Human behavior during COVID-19 has upended one of the most fundamental assumptions of economics, even if economists haven’t yet come around to admitting it. In sum: People are worse at big, important decisions than previously thought, and better at small, trivial ones.
Standard economics theory holds that people make relatively good decisions when there is a lot at stake. At the very least, they reason through the problem carefully, even if they do not always reach the optimal result. Alternatively, when the stakes are low, they process less information and their decision-making may be lackadaisical. People do not agonize over which paper clips to buy.
For some very important spheres of life, however, that distinction doesn’t hold — as the pandemic has made all too obvious. Millions of people have refused or delayed vaccinations, even though risk from mRNA vaccines seems to be zero and they save lives. Even many health care workers, who are at higher risk for COVID-19, are deciding not to get vaccinated.
Risk-taking more generally seems to have gone askew. While many of the 600,000 or so Americans who died from COVID-19 were victims of circumstance, others took more risk than they should have, for instance by dining inside when the disease was prevalent in their community.
Countries have been irrational too, though again the stakes hardly could be higher, including for political leaders themselves, whether it be Covid risk or re-election incentives.
You might wonder why we are getting these big, important decisions so wrong. I have at least two hypotheses. One is that anxiety causes people to make worse decisions. Facing the danger of a deadly pandemic, for example, the higher stakes might induce me to shift into denial, if only to protect my sanity and peace of mind. I might make worse decisions than if I were simply trying to avoid the common cold, for which the stakes are far lower.
My other hypothesis involves identity and the desire for belonging. People tend to see big decisions as more important in shaping their identity than small ones. In essence, the significance of a decision induces all kinds of surrounding social forces to “infect” that decision with partisan influences, and that decision in turn becomes a truly credible signal of what we believe.
For most economic decisions, people do still make better choices when the stakes are higher — but this isn’t a universal principle. Are you so sure, for example, that decisions about who to marry are made more rationally than those about which TV show to watch? Maybe they are, but it’s not entirely obvious.
The danger of course is that the sum of all these smaller triumphs convinces people that they are rational about big dilemmas too — despite the fact that they choose rather poorly on some of them. We are not used to a world where we are worse at big decisions than the small ones. But it has been hurtling our way for some while now.
Tyler Cowen is a Bloomberg Opinion columnist and professor of economics at George Mason University.
