Value System

That doesn't make sense, of course. But it was not a fluke. They got the same result when they gave some people a rare $2 bill and others two singles. It's not as though people never see a $2 bill, and it does have Thomas Jefferson on it after all, but just the slight unfamiliarity of the denomination was enough to make people devalue it.

Why would this be? Oppenheimer and Alter believe this irrational behavior is rooted in our most fundamental mental processes: The world is full of stimuli of various kinds, some more familiar than others, and the brain is tuned to process the familiar ones rapidly, effortlessly and intuitively. More difficult or alien cues require more mental work, more plodding deliberation, and the brain switches to its more cautious and calculating style to be on the safe side.

This is humbling to know. But there's more. The psychologists wanted to see if the same cognitive bias shapes our perceptions and attitudes toward goods themselves, and they came up with a clever way to find out. In this experiment, they gave everyone the same currency—the familiar dollar bill—but they made the commodities more or less accessible in a very subtle way. Some of the "consumers" purchased the gumballs and paper clips from a form that was printed in a clear black font while others had to select from a form printed in a difficult-to-read grey italic font. The idea was to make the strangeness as subtle as possible, to reduce it to basic perception. Even at this most fundamental level, the differences shaped economic judgment: Volunteers consistently rated identical goods as less valuable when they came in an unfamiliar, cognitively challenging form.

These findings echo some earlier, provocative studies of the stock market. In those studies, Oppenheimer and Alter looked at new stock offerings and found that companies with easy-to-read names were valued more highly by investors, at least in the short run. That is, companies with names like Barnings Incorporated consistently outperformed companies with names like Aegeadux Incorporated, simply because the names are more cognitively palatable.

So what do all these odd findings add up to? Well, the cognitive biases are not a bad thing, even if they are a bit irrational. In fact, they are essential to our everyday economic decision-making. We'd be paralyzed if we tried to make every market choice logically and the economic world would grind to a halt. But they should raise a cautionary flag about the very subtle ways marketers might manipulate our choices. Something to think about as we head off to the mall, not just this holiday weekend, but every day.

Wray Herbert writes the "We're Only Human …" blog at www.psychologicalscience.org/onlyhuman . 

© 2008