As someone who studies human behavior, I understand that people are not rational thinkers. Economists think we can be rational, but most people don’t need to read a book to conclude that humans tend to err on the side of the illogical. If you’ve ever interacted with people, you know we can be downright baffling! This is because we are humans, not robots, and we don’t always make sense, at least to the naked eye. The emergence of behavioral economics from Daniel Kahneman, and his friends like Barry Schwartz, offer a deeper understanding of how and why people make choices.
Unless you are a robot, chances are you hate losses. And not just when your favorite sports team loses. We feel loss more intensely than we feel gains and we don’t like to give things up! Even if we never spent a dime on it. Studies have given us great insight in reference to our psychology in holding on to common items, but I believe these theories apply to more pertinent issues, such as the widening wealth gap and racial inequities that permeate all of our lives. The lesson that activists, policy makers, and concerned citizens can gleam from behavioral economics is that equity is not a loss or a risk, it’s a gain.
It can be difficult to give up things that we feel are a part of us, even when we’d be better off without them. The fancy (aka academic) term for this is prospect theory. To simplify, we dislike losing more than we like to win because we feel loss more astutely (two to three times more than gain). For this reason, most people are risk averse, a perspective that is critical to reframe and reorient.
As a resident of Boston, I cannot keep up with the number of articles and reports that alert residents to the high income inequality among neighbors and throughout our communities. This is not just a challenge that my neighbors and I feel, although we were just ranked number one for city income inequality (and just like when the Patriots lose, it’s not something we boast about). Other cities throughout our country, from Washington, D.C. to Portland, Oregon share similar quandaries. Things are getting worse.
This is not something I need a newspaper or NPR to tell me. I have already moved out of what was once an affordable neighborhood due to severe cost of living increases. The truth is, even as someone who holds a Master’s degree from a prestigious ivy league institution, if my landlord raised the rent my boyfriend and I would be dislocated. In fact, we may not even be able to remain Boston residents. Since communities across the Greater Boston area are all experiencing cost of living hikes, it would be hard to come across affordable housing that also happens to be accessible to public transportation for work commutes.
This is not a new phenomenon. It is something that communities of color, primarily black and Latino, know too well. We can read all over the country, from Brooklyn to Oakland, that more affluent residents are moving into historically low income urban communities and “revitalizing” them. Revitalization is often framed as a gain: new restaurants, boutique fitness centers, and fancy coffee shops on the corner. But for the residents being displaced, these changes are synonymous with gentrification. If we take a long term view, and look past the fancy cheese shops moving in, this has a lasting negative effect on all of us. Be cautious not to be fooled by something that looks like a gain. Higher income people think that having a Whole Foods in the floor of their residential building makes their lives better, and in truth it does not; especially for those who have a lovely view of an interstate from their window.
Ironically, as a result of the law of diminishing marginal utility, the more wealth is acquired the less incremental satisfaction people feel. There is a certain amount of money that does influence happiness, but after that point satisfaction increases at a decreasing rate. While the rich are getting richer the poor are getting poorer, and everyone’s well-being is declining because of it.
There are lots of ways to look at the loss this wealth divide is creating. Those in the millennial generation spend a lot more on costs of living than buying houses, purchasing cars, and putting money toward retirement. We see the negative impact concentrated poverty has on everyone, not just those who are lower income. Another factor that perpetuates and exacerbates this disparity is race. The schools and early education centers that educate predominately black and Latino children are not of the same caliber or quality as resource rich schools found in white neighborhoods. Consider what that means for children of color who outnumber white students in classrooms across America.
I can continue to list major social issues and injustices of our time, but the truth is none of it matters. I could arm you with data and facts, but the reality is it wouldn’t adequately prepare you to be a changemaker without knowing what influences decision making. I know this from personal experiences trying to reason with people, as well as by looking at the trajectory of our country. Perhaps, dear reader, you’re like me and have tried various tactics to sway the opposition to see your side on matters such as these. Or maybe you are the person that gives general push back on these concepts. The technique I most frequently deploy is the one where you spit facts, on facts, on facts. Despite stating facts, a debate opponent may respond with something nonsensical. If emotions fuel your reaction, you may reply with more rationale, laced with disdain for your opponent who is so vehemently wrong. The only problem with such a technique is that it’s not effective, unless you want to turn loved ones into enemies and rivals. Again, this is quintessential human behavior, if we were rational thinkers we would be robots. As much as I like to debate and convince with reports and data, it has never worked well. My opponents typically don’t budge, while my frustration is fueled by lots of energy that could be applied elsewhere. This frustration is what led me to study human behavior. I couldn’t understand why so often, even when we know facts, we are unwilling to change our minds or actions.
An opinion poll on race relations in the United States released last year showed that both whites (60%) and blacks (58%) felt race relations worsened in the last year. The poll also asked if African Americans and whites have the same opportunities and equal justice. There was a clear distinction between respondents; 87 percent of blacks said they did not, while 50 percent of whites said they did.
Those with substantial financial and influential power have more to lose, and are thus averse to the risk of change. I believe that privileges and advantages have a similar effect. I didn’t do anything to be born a white woman, but I inherited a lot of privileges because of my skin color. This applies to anyone born with privilege: male privilege, able bodied privilege, etc. Chances are if we could to lose some of that privilege for others to gain, most people would choose not to. This is a painful truth. I care deeply about these systemic social issues way more than those clothes in my closet, but the same concepts apply.
Anyone who experiences privilege has a reference point they’ve developed through living in the world as they are. It is simply all they know. It’s not surprising that many privileged people, particularly those who are upper middle class, white and/or men, are not in solidarity with low income people of color and/or women (not an extensive list of privileged and historically oppressed/marginalized groups). Often, the way we discuss these issues is focused on loss, or a taking away, even if those are not the explicit words used.
While it’s easy to villainize individuals who hold on tight to their privilege and power, I think social change agents can use prospect theory to our advantage if we can find a way to offer a lens that compensates for inherent cognitive bias. Reframing the way we evaluate risk, loss, and gain could have a drastic influence on moving the proverbial needle, while bringing various reference points to neutral. It is then we can begin to clean out our metaphorical closet and dispose of this mentality that we, as a culture, have inherited — one which neither serves our shared humanity, nor addresses our common fate.