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Anchors Aweigh: Cognitive Biases in the Law

By Benjamin Shute

 

Human beings are inherently rational; or so we have always thought. Throughout most of history we have readily assumed that when making decisions, human beings take account of available information, probabilities, and costs and benefits, and weigh data logically to come to a preferred outcome. This idea, formally referred to as the rational-choice model, has played a definitive role in shaping Western theories of economics, politics, and philosophy.(1) Forty years ago, two Israeli psychologists began to dismantle it entirely.

 

You could be forgiven for not immediately recognizing the names Daniel Kahneman and Amos Tversky. But these two men have fundamentally changed the way we think about the decision-making process. The founders of prospect theory, Kahneman and Tversky used cognitive psychology to explain how the human brain consistently and systematically makes mistakes when formulating judgments.(2) They have shown that rather than functioning rationally, human beings often make decisions using cognitive shortcuts, relying on biases and heuristics to come to conclusions that aren’t always rational.(3) Their work, now known more broadly as behavioral economics, has redefined the way we think about the decision-making process in a variety of professional fields.

 

The law is certainly no exception. Every day lawyers negotiate contracts, settle business disputes, and argue for judgments using deliberate, logical arguments. We operate under the assumption that we are swayed by cogent reason and little else. But behavioral economics has largely disproven this theory. Today, there is great momentum behind the idea that biases and heuristics have more of an impact on our actions than we realize. Try as we might, lawyers are just as susceptible to these systematic errors as anyone else.

 

Of the many cognitive biases that affect our decisions, one of the most influential in the legal field is the anchoring-adjustment heuristic. In his seminal work Thinking Fast and Slow, Kahneman poses two questions to illustrate the anchoring effect:

 

    Was Ghandi more or less than 144 years old when he died?

    How old was Ghandi when he died?(4)

 

We know that Ghandi didn’t die at 144 years old, but no matter how illogical the number, it will still have a lasting effect on our judgment. When presented this way, the number 144 is the anchor. It acts as a reference point for our mental calculation, and immediately gives us the impression that Ghandi died an elderly man. The suggestion has a priming affect; it selectively evokes compatible evidence in our mind as we try to conjure an image in which the anchor is the real number.(5) No matter how absurd the suggestion, it pushes us to towards a conclusion for which we have no rational basis. We may attempt to adjust downward from 144, but that adjustment is still affected by the anchor.

 

The anchoring-adjustment bias is one of the few cognitive biases that can be scientifically measured as well. Kahneman and Tversky’s research found that when primed with random numbers, the anchor given to the respondent will skew his or her response to the second question by 55%. (6) This effect even holds true for professionals who are experts in the field being examined. When they studied real-estate agents and their valuations of homes, Kahneman and Tversky found that those agents who were primed with an asking price were anchored to that number by 41%.(7) When compared with the anchoring effect on business students examining the same property, the priming effect was substantially similar. The only difference, however, was that the business students readily admitted to being influenced by the anchor.(8) The real-estate agents remained in denial. Kahneman and Tversky concluded that no matter the subject, an anchor will always have an impressionable impact on how human beings render judgments. We are innately susceptible to the power of suggestion, and the priming effect that it has on our decision making. (9)

 

The implications for the practice of law are clear. Take lawyers engaging in contract negotiations, for example. When one side makes a valuation or offer, the other will automatically be anchored to that initial price point. Their mind will immediately draw upon evidence which rationalizes the number given to them, and they will use the anchor to construct a reality in which that number can be justified. Much like the real-estate agents valuing property in Kahneman and Tversky’s study, the attorneys involved in the negotiations are vulnerable to a 41% alteration in their valuation of the contract. No matter their experience or pedigree at the negotiating table, the attorney making the initial offer has a competitive advantage over the other through the use of anchoring bias.

 

The same holds true for arguments made before a judge or jury. Though many of the issues presented at a trial are more nuanced than single-issue negotiations, the attorney who argues first has an advantage over the other by anchoring the fact-finder to the first conclusion presented. Their minds are just as vulnerable, and by anchoring them to a particular idea, they will inherently try and rationalize it using whatever evidence is available.

 

The anchoring-adjustment bias is inescapable. It is a natural function of the human mind, and lawyers should take care to recognize the effect that it can have on their work. The legal profession is dedicated to the pursuit of just outcomes, and cognitive biases can have a colossal impact on how those take place. As the fields of cognitive psychology and behavioral economics continue to develop, so too will our understanding of the human decision-making process and the heuristics that influence it. Biases and heuristics used to be misunderstood and misapplied; soon enough their use in the law may be ubiquitous and quotidian.

 

Benjamin Shute is an Assistant Commonwealth’s Attorney for Gloucester County, where he is responsible for prosecuting felony and misdemeanor offenses. He currently serves as the Young Lawyer’s Conference 6th District Representative. An Arlington County native, he was admitted to the Bar in October of 2016.

 

1. Introduction to Choice Theory, Jonathan Levin, Paul Milgrom (September, 2004).

2. Prospect Theory: An Analysis of Decision under Risk, Daniel Kahneman and Amos Tversky. Econometrica, 47(2), pp. 263-291, March 1979.

3. Id.

4. Kahneman, Daniel. “Anchors.” Thinking, Fast and Slow, Farrar, Straus and Giroux, 2015.

5. Id. at 122.

6. Id. at 124.

7. Id. at 124.

8. Id. at 124.

9. The Anchoring-and-Adjustment Heuristic: Why the Adjustments are Insufficient. Nicholas Epley and Thomas Gilovich. Association for Psychological Science, Vol. 17, No. 4, pg. 311.