Epidemics as Tests of Rationality

One of the fascinating angles that a health epidemic such as the current Corona outbreak brings to the forth is the degree to which humans can (or cannot) be approximated as rational agents. We would like to think of ourselves as rational beings, but as the growing field of behavioral economics has shown, reality is far from it. A real human made of flesh and blood is far from the rational contemplating platonic agent we hope it to be. To put it differently, it looks like our brains have certain bugs (or features, depending on how one look at it) which become especially noticeable under certain new conditions.

As an example, it seems like our rationality is particularly vulnerable whenever we are faced with situations that involve probabilities. Most people have no problem handling judgments that require basic mathematical operations like addition or multiplication or even more complex operations such as solving equations. However, the same people often cannot make rational conclusions when faced even with the simplest situations that involve probabilities or statistics. There has been many excellent works that have shown these deficiencies in detail. For example, Daniel Kahneman's Thinking Fast and Slow is a classic and detailed study of the subject.1

One of these shortcomings that helps us understand the reactions to the current Corona outbreak better is what Kahneman calls the "availability" heuristics. This is the case where people make decisions or judgments about the probability of an event based on examples or instances of that event that they can access most easily. In the current context, this means judging the severity of the situation based on the most readily available examples or images. And because for most people the news outlets are their window to the reality, and because those outlets are saturated with news about the Corona outbreak, the natural conclusion is to associate a very high risk with the corona virus. In other words, the public perception of the risk associated with the virus is almost independent of the actual statistics and data. That there is a higher risk of dying from the flu than from Covid19 (at least as of now) does not seem to matter.

This non-rational response has profound effects as it tends to be amplified in situations involving closed positive feedback loops, leading to unstable behavior. As a result, we have witnessed the biggest drop in the financial markets in the past few days since the depression of 2008. In other words, we panic not because of some real world reality, but because others have panicked. And our panic causes more panics in others, which in turn causes more panic in us, etc. Clearly, this outbreak is far more than an infectious disease outbreak. It is also a laboratory for studying the nature of human behavior.

~~ Moe Azadeh

1. Daniel Kahneman, Thinking Fast and Slow, Farrar, Straus and Giroux, 2011.