Behavioral economics has largely put to bed the notion of humans as rational decision makers, but it has not diminished interest in how we make our decisions. A recent study explored whether our decision making abilities are largely something we’re born with or whether they can be improved with education.
“Using a randomized controlled trial of education support and laboratory experiments that mimic real-life examples, we established causal evidence that an education intervention increases not only educational outcomes but also economic rationality in terms of measuring how consistently people make decisions to seek their economic goals.” the authors say.
Rational decision making
The experiment involved following an education support trial undertaken in Malawi that provided financial support to help educate some 3,000 female ninth and 10th graders. Volunteers in the experiment were tracked via a survey that measured both their educational outcomes after the intervention, and their decision making ability. This latter characteristic was measured via lab-based utility maximization experiments.
“We found that those who took part in the education intervention had higher scores of economic rationality, suggesting that education is a tool for enhancing an individual’s economic decision-making quality,” the researchers explain. “While we know that schooling has been shown in previous work to have positive effects on a wide range of outcomes, such as income and health, our work provides evidence of potentially additional benefits of education coming from improvements in people’s decision-making abilities.”
Far from being a homogeneous rational mass, behavioral economics has shown the sheer diversity in decision making ability among us. Previous research on improving our decision-making abilities has focused on removing the biases that blight our decisions. Indeed, this is the bulk of work undertaken by the various ‘nudge’ units in governments around the world. The researchers propose a slightly different approach that revolves around education to turn us into more rational decision makers.
“Governments must never neglect investments in human capital of their citizens,” they explain. “In addition, this evidence provides an additional rationale for investment in education in resource constrained settings such as Malawi and other developing nations.”
