Status quo bias

I am fascinated by cognitive biases and heuristics which are part of the growing field of behavioral econonomics. I’ve written about a cognitive bias known as “The Dunning-Krueger effect” before, but today I’d like to discuss one that I see quite often at work – the “status quo bias”.

The status quo bias occurs when people prefer that things stay the same by doing nothing or by sticking to a previous decision because any change is perceived as a loss. In fact, it is actually a variation of the loss aversion bias.

This bias impacts people’s decision-making and has a number of attributes. On one end, we have a person weighing up the value of the gain vs the value of loss of any change/deviation from the status quo; they then weight the loss more heavily than the gain. A pure, logical analysis that makes perfect sense right? And this I think is what people probably think that they do.

But the reality is that change has a transaction cost (i.e. making a decision incurs a cost in the form of mental energy). Our evolution as humans has developed a built in mechanism for taking short-cuts (“rules of thumb”, etc) that allow us to make decisions more quickly without using too much brain power. Back in our cave-man days, this often meant the difference between eating or being eaten. These shortcuts are called heuristics.

The reality is that often we choose the status quo because it is an easier choice and that is all. It is easier to stay the same because what we are doing is known and the changed behavior/choice is unknown or uncertain. We are comfortable with what we have and even if we don’t really like it, we are used to it. We are unsure. “When in doubt, do nothing” as the saying goes. We rationalise our decision as a choice made by free will and a thorough analysis, but we all know that this is not often true.

Decision-making is difficult and costly. Think about a restaurant that has a menu that is ten pages long with hundreds of options. Often, we can’t make a choice and so defer to the waiter and ask “what do you recommend?”. Difficult choices cause a bias towards inaction and that is what happens to us many times every day.

The status quo bias is also demonstrated in what is known as the default position. To save the hassle of making a complicated decision, many people will simply accept the default option (also known as an opt-out plan). For example, getting people to opt-in to a pension plan at work is more difficult because a choice is nessary compared with automatically enrolling employees and allowing them to opt-out (far fewer people ever opt-out). This basic approach is actually being used in many countries with organ donor cards.

But this sort of default option is not always the optimal solution for someone. Have a look at this quote from a paper called “Overcoming status quo bias in the human brain” where the authors studied fMRI scans of people making decisions to understand the “cost” of decision making on our brains.

Our results show that participants are more likely to accept the status quo when faced with difficult choices, leading to more errors. This suboptimal choice behavior implies that the status quo bias may disconnect people’s preferences from their subsequent choices. For example, employees often accept a company’s default retirement plan even if it leads to poorer investments (26). Similarly, consumers become impassive in the face of overwhelming choice, leading to a fall in the number of purchases (3). Common to both these scenarios is a difficult decision and the opportunity to remain with the status quo.

They concluded that the brain actually sprung into action when initially rejecting the default position.

The main thing here is that decisions are tough and we are “hard wired” to have a preference for the status quo; but it doesn’t mean that we always must. Don’t say no to change because it feels right or it is easier… recognise this in-built cognitive bias and fight the temptation to stay the same, do the same, or to simply say no.

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