The trouble with people is that we are, well, Humans. We do not always behave rationally, we take short cuts in our decision-making, we don’t always do what is best for us even when we know it (smoking or over-eating for example), and we are subconsciously influenced by what is going on around us (such as “following the crowd”). We wear ties because others do and eat more when we’re with others than when we’re alone.

We are homo sapiens but we would like to think of ourselves as homo economicus, economic man, or Econs — people who think and choose unfailingly well. Econs are really no more than a theoretical concept, a model of how perfectly rational people — like Star Trek’s Mr Spock — might behave.

The reason we are Humans rather than Econs is explained by the way our brains work. We have two systems — one that is intuitive and automatic and another that is reflective. We use the automatic system when we duck without thinking if something is thrown at us (think George W Bush at his infamous Iraq press conference in late 2008) and the reflective system when we are asked, for example, to multiply 411 by 37, which route to take on a trip or which college to apply for.

The trouble is that, unlike Mr Spock, we do not use our reflective, reasoning powers to the full. We use other approaches:

• Rules of thumb. For example, we tend to assess the risk of certain things happening by how readily similar incidents come to mind. People are more likely to take out earthquake insurance after an earthquake, for instance, although the actual likelihood of one has not changed. And we see patterns in behaviors and incidents when they are not really there.
• Optimism and over-confidence. A survey of students’ performance expectations showed only 5% thought they would be below the median level, when, by definition, 50% would be. Similarly, more people over-estimate their immunity from harm, such as the likelihood of having cancer or getting divorced.
• Loss aversion. We hate losing roughly twice as much as we love winning, which leads to inertia, avoiding change even when it might be in our interest, for fear that something will go wrong.
• Status quo bias. We simply can’t be bothered. For example, we fail to cancel magazine subscriptions even though we never read them, or we stick with whatever TV channel we happen to be watching. Publishers and broadcasters know this and use it to their advantage.
• Framing. We allow ourselves to be influenced by the way information is presented. We are far less likely to opt for surgery if we are told “10 out of every 100 people who have this die”, than if the message is “the success rate is 90%.”

Not unnaturally, these behaviors can lead us astray. The picture that emerges is one of busy people trying to cope in a complex world, in which they cannot afford to think deeply about every choice they have to make. We need help. Instead, things are made worse by another human fallibility — temptation: the tendency to do things we know we shouldn’t.

It’s as if there are two parts of our brains at war with each other, and they are seen not only in temptation but in broader areas of self-control. These are labelled Planners (the part that knows how we should behave) and Doers (the part responsible for what we actually do). For example, our Planner may buy and set an alarm clock to get us up in time for work, but our Doer hits the “snooze” button and defeats it!

A further influence on our behaviors is the herd instinct. Econs, say Thaler and Sunstein, are not followers of fashion — they may communicate with and learn from others if it’s to their advantage but then they go their own way. Humans, by contrast, imitate others in general. We smile when others smile, we avoid visible differences, we support the majority view because it’s the majority, and we believe what others believe.

These and other many interesting aspects of homan decision-making behavoiors are discussed in Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein. Don’t make the mistake of assuming we’re rational beings when all evidence is to the contrary.

When buying, selling & marketing examine how understanding these behaviors can work for and against you – so you are no longer a victim of your tendencies but rather a victor by seeing, rising above and utilizing the powers they hold.