotes reset and started at 1. However, as we know from yesterday’s post the first footnote from Pigou is actually footnote #10.

Defining Externalities

The process for defining externalities is as muddled as the process for defining social entrepreneurship. Since the term ‘externalities’ came first,[1] it might be more accurate to say that the process for defining social entrepreneurship is as muddled as the process for defining externalities. The first appearance of a definition of externalities comes in the early 1900s from Pigou,[2] a British economist, who comes from the field of ‘welfare economics,’ which focused on maximizing the well being of society. The general understanding of externalities hasn’t changed too much since then, leaving us with the following definition: “An externality is a cost or benefit that is experienced by someone who is not a party to the transaction that produced it.”[3]

This definition of externalities leaves us with the possibility for positive (benefit) externalities or negative (cost) externalities. An example of a negative externality could be the pollution to the air (or water) caused by a factory. An example of a positive externality could be the honey caused by the natural process of bees. Those two examples of positive/negative externalities are simple ones, but there are many more. Some cite traffic congestion as a negative externality[4] and some cite immunization as a positive externality.[5] The concept of externalities came out of economic theory and as such, we can highlight (through economic theory) some of the results that come from negative/positive externalities. “Negative externalities cause overproduction of the good in a competitive market, while positive externalities cause underproduction of the good in a competitive market, in both cases leading to a deadweight loss.”[6]

There is another kind of externality: positional externalities. “A positional externality occurs when new purchases alter the relevant context within which an existing positional good is evaluated.”[7] An example of this could be said to be when a job candidate starts to wear really expensive suits. The side effect of this is that other job candidates don’t make as good an impression upon the interviewer. From the perspective of the other candidates, it would be most beneficial to go out and purchase expensive suits, so as to make a favorable impression on the interviewers. “But this outcome may be inefficient, since when all spend more, each candidate’s probability of success remains unchanged.”[8] The last kind of externality of this similar vein (positive, negative, and positional) is a network externality. This is also referred to as a network effect and is most often seen in technology. Think about your cell phone. The value of your cell phone is somewhat dependent upon the number of other people [network] who also have cell phones. There is a further way to distinguish between different kinds of externalities: ‘internal’ and ‘external’ externalities.[9] Internal externalities are those externalities that are external to the contractual relationship, but internal to those parties within the contract. External externalities are those externalities that are external to both the contractual relationship and the parties within the contract.

At this point, we have talked about the various kinds of externalities (positive, negative, positional, network, internal, and external). To solidify the understanding of externalities, I’d like to provide an example of the creation of externalities by externalities:[10]

Jacksonville, Florida requires apartment complexes to provide 1.75 parking spaces per one-bedroom apartment – despite the fact that 16% of Jacksonville’s renter households even own one [sic] car . . . Most American cities require office buildings to provide four parking spaces per 1000 square feet of office space. Because four parking spaces consume about 1200 square feet of space, this means that a commercial landlord must allocate the majority of his land to parking.

Minimum parking requirements reduce population and job density, because land that is used for parking cannot be used for housing or commerce. Residents of low-density areas tend to be highly dependent on automobiles for most daily tasks, because they are less likely to live within walking distance of public transit and other amenities.

Minimum parking requirements indirectly discourage walking, by encouraging landowners to surround their building with parking. Where shops and offices are surrounded by a sea of parking, they are unpleasant places for pedestrians, because pedestrians must waste time walking through parking lots and risk their lives dodging automobiles . . .

By increasing the number of parking lots, minimum parking requirements may increase pollution from stormwater runoff. Rainstorms cause stormwater to fall on parking lots, collect metal, oil and other pollutants lying on the ground, and then run off into nearby waters, thus making those waters dirtier and more dangerous.

As one can see, this never-ending string of externalities seems to keep going. All of this stems from the initial action of a policy seemingly trying to do well by its citizens. Now that we have talked about some of the different kinds of externalities and explored a concrete example of how externalities can quickly multiply, let’s look at some of the proposed solutions to these externalities. But just before we move into the description of some of the solutions to externalities, I thought it a good place to add a note from Coase, who is often part of the conversation of externalities: “The traditional approach [to externalities] has tended to obscure the nature of the choice that has to be made. The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is; how should we restrain A? But this is wrong . . . The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A?”[11] Coase is absolutely right in his critique of the framing of the question. Even in today’s discussion (Coase wrote this in the 1960s) about externalities, rarely is the question framed in the way that Coase has suggested.

~

Note: when we next pick-up this series, we’ll look at some solutions to externalities.

[1] Pigou, A. C. (1920). The economics of welfare. London: Macmillan and Co.

[2] Ibid.

[4] Bento, A., Kaffine, D., Roth, K., & Zaragoza, M. (2011). The unintended consequences of regulation in the presence of competing externalities: Evidence from the transportation sector. Yale Center for Business and the Environment.

[5] Simpson, B. P. (2007). An economic, political, and philosophical analysis of externalities. Reason Papers, 29(1), 123-140.

[6] Gruber, J. (2010). Public finance and public policy (3rd ed.). New York: Worth Publishers.

