Multi-Self Model and the Dual-Self Model Approaches to Self-Control Problems - Essay Example

Discussion and Analysis on Self-Control Models Introduction It is a prime issue of debate in the subjective discourse of economics that how can economic planners overcome the perceived but unexplained irrationalities often witnessed among different economic actors at different instances and in several situations. For example, researchers on the subject of quasi hyperbolic discounting have stated that economic behaviour and decision making of individuals can vary from time to time. Even if the course of such psycho-variant cognitive decision making can be diagnosed and predicted, economists have yet not been able to develop some mechanism to explain them. In this paper, first the multi-self model based approach is discussed followed by a similar discussion on the dual-self model. Next, the two models are mutually evaluated on the basis of the post economic recession situation of the world. Research Question Examine the multi-self model and the dual-self model approaches to self-control problems. Critically evaluate the respective strengths and weaknesses of each model. Multi-Self Model The multi-self model is a complex topic in behavioural economics. Authors like Ambrus and Rozen (2012) have described it as a broader conception in the form of an array of self control concepts or theories. As such, the concept of aggregator appears at the centre of this approach. The aggregator can be understood as a behavioural and psychometric mechanism that organises the available choices before the individual. The aggregator factors cumulate a suitable prioritised list of choices, and the individual’s sense of rational behaviour ultimately leads him or her to select the most appropriate one for one self. However, in the deep trenches of mind and thought processes, this one self is actually consisting of many selves. Hence, according to Ambrus and Rozen (2010), one of the most important characteristics of a given set of aggregators is that the aggregation can be dependent on the consumer’s economic utilities and objectives. Therefore, if an individual is considered as a coherence of more than one economic self, then preferences of one self may differ from that of another. Consequently, several contemporary models of “multi-self decision-making” (Ambrus and Rozen 2010, p. 2) utilise pieces of cardinal information that are embedded in the utility functions of an individual’s diverse economic selves. Aggregators being considered as the fundamentals of utility functions can also be defined as intensity of preferences, which are capable of moulding the dynamics of intra-personal economic decisions. However, this paradigm can be extended to inter-personal economic decisions too. Building upon the general implications of consumer behaviour from the perspective of market psychology and research, authors like Wilkinson and Klaes (2012, pp. 306-307) have endeavoured to explain the utilisation of multi-self models to understand and solve problem situations related to self control, economic action, game theory, etc. The authors have described the multi-self approach as one of the “alternative intertemporal choice models” (Wilkinson and Klaes 2012, p. 285) in the realm of behavioural economics. One of the main characteristics of this approach is dividing the individual economic actor in a number of psychological selves. And generally, the number of psychological selves in this approach is assumed to be greater than two. As such, an individual might contemplate on different short term, mid term, and/or long term economic benefits from dissimilar perspectives. Different economic selves that are entrenched profoundly inside one’s brain can also trigger off apparent irrationalities (Wilkinson and Klaes 2012). However, scholars who have adopted multi-self control approach tend to come up with diverse impulse control parameters and therefore, opinions regarding creation of aggregator, generation of choice prioritisation lists, preferences and irrationalities, etc. might vary from one expert to another (see for example the works of Masatlioglu, Nakajima, and Ozbay 2012). Dual-Self Model Although authors like Ambrus and Rozen (2012) have attempted to view the dual-self model as a special case of multi-self model, Wilkinson and Klaes (2012, pp. 307-309) appear to be favouring an independent treatise over the topic. According to Ambrus and Rozen (2012, p. 7), the dual-self approach gives rise to an “impulse control model with a long-run self exerting costly self-control over a short-run self.” But in order to develop a more comprehensive understanding of dual-self approach, Fudenberg and Levine’s (2006) research should be referred to directly. According to the authors, The approach of dual-self model is based on similar behavioural anomalies that have given rise to the conception of hyperbolic discounting. While dealing with decisions which affect selection of economic alternatives only, “the short-run self is indifferent, hence can be manipulated by the long run self at minimal cost” (Fudenberg and Levine 2006, pp. 1449-1451). Consequentially, the long-run self would clash with the short-run selves that gradually come up and subside with the lapse of time. The long-run self may directly interfere with the short living future selves. This happens when the long-run self is able to select a suitable utility function for the individual in proper time. However, the dual-self model also warns that this selection mechanism of suitable utility extracts a proportional “utility cost” too (Fudenberg and Levine 2006, pp. 1449-1451). A natural question in this context is that what the applicability of dual-self model as a concept is. Contextually, it should be noted that the concept of “dual-self” already attaches considerable academic significance to itself in a number of sociological research topics. For example, post-Mao socioeconomic and political conditions in China vis-à-vis the Chinese society’s drive towards individualisation and liberalism have been explained with the help of the concept of “dual-self” by Yan (2010, p. 489). Drawing another example from the field of applied behavioural economics with reference to health sciences, Heshmat (2011, p. 163) can be quoted to furnish a working definition of the specifics of this model: “The dual-system decision model can be interpreted naturally as the behavioural manifestation of a conflict between two selves: one inclined to consume more today, the other inclined to save for the future.” Hence the core pragmatic conception behind dual-self model is the very conflict among the two contrasting selves entrenched in a singular human mind. Heshmat (2011, p. 163) further states that the “short-run preference is assumed to be