Humans as intuitive classifiers.

Abstract

Mainstream decision research rests on two implicit working assumptions, inspired by subjective expected utility theory. The first assumes that the underlying processes can be separated into judgment and decision-making stages without affecting their outcomes. The second assumes that in properly run experiments, the presentation of a complete description of the incentive structure replaces the judgment stage (and eliminates the impact of past experiences that can only affect judgment). While these working assumptions seem reasonable and harmless, the current paper suggests that they impair the derivation of useful predictions. The negative effect of the separation assumption is clarified by the predicted impact of rare events. Studies that separate judgment from decision making document oversensitivity to rare events, but without the separation people exhibit the opposite bias. The negative effects of the assumed impact of description include masking the large and predictable effect of past experiences on the way people use descriptions. We propose that the cognitive processes that underlie decision making are more similar to machine learning classification algorithms than to a two-stage probability judgment and utility weighting process. Our analysis suggests that clear insights can be obtained even when the number of feasible classes is very large, and the effort to list the rules that best describe behavior in each class is of limited value.