[7] Frank, R. H. (2003). Are positional externalities different from other externalities? The Brookings Institution.

[8] Ibid.

[9] Buchanan, J. B., & Vanberg, V. J. (1988). The politicization of market failure, Public Choice Society Meetings.

[10] Lewyn, M. (2010). What would Coase do? (About parking regulation). Fordham Environmental Law Review, 22(1), 89-118.

[11] Coase, R. H. (1960). The problem of social cost. The Journal of Law and Economics, 3(1), 1-44.

Defining Social Entrepreneurship: Social Entrepreneurship and Externalities, Part 1

I enjoyed sharing the work that I’d done several years ago curating those quotes from various religious scriptures into a number of posts. As a result, it got me thinking of some of the other papers I’ve wrote and whether they’d be appropriate to share here. Since I just finished an MBA, I’ve gone through quite a number of case studies. Since professors tend to reuse those cases, it seems inappropriate to share the papers I wrote for those cases (as some students might try to pass it off as their own work). With that being said, yesterday’s post about fines vs. fees reminded me of a paper I wrote about a year ago for a class in social entrepreneurship. This paper wasn’t for a case, so I thought I’d share it in a number of installments. In today’s post, I’ll share the executive summary and the first section: defining social entrepreneurship.

Executive Summary

This aim of this paper is to answer two main questions: (1) are externalities essential to the understanding of social entrepreneurship? (2) are the economic theories of externalities used in the professional understanding of social entrepreneurship? To answer these questions, the definitions of social entrepreneurship and externalities are explored, along with the different categories of externalities. There is also a short examination of the different solutions to externalities. Following this, an analysis of the intersection of the two concepts (social entrepreneurship and externalities) is conducted, the results of which return answers of “yes” to both of the main questions of this paper.

Defining Social Entrepreneurship

Before moving into a discussion about social entrepreneurship and externalities, it is important to define these terms. As one delves further into the literature – both academic and popular – it quickly becomes clear that there are myriad understandings that cloud the space around these terms[1] and thusly make the task of definition that much more important. To begin, I will define social entrepreneurship, but before that, it might be more appropriate to start with a definition of entrepreneurship.

Most definitions of social entrepreneurship begin with an attempt to define entrepreneurship and logically so, as ‘social’ acts as a modifying word to entrepreneurship. One definition of what it means to be an entrepreneur that I particularly like, “A person is an entrepreneur from t1 to t2 if and only if that person attempts, from t1 to t2, to make business profits by innovation in the face of risk.”[2] Subsequently, the definition of entrepreneurship follows as, “The process of attempting from t1 to t2, to make business profits by innovation in the face of risk.”[3] While there is disagreement among some about how to define entrepreneurship, this basic understanding will suffice for the purposes of this paper.

Now that we have defined entrepreneurship, ‘business profits by innovation in the face of risk,’ we can move on to define social entrepreneurship. Similar to entrepreneurship (and maybe understandably so), social entrepreneurship lacks a consensual definition among those who study it. The Skoll Centre for Social Entrepreneurship at the University of Oxford defines social entrepreneurship as, “[being] about innovative, market-oriented approaches underpinned by a passion for social equity and environmental sustainability.”[4] Others believe that social entrepreneurship is, “ a process that catalyzes social change and/or addresses important social needs in a way that is not dominated by direct financial benefits for the entrepreneurs.”[5] While those definitions are similar, one could identify differences. The first definition includes an approach and the second definition includes a process. Part of the issue surrounding the definition of social entrepreneurship is that, “it means different things to different people.”[6] I may be a bit biased as I’m currently interning with Ashoka, but I think the person [Bill Drayton, founder and CEO of Ashoka] who ‘created’ the term[7] should have a great deal of say in the definition of said term. As such, Ashoka defines social entrepreneurship in following way:[8]

Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change.

Rather than leaving societal needs to the government or business sectors, social entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to take new leaps.

One of the important distinctions regarding Ashoka’s definition of social entrepreneurship is that the idea precedes the doing. That is, the social entrepreneur plans to address the problem (or social ill) before s/he begins the venture. This will be important later on when we talk about externalities. Another important distinction here is the specification of ‘changing the system.’ This is key because one of the more recent academic articles published on the topic of social entrepreneurship isolates four main factors of the definitions of social entrepreneurship, none of which are ‘changing the system’. They include: characteristics of individual social entrepreneurs, their sphere of operation, the processes and resources used by social entrepreneurs, and the mission of the social entrepreneur.[9] Let’s use the definition of social entrepreneurship provided by Ashoka and move on to define the next piece: externalities.

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Note: Check back tomorrow for the next section: defining externalities. Below, you’ll find a list of footnotes from this first section of the paper.

[1] For social entrepreneurship, see: Tan, W., Williams, J., & Tan, T. (2005). Defining the ‘social’ in ‘social entrepreneurship’: Altruism and entrepreneurship. International Entrepreneurship and Management Journal, 1(3), 353-365. For externalities, see: Barnett, A. H., & Yandle, B. (2009). The end of the externality revolution. Social Philosophy and Policy, 26(2), 130-150.