located in the limbic system and the long-run preferences in the lateral prefrontal cortex.” So after examining the recent and contemporary academia, it can be stated to that the dual-self model has had a considerable impact on existing self control paradigms and issues, and its practical significance is also deserving gravity. Comparative Analysis After the economic slowdown of 2008, experts in this field like Ariely (2009) started to explore that why did this slowdown take place and how come both the academia and the business world failed to forecast its entirety and global effect. Ariely has delivered a strong setback to the mainstream economics concept that a system can be operated on the assumptive fundamentals of rational behaviour. Ariely (2009) has shown that behavioural inconsistencies are practical issues that affect the standard economic paradigms around consumer behaviour, market research, etc. As early as the 1990s, researchers like Elster (1998) attempted to establish some credible relationship between human emotions and economic theory. Contextually, Thaler and Benartzi (2004) have also focussed on the factor of impulsive behaviour among arrogant spenders while researching on young and qualified executives. And in the light of the post economic depression developments, it can be deduced that it is indeed an imperative to formulate some technique that enables a researcher to differentiate rational behaviour and irrational behaviour along with detailed reasons and explanations. This is the most appropriate background study that helps a researcher to compare between the approaches of multi-self control and dual-self control. In the language of inferential statistics, irrational behaviours (occasional, randomised, or persistent) of an economic actor can be described as quasi hyperbolic discounting effects of an individual’s cognitive behaviour on his or her economic action. This cognitive behaviour may culminate at impulsive behaviour in certain situations. However, the multi-self model has a complex approach and expert opinions appear to be divided. For example, Ambrus and Rosen (2012) implemented multi-self approach for understanding intra-personal behavioural economics and developing mathematical implications in classical sense culminating at a reinforcement of the present day understanding of the issue. On the other hand, famous experts like Sen (1971) also initially concentrated on this area of behavioural economics, but later emphasised on the inter-personal aspects of the issue and developed implications to explain the importance of welfare economics (Nobel Media AB 2013). It can be stated that the multi-self approach does not appear to be giving the issue of explaining irrational behaviours some kind of a concrete solution. However, the dual-self model too has got its merits and demerits. Irrationalities in cognitive behaviour while making economic decisions have already been demonstrated by experimental knowledge of regularities as witnessed in research on self control problems (Fudenberg and Levine 2006). The prime demerit of dual-self model being its constrained treatment of the topic, it has a key feature of organising the aggregator factors. As such, despite the model focuses on just two dimensions of an economic actor’s intra-personal thought processes, the approach can help people to realise that “in certain situations, when in the other self, they may not act in their long-run self interest” (Sloan and Hsieh 2012, p. 69). Most importantly although researchers like Thaler and Benartzi (2004) have not correlated their research findings with dual-self approach directly, they have indeed established that certain economic groups may neglect their long term interests and indulge in short sited over consumption of available resources. For example, young executives time and again neglect their pension funds although they are aware and educated economic actors (Thaler and Benartzi 2004). So if Fudenberg and Levine (2006) ultimately attempt to streamline the concept of multiple economic selves, then their approach deserves credibility as utilised and pointed out by experts like Heshmat (2011). Conclusion The merit of multi-self model based approach is that it covers a wide range of possibilities and subtopics. The multi-self model provides a way for a researcher to understand the relationship between intra-personal and inter-personal thought processes of individuals. But a prime demerit of this approach is that it cannot streamline the available array of concepts which are consequential to the idea that contradictions on economic actions start seeding inside the mind of a person. On the other hand, the dual-self model of approach is highly constrained between only two categories of options. Building the parametrical constructs of the aggregator may become difficult in this approach. However, the approach appears to be highly pragmatic due to its concise treatment of the entire topic and direct focus on the key issues. Finally, it should be stated that either overspending or ultraconservative economic activities ultimately lead to unfavourable economic consequences. Understanding and analysing the role of impulsive (and also stereotypic) decisions is crucial to explore unexplainable economic activities and related irrational behaviours. List of References Ambrus, A. and Rozen, K., 2012. Rationalizing choice with multi-self models, Cowles Foundation Discussion Papers, Discussion Paper no. 1670, Yale University: Cowles Foundation Ariely, D., 2009. Predictably Irrational, New York: Harper Collins. Elster, J., 1998. Emotions and economic theory, Journal of economic literature, 36, pp. 47-74 Fudenberg, D. and Levine, D.K., 2006. A dual-self model of impulse control, The American Economic Review¸ 96, pp. 1449-1476s Heshmat, S., 2011, Eating Behaviour and Obesity: Behavioural Economics Strategies for Health Professionals, London and Heidelberg: Springer Masatlioglu, Y., Nakajima, D., and Ozbay, E.Y., 2012. Revealed attention, The American Economic Review, 102, pp. 2183-2205 Nobel Media AB, 2013. Amartya Sen – Biographical, Nobelprize.org. Available: http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1998/sen-bio.html. Last accessed on 19th December 2013 Sen, A.K. 1971. Choice functions and revealed preference, The Review of Economic Studies, 38, pp. 307-3017 Sloan F.A. and Hsieh, C.-R., 2012. Health Economics, Boston: MIT Press Thaler, R.H. and Benartzi, S., 2004. Save More Tomorrow: Using behavioural economics to increase employee saving, Journal of Political Economy, 112, pp. S164-S187 Wilkinson, N. and Klaes, M., 2012. An Introduction to Behavioural Economics, London: Palgrave Macmillan Yan, Y., 2010. The Chinese path to individualization, The British Journal of Sociology, 61, pp. 489–512 Read More