What Behavioral Economics Tells Us about Decision-making and Ageing

 

Behavioral economics is a very fascinating field, and a very popular one nowadays. While it has long been considered that people are rational beings, the assumption now appears to be not entirely true.

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Since Daniel Kahneman’s ?Thinking, Fast and Slow? and other similar publications saw light and everyone learned that we are prone to fast thinking, irrational sub-optimal choices, that we are frequently affected by biases, some companies endeavored to implement this knowledge to help people to alter their behavior for the better (for instance, StickK.com site and app). However, it is no less important to understand how decision-making patterns change with age.

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Why It Is Important

Obviously, people are not able to get younger, rather, they get older. It is inevitable. Besides, with all the more increasing quality of life as well as lifespan, seniors are becoming all the more significant part of the society, their choices matter more and their decisions make a difference. Thus, it’s time to focus not on the younger audience but on the elder one.

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Present Studies and Their Findings

Several psychologists have started digging into the sphere fairly recently but they have already got us something to think of. For instance, Ellen Peters has a fascinating article about how decisions are made in older years (?Ageing-Related Changes in Decision Making?), Laura Carstensen states that older people are happier, and Mara Mather delves into ?The Affective Neuroscience of Aging?; and there are others, of course.

It is not just that the ageing mind is an interesting thing, indeed, but it’s decision-making processes are quite peculiar, not to be taken for granted. While it is now much clearer to us how heuristics and biases affect our thinking and behavior, we do mostly know it from asking younger and middle-aged individuals, leaving out a fair share of people who frame our economy now more than ever, and who are a target audience of many marketing campaigns (or will be in the nearest future).

Older individuals, however, have been proved to form and act on their decisions slightly differently than younger ones, studies have observed that seniors are more prone to certain cognitive biases and heuristics is the approach that often wins.

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Three major differences are:

• Older people do not appreciate choices as much as younger people do, they mostly feel overwhelmed by excessive alternatives.
• The prevalence of System 1 thinking, which makes older people sometimes very stubborn and rigid. They tend to rely more on their intuition and life experience as well as things familiar to them; and they are unwilling to make an effort and really think.
• Positive affect plays important role in decision-making of older adults. Not only they are more emotionally intelligent at that age, but they are also prone to focusing on the things that provide emotional satisfaction in the first place rather than on the ones that bring status, success or increase adrenalin levels.

So far, these conclusions are definitely insufficient, although, very eloquent. More researches are likely to be conducted in the nearest future that will allow having yet a better picture of decision-making processes in the ageing mind. However, the already existing understanding can be used no less effectively than in the aforementioned StickK.com example, this knowledge can be successfully implemented in many areas where older adults are involved – in public health as well as in retirement sector, major fields that make a difference to a life of an older adult.

Take the idea about choices – it is true that optimization of their quantity and structure can make a pretty feasible difference: ?The evidence suggests that a well designed choice architecture may lead individuals to better decisions for their long-run health, while poorly designed choice environments may lead individuals to delay decisions or choose insurance and spending options that are sub-optimal for both health and financial well-being.? (Behavioral economics and aging, by Margaret McConnell.) Literally, when it is transparent to older adults where to start and what comes next, they are likely to choose qualitatively. That’s definitely something to think of for policymakers when it comes to senior healthcare and retirement; a broad field for the improvement of the existing plans.

It is also true that many commercial businesses have already developed perfect skills for detecting their customers’ biases and now exploit them successfully. Marketing campaigns are not, after all, regulated on such a level as to prevent their being successful by any means. They use the knowledge for sheer profit.

However, let’s hope that the aforementioned insights into behavioral economy and senior decision-making will be used primarily to help older adults to make most advantageous decisions.