[2] Tan, W., Williams, J., & Tan, T. (2005). Defining the ‘social’ in ‘social entrepreneurship’: Altruism and entrepreneurship. International Entrepreneurship and Management Journal, 1(3), 353-365.

[3] Ibid.

[5] Mair, J., & Marti, I. (2004). Social entrepreneurship: A source of explanation, prediction, and delight. Journal of World Business, 41(1), 36-44.

[6] Dees, J. G. (1998). The meaning of ‘social entrepreneurship.’ Stanford University: Center for Social Innovation. See: http://www.caseatduke.org/documents/dees_sedef.pdf

[9] Dacin, M. T., & Dacin, P. A. (2011). Social entrepreneurship: A critique and future directions. Organization Science, 22(5), 1203-1213.

 

Chapter 2 – Fines vs. Fees: What Money Can[‘t] Buy, Part 2

In the first post in this series, I chewed on the material from chapter 1 of Professor Michael Sandel‘s book, What Money Can’t Buy. The first chapter was all about jumping the line (or budding, as I remember it from my elementary school days). In Chapter 2, the theme was incentives.

I had finished reading chapter 2 a little while ago, but I’d been busy recounting the bits from that paper over the last several days, so I’d sidelined a post about chapter 2. Now that I’ve finished the paper (A Collection of Scriptures for Guidance), I thought I’d chew on the material from chapter 2.

As I said, the title of chapter 2 was incentives. There were a few things that I wanted to highlight (though, I thought the whole chapter was fascinating). In particular what stood out to me were three things: incentives (and the perverting of incentives), fines vs. fees, and paying kids to read. Let’s start with the last one, which will link to the first one.

Nowadays, some parents pay their kids to read. In fact, some schools encourage the idea of rewarding children for reading. At first, this seems like a great use of the free market, right? Incentivizing the reading of books to get kids to read more books. Except, what if part of the pleasure of reading is the pure desire to read? By paying kids to read, it robs them of that intrinsic motivation. In fact, by paying kids to read, it could de-incentivize them from reading when there is no reward involved (perverting the incentives).

In thinking about this example, it made me contemplate just how hard it can be for lawmakers (i.e. Congresspeople, Members of Parliament, etc.) to write legislation that will properly incentivize the citizens to act in a way that is best for themselves (and the town/city/county/country, etc.). Paying kids to read seems like an easy way to get kids to read, but when one plays out the incentive and considers the unintended consequences, one can see how this perverts the intent of getting kids to read.

The next piece I wanted to talk about was fines vs. fees. This part was really interesting to contemplate. From the book:

What is the difference between a fine and a fee? It’s worth pondering the distinction. Fines register moral disapproval, whereas fees are simply prices that imply no moral judgment. When we impose a fine for littering, we’re saying that littering is wrong… It reflects a bad attitude that we as society want to discourage. Suppose the fine is $100 [for littering] and a wealthy hiker decides it’s worth the convenience of not having to carry his empties out of the park. He treats the fine as a fee and tosses his beer cans into the Grand Canyon. Even though he pays up, we consider that he’s done something wrong. By treating the Grand Canyon as a dumpster, he has failed to appreciate it in an appropriate way.

Sandel goes on to talk about how this fines vs. fees attitude can also be applied to disabled parking spaces, speeding, the subway/metro, renting videos, and many others. I found this discussion especially interesting because of the moral-ness to it. When one is creating fines, one is (whether one means to or not) using morals. We don’t think it’s morally right to litter and that’s why there’s a fine for littering. Paying to park your car in a garage is a fee.

There’s one more passage that I think was really important to remember from this chapter:

But why does this mean that moral philosophy must enter the picture? For the following reason:

Where markets erode nonmarket norms, the economist (or someone) has to decide whether this represents a loss worth caring about… The answer will vary from case to case. But the question carries us beyond predicting whether a financial incentive will work. It requires that we make a moral assessment: What is the moral importance of the attitudes and norms that money may erode or crowd out?

If you liked this post, you might like one of the other posts in this series:

When Did our Mental Health Become Separate From our Body’s Health?

I was thinking about the medical system today and it dawned on me, ‘when did mental health become separate from our body‘s health?’ It might seem like a silly question, but think about it for a moment. When you go to see the doctor, the doctor — typically — is there to correct the imbalances in your body, right? S/he asks you questions about your body’s health. How are you feeling? Is your knee any better? Is your head warm? How’s your elbow been lately? Any pain in your stomach? 

What I want to know is, when did general health questions stop including mental health?

I mean, it’s not really still taboo to think that an unhealthy mind can lead to an unhealthy body, right? There’s a whole field dedicated to it — psychoneuroimmunology.

The whole idea of dualism reminds me of a post I read, almost a year ago, that detailed some research about how our health can be affected by our philosophical bent:

Overall, the findings from the five studies provide converging evidence demonstrating that mind-body dualism has a noticeable impact on people’s health-related attitudes and behaviors. These findings suggest that dualistic beliefs decrease the likelihood of engaging in healthy behavior.

