Irrational Thinking

This post at the Freakonomics blog talks about Air Canada’s Jazz division’s choice to remove life vests from their aircraft to reduce weight and therefore fuel consumption.  This decision is effectively saying that the cost to them of providing you with a life vest (about 3¢) is not worth it.  The economist blogger agrees with the decision, but correctly predicts that most people, given the choice, would rather pay 3 more pennies to have the vest with them.

What’s the lesson here?  That people are not rational.  This isn’t good or bad; it just is.  The chance that a life vest would make a difference in the event of a plane crash is infinitesimally small – as a matter of fact, I can’t think of an example of it ever happening.  But people discount small expenditures, especially when the other side of the scale holds something very valuable (like one’s life).

It’s the same phenomenon that an old friend of mine noticed in Vancouver years ago: there was a tragic apartment fire where a young girl was killed.  It came out in the investigation that if her third floor bedroom had had a fire escape, she may have been able to escape.  There was great hue and cry to create new fire escape legislation, which happened.  The cost to society to implement those changes was huge.  My friend (who was an expert on traffic science) observed that spending that same amount of money on left turning lanes would guarantee  dozens of eliminated deaths and injuries every year, whereas the fire escapes might, one day  save some single person.

It’s a fact of life that we all make irrational decisions.  (I buy lottery tickets, e.g., which I fully acknowledge to be a tax on the mathematically impaired.)  And society as a whole is no better.  That’s why any vocation that attempts to make people do something predictable (like marketing does) is always going to be an art as well as a science.

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