We had great weather on the May Day bank holiday. This meant that pretty much everybody around here decided to drive to Rutland Water, with the result that there were hours of gridlock on our usually empty roads.
This was a common mistake. It’s what David Navon calls the egocentric framing error – the tendency to think only from one’s own perspective. It seemed a good idea to each person to drive to Rutland Water. Thousands of these, however, failed to ask: “won’t everybody else have the same idea?” And so they spent hours of a beautiful day stuck in a car.
You might well have made a similar mistake if you’ve been stuck in traffic on a motorway. You decide to change lanes only to see the lane you’ve left move faster because other people had the same idea as you and so emptied a lane.
This costs people real money as well as time. One of the strongest mispricings in stock markets is the tendency for newly-floated stocks to be over-priced and so fall (pdf) in the months after they were issued: to take just three cases that immediately spring to mind, AA, Pets at Home and Saga are all lower now than when they were floated, despite a strong rise in the overall market.
One reason for this, I suspect, is egocentric framing. Investors think “hey, this is a great investment” without stopping to consider things from the seller’s point of view. They don’t ask: if this is such a good business, why are the folk who know most about it so keen to sell?” Exactly the same error can cause people to trade stocks too much. In fact, it can cause people to become money pumps as they fall into the “two envelopes” error.
Bad chess or (I gather) poker players often make the same mistake. They pay too much attention to their own next move and neglect to consider their opponents’ strategy.
A variant of this error is our tendency to be insufficiently self-critical of our own ideas. Like photographers, we fall in love with our models because we don’t sufficiently ask: how do these ideas look to others? We’re especially prone to this if we associate ourselves with like-minded people. When I recently complained about centrists not seeing that they are ideologues like the rest of us I was, in effect, charging them with the egocentric framing error.
There’s a reason why I say all this today. Many people agree with Ian Dunt in thinking the EU will “undoubtedly reject” Theresa May’s plan to have, in effect, membership of the single market for goods but not services. One reason why they believe rejection is likely is that the government has spent so much time negotiating among itself that it has neglected the question: what might be acceptable to the EU? As Jonathan Lis says:
The UK and EU are not speaking different languages, they are occupying different mental universes.
This, though, is egocentric framing – the inability to put yourself in the other guy’s shoes. I fear that in this case the error is magnified by our national self-delusions – our belief that we are an exceptional nation, for example that we are uniquely open to trade (despite the fact we export much less than the Germans) or that they need us more than we need them. (And of course, it's possible that the same error helps explain why ministers have not yet found a compromise among themselves).
It’s here that I lose patience. In a complex and unknowable world, it is impossible for us to optimize. Some “errors” of policy are therefore inevitable and forgivable. What we should expect of policy-makers, however, is that they avoid obvious mistakes, of which egocentric framing is one. The government, however, seems unable to do this.