These findings support the researchers’ original hypothesis that the more people perceive their minds and bodies to be distinct entities, the less likely they will be to engage in behaviors that protect their bodies.

From a dualistic perspective, bodies are ultimately viewed as a disposable vessel that helps the mind interact with the physical world.

Simply believing (understanding?) that our minds are not separate from our bodies, but that they are one in the same, can lead to better choices that affect one’s health.

I wonder, if as a way to facilitate this understanding in people, doctors started to treat the mind as if it were part of the body and ask questions about one’s mental health during visits to the doctor, would we those who see the mind as separate begin to see it as part of the body?

A Collection of Scriptures for Guidance: Christianity, Part 8

Note: the first two paragraphs are introductory and are derived from the first post in this series. I’ll continue to repost them, in case this is your first time reading a post from this series.

When I was still a doctoral candidate at Sofia University, one of the courses I completed was “World Religions.” This was one of the classes I enjoyed the most during my time at Sofia University. I’d never had such broad exposure to the world’s religions before and this class really allowed me to gain a better understanding of them.

One of the papers I wrote for that class really tied in the fact that I was in a clinical psychology PhD program. The purpose of the paper was to collect quotes from scriptures of the various world religions that I could use with clients/patients when I became a therapist. While I’m no longer pursuing a PhD in clinical psychology, the quotes I collected could certainly be of use, so I thought I’d share them here.

Today’s collection of scriptures for guidance comes courtesy of Christianity. Enjoy!

Anxiety

I’m leaving you with a gift: peace of mind and heart! And the peace I give isn’t fragile like the peace the world gives. So, don’t be troubled or afraid. (John 14:27)

Let not your heart be troubled. You are entrusting God, now trust in Me. (John 14:1)

Surely goodness and mercy shall follow me all the days of my life. (Psalm 23:61)

Anger

The Lord is gracious and merciful, slow to anger and abounding in steadfast love. (Psalm 145:8)

Whoever is slow to anger has great understanding, but he who has a hasty temper exalts folly. (Proverbs 14:29)

Be not quick in your spirit to become angry, for anger lodges in the bosom of fools. (Ecclesiastes 7:9).

Addiction

It was for freedom that Christ set us free; therefore keep standing firm and do not be subject again to a yoke of slavery. (Galatians 5:1)

For the law of the Spirit of life in Christ Jesus has set you free from the law of sin and of death. (Romans 8:2)

Death

Precious in the sight of the Lord the death of his saints. (Psalms 116:15)

The righteous perish, and no one ponders it in his heart; devout men are taken away, and no one understands that the righteous are taken away to be spared from evil. Those who walk uprightly enter into peace; they find rest as they lie in death. (Isaiah 57:1-2)

Now we know that if an earthly tent we live in is destroyed, we have a building from God an eternal house in heaven, not built by human hands. Meanwhile we groan, longing to be clothed with our heavenly dwelling. (2 Corinthians 5:1-2)

Depression

The righteous cry, and the Lord hears and delivers them out of all of their troubles. (Psalms 34:17)

He heals the brokenhearted and binds up their wounds. (Psalms 147:3)

Now He was telling them a parable to show that at all times they ought to pray and not lose heart. (Luke 18:1)

Grief

This is my comfort in my affliction, That Your word has revived me. (Psalm 119:50)

Now may our Lord Jesus Christ Himself and God our Father, who has loved us and given us eternal comfort and good hope by grace, comfort and strengthen your hearts in every good work and word. (2 Thessalonians 2:16-17)

When you pass through the waters, I will be with you; And through the rivers, they will not overflow you. When you walk through the fire, you will not be scorched, Nor will the flame burn you. (Isaiah 43:2)

Guilt

In whatever our heart condemns us; for God is greater than our heart and knows all things. (1 John 3:20)

I, even I, am the one who wipes out your transgressions for My own sake, and I will not remember your sins. (Isaiah 43:25)

They will not teach again, each man his neighbor and each man his brother, saying, “Know the Lord, for they will all know Me, from the least of them to the greatest of them,” declares the Lord, “for I will forgive their iniquity, and their sin I will remember no more.” (Jeremiah 31:34)

Loneliness

I will not leave you as orphans; I will come to you. (John 14:18)

Do not let your heart be troubled; believe in God, believe also in Me. (John 14:1)

“For the mountains may be removed and the hills may shake, but my Loving kindness will not be removed from you, and My covenant of peace will not be shaken,’ says the Lord who has compassion on you. (Isaiah 54:10)

Stress

Peace I leave with you; My peace I give to you; not as the world gives do I give to you. Do not let your heart be troubled, nor let it be fearful. (John 14:27)

Anxiety in a man’s heart weighs it down, but a good word makes it glad. (Proverbs 12:25)

Casting all your anxiety on Him, because He cares for you. (1 Peter 5:7)

The Lord is my light and my salvation; whom shall I fear? The Lord is the stronghold of my life; of whom shall I be afraid? Though an army encamp against me, my heart shall not fear, though war rise up against me, yet I will be confident. (Psalm 27:1, 3)

If you liked this post, you might like one of the other posts in this series:

A Collection of Scriptures for Guidance: Hinduism, Part 7

Note: the first two paragraphs are introductory and are derived from the first post in this series. I’ll continue to repost them, in case this is your first time reading a post from this series.

