COGNITIVE CREATIVITY
An Analysis
Parker Adams
Behavioral Economics 410
Dr. Bantam
March 11, 2021
Cognitive Creativity
An Analysis
The study of behavioral economics encompasses a vast array of topics. Simply put, behavioral
economics examines the reasons why individuals often make less-than-optimal decisions and attempts
to predict the circumstances under which those decisions occur. In addition, the study of behavioral
economics explores how the presence of risks affect optimal decision-making. Many scholars have
emerged in this field, but few are as prominent as Daniel Conner, Nobel Prize winner, researcher,
professor, author of a textbook on creative thinking. In this book, Conner explores the human psyche
and presents findings related to economic decision-making. A wealth of knowledge, “Cognitive
Creativity” explores three main areas of behavioral economics:
the irrationality of humans
the concept of prospect theory
the nature of well-being
Decision Systems
According to Conner, the human brain is divided into two systems, which determine the way
thoughts and opinions are formed, and decisions are made. The first system, System 1, can form
thoughts quickly and make snap decisions using association and metaphor, producing a rough draft of
reality. System 2, on the other hand, is much slower and more deliberate. Drawing on System 1’s rough
draft of reality, System 2 is able to arrive at reasoned beliefs and explicit choices. A drawback to
System 2, however, is that it is lazy and tires quickly. Instead of thoroughly analyzing information
provided by System 1, System 2 is usually content to accept the simple but sometimes unreliable
information about reality that System 1 provides. According to Conner in “Cognitive Creativity,”
although “System 2 believes itself to be where the action is, the automatic System 1 is the hero of this
book”.
System 1
Quick thinking
68%
0.72
System 2
Deliberate decisions
32%
0.39
System Tendencies
Humans often fall prey to cognitive biases, which are fallacies in reasoning and judgment
because of holding on to one’s individual preferences and beliefs, regardless of any contrary
information that is presented. As such, humans can make irrational decisions that do not provide the
most value to the decision-maker. System 1 is generally responsible for maintaining cognitive biases,
due to System 2’s tendency toward laziness. For example, an “anchoring bias” is a comonly known
cognitive bias. In this particular bias, the human mind has a tendency to trust too heavily in the first
piece of information provided, thanks to System 1’s ability to come to certain conclusions quickly. In
fact, System 1 often operates just under the radar of consciousness. Often, an individual will come to
certain beliefs or form different opinions without consciously considering why those beliefs or opinions
have been formed. As such, humans are sometimes predisposed to making decisions that do not make
the most sense or provide the most value.
System Biases
Another cognitive bias that can cause humans to make irrational decisions is know as theoryinduced bias. According to Conner, theory-induced bias occurs when an individual has accepted a
theory and uses it as a tool in thinking, he or she becomes unwilling to notice any flaws in the theory.
Persuading a person to disbelieve a theory is significantly more difficult than convincing someone to
believe a theory. Often, individuals believe that because a solution to a problem worked once, it will
work every time. As such, theory-induced blindness usually causes individuals to disregard valuable
and more economical solutions to problems.
In “Cognitive Creativity,” Conner argues that human reasoning, when left to its own devices, is
likely to engage in many systematic errors and fallacies. Individuals should attempt to recognize
cognitive biases and attempt to work around them, to think and make decisions as rationally as
possible. Humans are much more apt to make decisions based on instict rather than rationality and
overcoming the tendency to rely on instinctual or “knee-jerk” thoughts and decisions is the first step in
the journey toward rational thinking and decision-making.
Stages of Prospect Theory
In prospect theory, the decision-making process is broken down into two stages. The first
phase, called “editing,” is the process of examining outcomes of a decision. Once the outcomes are
determined, they are ordered according to the individual’s aversion to risk. Depending on the person,
certain outcomes may be riskier than others, and may subsequently be avoided. On the other hand,
some outcomes may be deemed by another individual as less risky and may be preferred. During the
editing phase, a decision-maker sets a reference point and considers greater outcomes as gains and
lesser outcomes as losses. In the second phase, which is called “evaluation,” an individual determines a
value based on the probabilities of possible outcomes and chooses an alternative that has the highest
utility for the individual decision-maker.
Prospect Theory
Another topic covered in “Cognitive Creativity” is the concept of prospect theory. Simply
defined, prospect theory examines the way individuals make choices between probabilistic alternatives
involving risk, when the probabilities of outcomes are unknown. This theory suggests that people make
decisions based on the perceived, potential value of gains and losses, instead of actual outcomes.
Additionally, prospect theory believes that individuals determine the value of gains and losses using
different techniques, or “heuristics.” Instead of modeling optimal decisions, prospect theory in
behavioral economics attempts to model real-world decisions and choices. As such, the theory can
adequately explain the decision-making process of most individuals.
Probability Analysis
Prospect theory can be illustrated in problems related to probabilities of certain outcomes. For
example, if a person was offered a 25% chance to win $500, or a 75% chance to win $50, different
individuals would make different choices, depending on their tolerance for risk. Additionally,
everyone’s risk tolerance may increase or decrease, depending on the amounts involved or whether
the outcome could cause the person to become better or worse off. For instance, many people buy
both lottery tickets and insurance policies. Most individuals are okay with spending a couple of dollars
for the chance to win millions, while at the same time purchasing insurance policies to protect against
large losses on expensive items. In prospect theory, risk tolerance is the key motivator in the decisionmaking process for individuals.
Conclusion
In the last pages of “Cognitive Creativity,” Daniel Conner explores the facets of happiness and
examines ways to maximize well-being. According to Conner, each person is comprised of two “selves.”
The first self is known as the “experiencing” self, while the second self is known as the “remembering”
self. Typically, the remembering self is stronger than the experiencing self. For example, if a person
watches a great movie in a theater, but during the last 10 minutes of the movie, another person spills
soda on the moviegoer, the moviegoer will likely remember the entire movie experience in a negative
light. Often, people confuse memories with experiences, and as a result, some experiences are
remembered in negative ways, even though most of the experience was pleasurable. Generally, the
way an experience ends is better remembered than the way an experience was lived. To maximize
happiness, a conscious effort must be made to remember an experience and not simply the negative
parts.
According to Conner, an individual’s “emotional state is largely determined by what they attend
to, and they are normally focused on their current ability and immediate environment”. For instance,
someone could be stuck in traffic, but remain happy because they just received some great news. On
the other hand, a person struggling with the loss of a loved one could watch a funny movie but still feel
depressed. To circumvent this, individuals can work to stay present in the moment, and try not to let
negative emotions color happy experiences. Additionally, Conner notes that individuals are prone to
focus on only one aspect of a decision or event. The potential for error increases as an individual’s
focus is homed in to one facet of a decision or experience. Often, a decision or experience is made up
of many different aspects. When an individual is asked to identify what would make them happy in life,
they often reply with an answer consisting of one thing, such as money, health, or love. Happiness is
made up of many different factors. No sole thing such as wealth can make a person truly happy.
Daniel Conner does an excellent job exploring and communicating the inner workings of the
human mind. He presents an excellent argument that humans are typically irrational and do not make
decisions that provide the most economical value. In addition, humans are often subconsciously
subject to cognitive biases, because of holding onto one’s preferences and beliefs. As such, Conner
discusses strategies for individuals to overcome cognitive biases and make the most economical
choices. Finally, Conner touches on the nature of happiness and examines ways for individuals to
maximize happiness, based on the inner workings of human consciousness.
Submitted by Parker Adams
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