Tuesday, August 7, 2012

My thesis in decision making


My thesis briefly discusses decision-making basic theory, in particular the deliberation method, and applies it to decision-making in the mining sector when making investment agreements between government and the private sector. However, decisions could be examined and applied in every industry sector. For instance, the mining sector includes many different decision making methods such as cost benefit analysis and socio-economic, environmental and health impact assessments. Every analysis and impact assessment requires different stakeholder participants and analysts from different sciences. This can sometimes make decisions more complicated. My thesis analyzes the planned Oyu Tolgoi (OT) copper and gold project in Mongolia using the Multi Account Evaluation method, which includes financial, economical, social and environmental analysis. It also briefly discusses social and environmental impacts from the Mongolian government point of view and whether this project will have a positive or negative influence on Mongolian economic and social development. My thesis also shows the current Mongolian decision-making situation and its problems.


Do We Need Non-Rational Decisions!?

What Is a Decision? A decision is a choice made by some entity of an action from some set of alternative actions (Doyle, 1999).

Good Decision: A good decision identifies an alternative that the decision maker believes will prove at least as good as other alternative actions. Various decision theories provide different definitions, such as calling a decision good if it identifies an alternative that the decision maker considers good enough (Dolye, 1999). However, decision theory has nothing to say about individual self-interest and its influence on decision making.  Because of this neglect, I focus here more on decision made by individual decision makers.

Decision analysts examine decision theories or analysis only from the external point of view. They do not account for or explain the interaction of internal and external rational decision making. They recommend that decision-makers should follow and be guided by decision-making theories in terms of producing the best decisions. However, there are many human subjective (internal) factors that influence decisions, before producing an actual decision or at least before following decision-making theories. It is very difficult to judge whether these decisions are subjectively censored or not. Nevertheless, there is having a chance that they have been cognitively censored. Here, I am not denying the use of decision-making theories. However, if we think that decisions that follow various decision-making theories are best, this is not necessarily true. Decision-making theories aimed to produce the best objective decisions. However, when individuals are making decisions subjectively they choose the best solutions for themselves but not for others. This is because what may be the best choice based on external factors can be conflict with their personal interests. There are many factors that influence a personal rational best choice decision. If a person wants to make decisions based on the best choice for others, it may hamper his or her interest or conflict with his inner world or badly influence his or her next career, dignity, or even impede others’ interest. Therefore, a person can try to omit or eliminate information from the decision that is harmful to others or conflicts with his interest but it simultaneously reduces the decision’s quality. He himself rationally calculates all these factors and makes decisions that are best for him but not for others. However, we cannot distinguish and guess whether this decision reflected his interest or whether is a distorted decision. People make sequential decisions based on other people’s biased decisions. It is also difficult to know whether this decision is better or worse. As a result real world decisions may be distorted and not based on the best solutions and choices. 

Individually determined rational decisions cannot be helpful all the time to a society and they could well be irrational decisions in terms of the larger society. Similarly, decisions that are irrational in terms of an individual can be exact, honest, direct and helpful to the society and others. This is because, he or she has not calculated their own interests when making the decision. Therefore, it can be risky to them. However, not many people take such risks and are usually afraid of other negative consequences. Even if some people take such risks, it can be harmful to his or her career and life, or at the very least not beneficial in the long-run. People often do not like honest and straight people, but such people can help to improve society. How we should describe them? Irrational or rational or brave?  On the other hand, do rational or egotistical people really help society or produce good decisions?  Maybe some really influential and brave leaders can make this kind of decision. On the other hand, the story of the Emperor's new clothes comes to mind. “The emperor is naked,” yelled a little boy, because children’s minds are not corrupted yet and no other external mature factors influenced his perception. However, adults say nothing even when they know something to be true, because they are afraid to take a risk. Does it really, one of the big illustrations of self-centered human behavior, how we should distinguish it, is it rational or irrational? This kind of behavior widespread throughout the whole society. Society’s decisions are based on individuals’ theoretically rational, but in real life, irrational decisions and opinions. Therefore, can we call it fully rational choice or the best decision? It will be always problematic to do so. Therefore, maybe, concepts of democratic systems are based on, or seek to prevent, protecting society from the individuals' harmful self-interest. Therefore, a strong civil society and oversight mechanisms are needed. Sometimes they work, sometimes not. However, this system works only for the major decision and policy makers. How about the rest of society's members? Therefore, a question is raised: do we need more individual irrational decisions? [1]

Similar characteristics can be illustrated at the organizational, national and international level decision-making process. But this time organizations make decisions that are best for themselves but maybe not necessarily for other organizations. Nations make decisions that are best for their own interest but not internationally. Each level of decision-making conflicts with others. Do we really have the possibility to make decisions that are best for all? There are additional factors that reduced the quality of decisions. As Simon noted, “full” rationality implied by the rational choice model was an unrealistic standard for human judgment. He proposed a more limited criterion for actual performance, famously dubbed bounded rationality, that acknowledged the inherent processing limitations of the human mind. People reason and choose rationally, but only within the constraints imposed by their limited search and computational capacities (Simon,1957).
Therefore when decisions come to the real world they are subjectively censored by individual interests and simultaneously hindered by other factors such as limited search abilities and a lack of computational capacity, and even conflict with other level decisions. 
However, this idea does not propose an answer, but only seeks to explain why real world decisions cannot be the best that are theoretically possible.

Doyle and Thomason,1999.  Background to Qualitative Decision Theory, AI Magazine, Vol. 20, No. 2 (Summer 1999), pp. 55-68. http://www.csc.ncsu.edu/faculty/doyle/publications/qdt99.pdf

Kahneman et al, 2002, Heuristics and biases: The Psychology of Intuitive Judgment, Cambridge University Press 2002

[1]                      Here, I have not taken into account other irrational human behavior such as stupidity, etc. and other influential factors (risk, uncertainty). I have also not considered decisions about irrational objectives. In addition, an individual’s internal factors are most relevant in social science or social life decisions, but do not apply as much to other sciences such as technical or engineering fields or philosophy. However, people, organizations or nations can intentionally use other sciences (such as chemistry, physics, biology) for purposes such as meeting their own selfish interests rather than the ends of the science itself.