When I was still a doctoral candidate at Sofia University, one of the courses I completed was “World Religions.” This was one of the classes I enjoyed the most during my time at Sofia University. I’d never had such broad exposure to the world’s religions before and this class really allowed me to gain a better understanding of them.

One of the papers I wrote for that class really tied in the fact that I was in a clinical psychology PhD program. The purpose of the paper was to collect quotes from scriptures of the various world religions that I could use with clients/patients when I became a therapist. While I’m no longer pursuing a PhD in clinical psychology, the quotes I collected could certainly be of use, so I thought I’d share them here.

Today’s collection of scriptures for guidance comes courtesy of Hinduism. Enjoy!

Anxiety

Those who surrender to God all selfish attachments are like the leaf of a lotus floating clean and dry in water. Sin cannot touch them. Renouncing their selfish attachments, those who follow the path of service work with body, senses, and mind for the sake of self-purification. Those whose consciousness is unified abandon all attachment to the results of action and attain supreme peace. (Bhagvad Gita 5.10-12)

Anger

Why, sir, do you get angry at someone
Who is angry with you?
What are you going to gain by it?
How is he going to lose by it?
Your physical anger brings dishonor on yourself;
Your mental anger disturbs your thinking.
How can the fire in your house burn the neighbor’s house
Without engulfing your own? (Basavanna Vachana, 248)

Addiction

Excessive eating is prejudicial to health, to fame, and to bliss in Heaven; it prevents the acquisition of spiritual merit and is odious among men; one ought, for these reasons, to avoid it carefully. (Laws of Manu, 2.57)

Death

Now my breath and spirit goes to the Immortal,
and this body ends in ashes;
OM. O Mind! remember. Remember the deeds.
Remember the actions. (Isah Upanishad, 17, Yajur Veda, 40.15)

Guilt

All evil effects of deeds are destroyed, when He who is both personal and impersonal is realized. (Mundaka Upanishad, 2.2.9)

If we have sinned against the man who loves us, have wronged a brother, a dear friend, or a comrade, the neighbor of long standing or a stranger, remove from us this stain, O King Varuna. (Rig Veda, 5.85.7)

Though a man be soiled with the sins of a lifetime, let him but love me, rightly resolved, in utter devotion. I see no sinner, that man is holy. Holiness soon shall refashion his nature to peace eternal. O son of Kunti, of this be certain: the man who loves me shall not perish. (Bhagavad Gita, 9.30-31)

If you liked this post, you might like one of the other posts in this series:

Ways For Avoiding Cognitive Biases: List of Biases in Judgment and Decision-Making, Part 16

It’s Monday, so that means it’s time for another cognitive bias. However, I’ve finished the list of cognitive biases that I wanted to highlight. Of course, there are many more biases that could be discussed, but I thought those 14 were some of the more important cognitive biases. With today’s post, I thought I would review all of the ways for avoiding the biases, categorized by bias. So, I’ll list each bias and recount the ways that I suggested for avoiding the bias.

This is going to be a jam-packed post (with over 3000 words!) I highly recommend bookmarking this post and coming back to it as a reference. Alrighty, with that being said, let’s start with the sunk cost fallacy.

Ways for Avoiding the Sunk Cost Fallacy

So, now that we’ve looked at the sunk cost fallacy, how can we avoid it? Well, the first step in avoiding the sunk cost fallacy is recognizing it. Hopefully, the above examples have given you an idea of how this bias can arise. There are a two other ways I want to highlight that you can use to avoid this trap.

1) What am I assuming?

The crux of the sunk cost fallacy is based on an assumption. That is, you’re assuming that because you’ve already spent money on X, that you should keep spending money on X. If you look at what it is that you’re assuming about a situation, you just might find that you’re about to step into the sunk cost trap.

2) Are there alternatives?

Related to the above example is alternatives. You’re not bound to a decision because you’ve made a similar decision in the past. Just because you bought the ticket to go to the movie, if another activity presents itself as more enticing, you’re allowed to choose that one instead. In fact, if when you sit down to watch the movie, it’s bad, you’re allowed to get up and walk out. Don’t fall into the sunk cost trap thinking that you have to stay because you paid for it. There are any number of things you could be doing: going for a walk, calling an old friend, etc.

Ways for Avoiding Loss Aversion

As with the sunk cost fallacy, one of the most important ways to avoid loss aversion is to recognize it. That is, to know that humans have a tendency for loss aversion is an important first step in not falling into the trap of loss aversion.

1) What’s the big picture?

In our example of golf, that might mean knowing where you are in relation to the other players your competing with in the tournament (rather than where your ball is relation to the hole and what specific stroke you’re about to hit). In business, one might examine a decision about one business unit in relation to the entire company (rather than looking myopically at the one business unit).

