will be updated. work in progress
Fooled By randomness, Nassim Taleb
The 20/80 principle, Richard Koch
Private Truths, Public lies, Timur Kuran
In a perfect world, tradeoffs are straightforward.
I give up on X, you give up on return on some Y valued similarly. Simple. Rational. Easy.
Loss aversion destroys this logic.
Loss aversion - Kahneman and Tversky 197x - shows that people value losses vastly more than their natural value.
I'll do vastly more try preserve my existing girlfriend, than to chase her has she been single. I'll ask vastly more for what I have than how much I would've paid to buy it.
Back to negotiations.
Suppose the UK asks the EU to give up on X (day freedom of movement), in return for whatever. Let's assume that the deal makes rational sense. (We ignore the strategic issues, have theoretic math etc)
For the EU, giving up on something is a loss. Losses are valued? Double their nominal value.
Hence, EU will ask the UK double the value in return.
Let's assume the required thing is money - for simplicity.
Say the EU says. Ok. No freedom of movement, but give £10bn yearly to the EU budget.
Now, for the UK this extra £10bn is perceived as a loss. Valued at double at £20bn
This explains why negotiating tradeoffs is so tough and usually just doesn't happen.
I am told that this idea has already been developed in a chapter by Kahneman and Tversky about conflict resolution, but I can't find the reference right now
Rationality can be arrived into by rationality. This is right, and this is why I'm doing it.
Some people reach the jacket of rationality for completely different reasons:
1) bad intuition / irrational nature.
Most people don't practice strict rationality. But there end up pretty much rational in multiple ways. Social learning / imitation. Or listening to some teachers. Or using life experience and emotional reaction to teach pretty much rational directions.
If someone is failing in some of the above, he might have to use aggressive "rational" rationality to get his life in order.
2) a tendency to be rational. Sometimes an obsession, sometimes loving it, etc.
NOTE route / outcome confusion.
I've noted elsewhere that we intuitively mix-up the way how people get somewhere, with its desirability.
This is a huge mistake.
However one ended up with the rationality habit, it's outcome is what matters, not why and how he got there.
(Outcome, of course includes experienced effects age utilitarian results!!)