2) Am I afraid of losing something?

This may seem like an obvious solution, but it’s pretty important. If before making a decision you can think to yourself (or have your team ask itself), “am I afraid to lose something here?” You might find that you are and it could serve to help you or your company avoid falling into the trap of loss aversion.

3) Do you really expect to never lose anything — ever?

Loss is inevitable. Sometimes, you won’t make that par putt (or that birdie putt). Sometimes, when you negotiate a deal, you won’t get the best deal. Sometimes, the decision to sell that business unit might result in losses somewhere else. If you can come to grips with the fact that every decision you make won’t be perfectand that sometimes you will lose, you may begin to shift your expectations about loss.

Ways for Avoiding the Endowment Effect

1) Am I emotional?

A seemingly obvious way to avoid the endowment effect is assessing whether our emotions are involved. Don’t get me wrong, emotions are a good thing, but they are a surefire way to overvaluing things that you own. That is, if you find yourself overly connected to something, your emotions might be getting in the way.

2) Independent Evaluation

This dovetails nicely with the idea of being unemotional. To guard against succumbing to the endowment effect, be sure to have an independent appraisal of whatever it is that you’re looking to sell of yours. While you’ll still have the final say on what you sell and how much you sell it for, having a second pair of eyes look at your side of the “deal” might help you determine if you’re judgment’s clouded.

3) Empathy

I wasn’t going to include this initially, but after reading the research, it certainly fits. Before I go on, I should say that folks might be confused in that I just suggested asking whether one is emotional and now I’m saying to practice empathy? For those wondering, being emotional is not the same thing as being empathetic. Back to empathy and the endowment effect. In situations where we’re selling something, researchers found there to be an empathy deficit when the endowment effect was present. So, to counter this, you should try to empathize with whom you’re negotiating.

Ways for Avoiding the Planning Fallacy

With the first three biases I talked about, awareness was a key step in overcoming the bias. While you could make that argument for the planning fallacy, one of the hallmarks of [the fallacy] is that people know they’ve erred in the past and stillmake the mistake of underestimating. So, we’ll need to move beyond awareness to help us defend against this bias.

1) Data is your friend

No, I don’t mean Data from Star Trek (though Data would probably be quite helpful in planning), but now that I think about it, Data (the character) might be a good way to position this ‘way for avoiding the planning fallacy.’ For those of you not familiar, Data is a human-like android. In thinking about this way for avoiding the planning fallacy, think about how Data might estimate the length of time it would take to complete a project. It would be very precise and data-driven. Data would likely look at past projects and how long it took for those to be finished to decide the length of time needed for this new project. To put it more broadly, if you have statistics on past projects (that were similar) absolutely use them in estimating the completion time of the new project.

2) Get a second opinion

When we think about the project completion time of one project in relation to another project, we often think about the nuances that make this project different from that project — and by extension — why this project won’t take as long as that project. Planning fallacy. If you can, ask someone who has experience in project completion in the area for which you’re estimating. When you ask this person, be sure not to tell them all the “various ways why this project is different,” because it probably isn’t and it’s only going to cloud the predictive ability of the person you’re asking. You’re probably going to hear an estimate that’s larger than you thought, but I bet you that it’s probably a lot closer to the real project completion time than the estimate you made based on thinking about the ways that this project was going to be different than all the other projects like it.

Ways for Avoiding the Framing Effect

1) Reframe the question

It may seem obvious, but you’d be surprised how many people don’t consider “reframing” the frame with which they are looking at a situation. For instance, in the example from earlier, instead of looking at it as a choice between Program A and Program B, someone could reframe Program A so that it looks like Program C and do the same with Program B, so that it looks like Program D. As a result, one would then be getting a “fuller” picture of their choice.

2) Empathy — assume someone else’s perspective

Many choices implicate another in a situation. As a result, it might be worth it to put yourself in the shoes of that other person to see how they would view a given situation. This is similar to the reframe, but is more specific in that it might serve to help the person remove themselves a little bit from the decision. That is, when we’re faced with a choice, our personal biases can have a big impact on the decision we make. When we imagine how someone else might make this decision, we’re less likely to succumb to our personal biases.

3) Parse the question

Some questions present us with a dichotomous choice: are apples good or bad? Should we exercise in the morning or the evening? Are gap years helpful or harmful? When faced with a question like this, I would highly recommendparsing the question. That is, are we sure that apples can only be good or bad? Are we sure that exercising in the morning or the evening are our only options? Often times, answers to questions aren’t simply this or that. In fact, more times than not, there is a great deal of grey area. Unfortunately, when the question is framed in such a way, it makes it very difficult to see the possibility of the grey area.

Ways for Avoiding the Confirmation Bias

As with other cognitive biases, being aware that there is such a thing as the confirmation bias is really important. It can be hard to change something if you don’t know that there’s something to be changed.

1) Seek out contradictory ideas and opinions

This is something that I’ve written about before. If at all possible, you’ve got to be sure that you’re getting information that is counter to your beliefs from somewhere. If not, there’s little chance for growth and expansion. This can be difficult for some, so I’ve outlined ways to do this on the post I referenced above.

2) Seek out people with contradictory ideas and opinions

I answered a question on Quora last November where I placed these two ways for avoiding the confirmation bias one and two. Some folks might find it a little more difficult to seek out people with opposing views and that’s why I suggest starting with seeking out contradictory views in print (or some other form of media) to begin. However, in my experience, speaking with someone who has opposing views to mine (assuming that they are also altruistic in their endeavor to seek out opposing views) can be quite enriching. A real-life person can usually put up a better defense when your “confirmation bias” is activated. Similarly, you can do the same for them.

3) What do you really know?

My last suggestion for avoiding the confirmation bias is to always be questioning what it is that you know. This can sound tedious, but if you get into the habit of questioning “how” you know something or “why” you know something, you’d be surprised how ‘thin’ the argument is for something that you know. For instance, let’s say that you have a racial stereotype that ethnicity “x” is bad at driving. When you’re on the highway, you notice that someone from ethnicity “x” cuts you off. Instead of going into a tizzy about ethnicity “x,” you might stop and remember that, in fact, of all the times that you’ve been cut off, ethnicity “x” is the ethnicity that cuts you off the least. This is a curt example, but I think you get the idea. Just to emphasize my point: I would argue that questioning your deeply held beliefs would be a good way of countering the confirmation bias.

Ways for Avoiding the Gambler’s Fallacy

1) Independent Events vs. Dependent Events

The biggest way to avoid the gambler’s fallacy is to understand the difference between an independent event and a dependent event. In the classic example, the odds of a coin landing on heads or tails is — negligibly – 50/50 (I say negligibly because there are those who contend that the “heads side” weighs more and thus gives it a slight advantage). An example of a dependent event would be picking cards from a deck. There are 52 cards in a deck and if you pick one card without replacing it, your odds of picking one of the other 51 cards increases (ever so slightly).

Ways for Avoiding the Fundamental Attribution Error

1a) Empathy

As with many of the other biases, empathy is one of the quickest ways to thwart its power of you. If I put myself in the shoes of another, I’m more likely to understand that there might be more going on in the situation than I can see from my perspective. For instance, if we look at the red light example from above, by empathizing with the driver who runs the red light, I have a much higher chance of understanding that there running the red light is not a demonstration of their disregard for the world around them, but maybe that there’s something urgent to be taken care of.

1b) “Why Would a Rational Person Behave This Way?”

The above sentence is essentially a way to create a sense of empathy, but in case empathy is an ambiguous term, I’ve marked this ‘way’ 1b. Asking yourself this question will make it easier to consider the other factors at contributing to a situation.

Ways for Avoiding the Overconfidence Effect

1) Know what you know (and don’t know)

The fastest way to slip into the trap of the overconfidence effect is to start making “confident” predictions about things that you don’t know about. Guessing the number of paper clips in a bottle is something that most of us have little to no expertise in. So, list a large confidence interval. If you have no experience in managing a project, it might be in your best interest not to make a prediction about how long it will take to complete the project (planning fallacy).

2) Is this person really an expert?

Sometimes, you’ll hear someone displaying a level of confidence in a given situation that makes you think they know what they’re talking about. As a result, it might bias you into believing what they are saying. It’s important to know if this person is an expert in this field, or if maybe they’re succumbing to the overconfidence effect.

Ways for Avoiding the Halo Effect

1) Different strengths for different tasks

One of the easiest ways to avoid falling into the trap of the halo effect is to notice that there are different skills/strengths required for different tasks. As such, just because someone is good at climbing mountains doesn’t mean that they would make a good politician. The strengths/skills required for those two tasks are different. Put another way, think about the strengths/skills required for a particular tasks before evaluating whether someone would be good at that task.

2) Notice other strengths (or weaknesses)

It’s been said that, “nobody’s perfect.” When someone is good at one thing, there’s a good chance that they won’t be good at something else. Noticing that this person isn’t good at someone else may help to quell the urge to assume that this person is good at everything.

Ways for Avoiding the Primacy/Recency Effect(s)

How you avoid these two biases really depends on the context of the decision you’re making. For instance, if you want people to remember something, you probably don’t want to give them a long list (thereby invoking the possibility of one of these two biases to happen). There are some general ways to mitigate these baises, though.

1) Keep a record (write down the data)

One of the simplest ways that either of these biases can have an impact on a decision is when there isn’t a record of data. If you’re just making a decision based on what you remember, there will be an unnecessary weighting for the beginning or the end. As a result, keeping a record of the choices can make it easier to evaluate all choices objectively.

2) Standardized data

As I mentioned earlier in this post, it’s important that the data by which you’re evaluating a choice be standardized. As we looked at in number one, keeping data isn’t always enough. it’s important that the data be uniform across choices, so an evaluation can be made. In this way, it’s easier to look at earlier choices and later choices equally whereas if this weren’t instituted, there might be a slight bias towards the beginning or the end. This tip would work for situations similar to making a purchase (and gathering data), interviewing candidates, or something that can be analogized to either of these two.

Ways for Avoiding Functional Fixedness

1) Practice, practice, practice

Probably the easiest and most effective way of overcoming functional fixedness is to practice. What does that mean? Well, take a box of miscellaneous things and see if you can design something fun/creative. The emphasis should be on using those things in a way that they weren’t designed. For instance, if you’re using a toolbox, you might think about how you can use something like wrenches to act as “legs” of a table or as a conductive agent for an electrical circuit.

2) Observant learning — Find examples

Another good way of overcoming functional fixedness is to look at other examples of people who have overcome functional fixedness. When I was giving a presentation on functional fixedness to a group (of college students) about a year ago, I showed the video below. About halfway through the video, one of them remarked: “So, basically, it’s how to be a college student 101.”

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.

Ways for Avoiding the Hindsight Bias

1) Write it down!

This might be a bit tedious, but it’s a surefire way to guard against the hindsight bias. I’ve read a few articles about folks who’ve documented every prediction that they’ve ever made. While this had more to do with their profession (forecasting, stocks, etc.) it might be something you want to consider.

2) “I knew it all along!”

Have you ever found yourself saying, “I knew it all along,” or “I’m was sure it was going to happen?” These are good indicators that you’re probably operating under the hindsight bias. When you catch yourself saying these phrases, stop and think about what has happened in the situation. Chances are that you’ve “short-circuited” and you’re not thinking about what’s happened to cause that situation.

A Collection of Scriptures for Guidance: Buddhism, Part 6

Note: the first two paragraphs are introductory and are derived from the first post in this series. I’ll continue to repost them, in case this is your first time reading a post from this series.

When I was still a doctoral candidate at Sofia University, one of the courses I completed was “World Religions.” This was one of the classes I enjoyed the most during my time at Sofia University. I’d never had such broad exposure to the world’s religions before and this class really allowed me to gain a better understanding of them.

One of the papers I wrote for that class really tied in the fact that I was in a clinical psychology PhD program. The purpose of the paper was to collect quotes from scriptures of the various world religions that I could use with clients/patients when I became a therapist. While I’m no longer pursuing a PhD in clinical psychology, the quotes I collected could certainly be of use, so I thought I’d share them here.

Today’s collection of scriptures for guidance comes courtesy of Buddhism. Enjoy!

Anxiety

One who has mastered Dharma, one much learned,
Has no such thought as, Ah! ‘tis well with me!
Look you! How tortured is he that has possessions!
One to another human folk are bound. (Udana 13)

Anger

Conquer anger by love. (Dhammapada 223)

If an evil man, on hearing of what is good, comes and creates a disturbance, you should hold your peace. You must not angrily upbraid him; then he who has come to curse you will merely harm himself. (Sutra of 42 Sections 7)

Addiction

What are the six channels for dissipating wealth? Taking intoxicants; loitering in the streets at unseemly hours; constantly visiting shows and fairs; addiction to gambling; association with evil companions; the habit of idleness….

Gambling and women, drink and dance and song,
Sleeping by day and prowling around by night,
Friendship with wicked men, hardness of heart,
These causes six bring ruin to a man.

Gambling and drinking, chasing after those
Women as dear as life to other men,
Following the fools, not the enlightened ones,
He wanes as the darker half of the moon.

The drunkard always poor and destitute;
Even while drinking, thirsty; haunting bars;
Sinks into debt as into water stone,
Soon robs his family of their good name.

One who habitually sleeps by day
And looks upon the night as time to rise
Licentious and a drunkard all the time,
He does not merit the rank of householder. (Digha Nikaya iii.182-85 Sigalovada Sutta)

Death

For death carries away the man whose mind is self-satisfied with his children and his flocks, even as a torrent carries away a sleeping village. (20 Dhammapada, 287)

Depression

We are shaped by our thoughts; we become what we think. When the mind is pure, joy follows like a shadow that never leaves. (Buddha)

Grief

My sickness comes from my ignorance and thirst for existence, and it will last as long as do the sickness of all living beings. Were all living beings to be free from sickness, I also would not be sick… As the parents will suffer as long as their only son does not recover from his sickness, just so, the bodhisattva loves all loving beings as if each were his only child. He becomes sick when they are sick and is cured when they are cured. (Holy Teaching of Vimalakirti 5)

In the perilous round of mortality,
In continuous unending misery,
Firmly tied to the passions
As a yak is to its tail;
Smothered by greed and infatuation,
Blinded and seeing nothing;
Seeking not the Buddha, the Mighty,
And the Truth that ends suffering,
But deeply sunk in heresy,
By suffering seeking riddance of suffering;
For the sake of all these creatures,
My heart is stirred with great pity. (Lotus Sutra 2)

Guilt

Though a man be soiled with the sins of a lifetime, let him but love me,
rightly resolved, in utter devotion. I see no sinner, that man is holy.
Holiness soon shall refashion his nature to peace eternal. O son of
Kunti, of this be certain: the man who loves me shall not perish. (Meditation on Buddha Amitayus 3.30)

If you liked this post, you might like one of the other posts in this series: