Chapter 1
INTRODUCTION TO INTUITION
1.1 Introduction
Homo economicus is a rational individual calculating costs and benefits
at the margin. John Neville Keynes, in his book, The Scope and Method of
Economics (Keynes, 1955), asserts that the basic principles of economics,
including the principle of rational behavior is a priori. Thus, what is known
precedes and is also independent of observations. The “facts of human
nature,” according to J.N. Keynes, are not directly observed, but are the
result of “an introspective survey” (ibid, p. 173). Economic laws, including
the law of rational behavior, are thus derived from facts about human nature
which are intuitive or obvious. As we shall see, the apple (John Maynard
Keynes) never falls far from the tree (John Neville Keynes).
Max Weber argued that because we are human beings we understand the
motives behind human behavior through our own introspections. For Weber,
“This verstehen, or intuitive understanding of human motivation, is what
distinguishes the human sciences from the physical sciences” (Lewin, 1996,
1298). Adam Smith, explicitly in The Theory of Moral Sentiments (Smith,
1969), and implicitly in An Inquiry into The Nature and Causes of the Wealth
of Nations (Smith, 1937) would have said it differently. However, the
message is similar. For Smith the message is that intuition, he preferred the
word “sympathy,” is integral in both moral judgments and the invisible hand
of the market. Despite some trends to the contrary, the majority opinion on
this subject within the economics profession today is that economics as a
science has little need for verstehen or intuition, or concepts such as
consciousness, or understanding. These concepts are regarded as a
“meaningless pursuit” because science should limit itself to “observable
empirical regularities” (ibid, 1305) and hence to describing these regularities.
The economists discussed in this book assume, explicitly or implicitly,
that we live in a world replete with uncertainty, and that human behavior can
be unpredictable, even capricious. This makes describing empirical
regularities very difficult. With the possible exception of John Stuart Mill,
the economists discussed in this book considered intuition a resource for
dealing with uncertainty rather than a ‘meaningless pursuit.’ The economists
discussed in this book also assumed, explicitly or implicitly, that humans
have two minds, although it is intuitively obvious that they do not mean this
literally. The two minds – two ways of knowing, thinking, or processing
information – are the analytical and the intuitive mind, and they are
complementary with each other.
There are several variations of the idea of two minds. Steve Sloman, in
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his article “Two Systems of Reasoning” (Sloman, 2002), says that we follow
our “noses” but feel compelled to justify our behaviors with reasons. Sloman
distinguishes the Associative System of reasoning from the Rule-Based
system. Forms of associative reasoning include intuition, imagination, and
associative memory. Forms of rule-based reasoning are deliberation, formal
analysis, and strategic memory. Sloman presents evidence from several
studies showing that intuition and analysis often lead to similar judgments. In
addition, he points out that analytically based judgments become more
intuitive (common sense, or intuitively obvious) over time. Others have
classified the dual processing system as experiential and rational (Epstein,
1994), intuition and analysis (Hammond, 1996), narrative and logioscientific
(Bruner, 1986), and mystic and savant (Bergland, 1985). Michael Polanyi
refers to this duality as the intuitive and the formal (Polanyi, 1974,
131).Robin Hogarth in his book, Educating Intuition generalizes this point,
saying that “humans have a variety of different information-processing
systems that vary from the innate to the fully conscious, that most of these
systems operate continuously…” (Hogarth, 2001, 179).
There are a few basic issues that must be discussed at the beginning of
this book: What is intuition? Are intuitions always correct? Is intuition an
inherently metaphysical concept?
1.2 What Is Intuition?
The Oxford English Dictionary lists several definition and uses of the
word intuition including the five listed here. First, “The action of looking
upon or into; contemplation; inspection; a sight or view” (Oxford, vol 8, p
29). Second, “The action of mentally looking at; contemplation;
consideration; perception, recognition; mental view” (ibid, pp. 29-30). Third,
“The spiritual perception or immediate knowledge, ascribed to angelic and
spiritual beings, with whom vision and knowledge are identical” (ibid, p. 30).
Fourth, “The immediate apprehension of an object by the mind without the
intervention of any reasoning process.” Fifth, an “Immediate apprehension
by the intellect alone” (ibid, p. 30. An example of this fifth definition is from
a 1659 publication, “This is that Tree of Knowledge…which instructs
not…by sad and costly experience, but by fair and safe intuitions” (ibid, p.
30).
Meanings and examples are also listed for the word intuitive. First,
“Intuitive (Intellectual Sight) when we perceive the Agreement or
Disagreement of one Idea with another immediately and by themselves,
without the Mediation of any other idea.” Second, “Not acquired by
learning; innate.” Third, “…immediate apprehension; opposed to discursive.”
Fourth, “The swift power of intuitive discernment…” Fifth, “The truths of
Arithmetic, intuitive or not, certainly cannot be acquired independently of
experience.” Sixth, “I conceive that most of the highest truths are…intuitive;
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Introduction to Intuition
that is, they need neither explanation nor proof, but if not known before are
assented to as soon as stated.” Thus, intuition is concerned with knowledge
gained swiftly and immediately, and seemingly obvious, not involving the
process of analysis, but giving the intuitor, whether human or angelic, a sense
of having a inside view of a thing or a relationship between or among things
(ibid, page 31).
1.3 Intuition is a ‘Measure of Our Ignorance’
Productivity, measured as output growth not accounted for by inputs
growth, is often referred to as a measure of our ignorance. Intuition is not a
conscious analytical -- logical, sequential, step-by-step, and reasoned -process of thinking. Intuition is, therefore, what it is not, and as such is a
measure of our ignorance. Robin Hogarth, in Educating Intuition, lists the
characteristics of intuition as speed of knowing, immediate cognition, the
absence of rational or deliberate thought, knowing without knowing how you
know, knowing without the use of a conscious step-by-step process (Hogarth,
2001).
Mario Bunge, in Intuition and Science, says that intuition is “the
collection of odds and ends where we place all the intellectual mechanisms
which we do not know how to analyze or even name with precision, or which
we are not interested in analyzing or naming” (Bunge, p. 68). Bunge lists
several characteristics of “the scientist’s intuition,” including quick
identification, clear understanding of the meaning of something or the
interrelationship of several things, the ability for easy and correct
interpretation of equations or formulas, imaging or representing abstract
entities or objects transcending the senses, designing appropriate metaphors,
creative imagination leading to new ideas or discoveries, quick inference,
synthesizing separate ideas into a new coherent system, insight or sound
judgment, and common sense (Bunge, pp. 67-111).
Peter Medawar, in Induction and Intuition in Scientific Thought
(Medawar, 1969), says that intuition takes four forms. First, deductive
intuition, meaning “perceiving logical implications instantly; seeing at once
what follows from holding certain views.” Second, inductive intuition,
meaning “thinking up or hitting on a hypothesis from which whatever we
may wish to explain will follow logically.” Third, “the instant apprehension
of analogy.” And fourth, “thinking up or thinking out an experiment which
provides a really searching test of a hypothesis… experimental flair or
insight” (ibid., p. 56-7). However, he says that scientists are reluctant to use
the term intuition because “Scientists are usually too prod or too shy to speak
about creativity and ‘creative imagination’; they feel it to be incompatible
with their conception of themselves as ‘men of facts’ and rigorous inductive
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Two Minds
judgments” (ibid., p. 55).
Let me add three other, complementary, forms of our intuitions. First,
intuition is the vision or inspiration behind a stated axiom. John Locke was
one of many 17th. Century writers who spoke about intuition as an axiom.
According to Locke, an intuition occurs when the mind perceives a
relationship (or lack of one) between two ideas immediately, directly, and
with a sense of certainty such that proof is not required. For example, he held
it to be an intuition that 2 + 2 = 4, or that a triangle has three sides.
Reasoning, on the other hand, is the mind perceiving a relationship (or lack
of) between two ideas indirectly, that is, using intermediate ideas in order to
do so. Reasoning is thus “indirect intuition.” Locke also considered intuition
to be rapid reasoning (Locke, 1894, vol. 2, p. 179), and complementary with
conscious reasoning.
Second, intuition as a pre-analytic vision. An intuition is a vision which
precedes, motivates, and guides analytical thinking. According to Joseph
Schumpeter (Schumpeter, 1954) intuition” is a “pre-analytic cognitive act
that supplies the raw material for the analytical effort” (ibid., p.41). The
vision motivating analytical thinking is “the first perception or impression of
the phenomena to be investigated” (ibid., p. 570). How do we acquire our
vision of a set of phenomena? Schumpeter says we acquire it “intuitively.…
This should be obvious. If it is not, this is owing to the fact that in practice
we mostly do not start from a vision of our own but from the work of our
predecessors or from ideas that float in the public mind” (ibid., p. 562).
Third, intuition as expert decision making. Herbert Simon (Simon, 1978,
1989) is a chief proponent of this definition of intuition. Logical processes
means conscious thinking which can be expressed in words or other symbols
such as mathematics. In logical processes, goals and alternatives are
specified, as are the costs and/or benefits of the alternatives. Non-logical
processes are subconscious, and hence are not part of the conscious
reasoning process. Non-logical processes “are only made known by a
judgement, decision, or action” (Simon, 1989, p. 24). Hence, the individual
can give neither an account of the process of decision making nor how they
judge it to be correct. Despite this, the individual often reports great
confidence in their, intuitive decision. In Administrative Behavior, Hebert
Simon (Simon, 1978), expressed a discomfort with these ideas because he
did not understand precisely what unconscious processes resulted in
intuition. It was when computers began to ‘play’ chess that Simon starting
putting together pieces of the role of the unconscious and intuition and began
writing about it.
In addition, intuition is also associated with a wide range of everyday
phenomena, from decisions by stock brokers, sensing danger, “picking up”
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Introduction to Intuition
good or bad vibes about strangers you have just met, parents knowing the
emotional state of their children, and everyday “woman’s intuition.” In
addition, intuition may be part of our “cultural capital,” or our cultural
heritage. This consists of the ways we see and interpret the world, people,
and events. This was one of Mill’s interpretation of intuition, and a reason
Mill assumed that most of what we call intuition is culturally defined
conventions and beliefs whose source we can not identify.
1.2.2. The Value of Harnessing a Strong Intellect to a Strong Intuition
The discussions by Medawar, Hogarth, and Bunge point to a “mystical”
element to intuition. Bunge’s quote, that intuition is “the collection of odds
and ends where we place all the intellectual mechanisms which we do not
know how to analyze or even name with precision, or which we are not
interested in analyzing or naming,” expresses the mystical element of
intuition (Bunge, p. 68). Jacques Hadamard in, The Psychology of Invention
in the Mathematical Field, adds to this discussion of a mystical element by
discusses intuition in a chapter titled, “Paradoxical Cases of Intuition.” The
paradoxes are cases of scientists who made breakthroughs in knowledge in
ways that defy logic. For example, Pierre de Fermat (1601-1661)
showed that xm + ym = zm
“is impossible in integral numbers (x, y, z
different from 0; m greater than 2; but the margin does not leave me room
enough to inscribe the proof” (Hadamard, p. 116). What was the proof?
Partial proofs have been found. However, they “required the help of some
algebraic theories of which no knowledge existed in the time of Fermat, and
no conception appears in his writings (Hadamard, p. 117). Hadamard
concludes that Fermat’s theorem is “mysterious.” Bernard Riemann’s (1826
– 1866) work on the distribution of prime numbers is another of the great
mysteries in mathematics. Riemann, who had “extraordinary intuitive power”
(Hadamard, p. 117), did not leave proofs of all his work because “I did not
succeed in simplifying enough to publish it” (Hadamard, p. 118). The facts
needed to prove some of his theorems require “facts which were completely
unknown in his time; and … it is hardly conceivable how he can have found
it without using some … general principles, no mention of which is made in
his paper” (Hadamard, p. 118).
One of Evariste Galois’s (1811 – 1831) theorems about integrals “could
not have been understood by scientists living at the time of Galois… It must
be admitted, therefore: (1) that Galois must have conceived these principles
in some way; (2) that they must have been unconscious in his mind, since he
makes no allusion to them, though they by “themselves represent a
significant discovery” (Hadamard, pp. 119 – 120). Albert Einstein,
emphasizing the complementarity of intuition and experience, spoke of
scientific discovery by stating that “There is no logical path leading to these
laws [of nature], but only intuition, supported by sympathetic understanding
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Two Minds
of experience” (Miller, p. 369). Intuition is, therefore, a feel for nature. This
comes in handy because “… scientific thought is a development of prescientific thought” (Miller, p. 340). And, “All great achievements of science
start from intuitive knowledge, namely in axioms, from which deductions are
then made… Intuition is the necessary condition for the discovery of such
axioms” (Miller, p. 204). In other words, intuition is a catalyst for logical
analysis. Einstein also defined intuition as the ability to distinguish
fundamental from non-fundamental problems in your field of interest.
After Einstein failed at economics he considered mathematics as a
career. However, he choose physics because he had an intuitive flash that
“my intuition was not strong enough in the fields of mathematics in order to
differentiate clearly the fundamentally important, that which is really basic,
from the rest of the more or less dispensable erudition” (Miller, p. 369). In
other words, Einstein intuited that his intuition wasn’t strong enough to
distinguish the mathematical forest from the mathematical trees. Einstein
also associated intuition with visual imagery. When a particular image
appears in the mind’s eye often enough it begins to connect apparently
unrelated ideas leading to models and theories. In Einstein’s case he
visualized riding a beam of light and wondering whether he could see
himself in a mirror he was holding. A result of this extraordinary inner
process is his theory of relativity.
Henri Poincare said that “To make geometry, or to make any science,
something else than pure logic is necessary. To designate this something else
we have no word other than intuition” (Miller, p. 353). In 1881 Poincare
discovered automorphic functions. In his description of his own mental
process which he used to make this discovery Poincare described cycles of
thought from conscious thought to unconscious thought or rest, to sudden
illumination, and then verification via more conscious thought. About the
existence of unconscious thought he simply said that “What strikes us
immediately are these appearances of sudden illumination, obvious
indications of a long period of previous unconscious work” (Miller, p. 354).
The unconscious mind, or intuition, contributes by selecting and combining
facts assembled during conscious work. How does this happen? “The rules
that guide choices are extremely subtle and delicate, and it is practically
impossible to state them in precise language; they must be felt rather than
formulated” (Miller, p. 354). Clearly, in his view intuition is a catalyst for a
vision and subsequent analysis via logic. In “Mathematical Definitions of
Education” (1904) he stated “It is by logic we prove, it is by intuition we
invent” (Miller, p. 351). In 1908 he stated that “Logic, therefore, remains
barren unless fertilized by intuition” (Miller, p. 351).
Jonas Salk saw intuition and analysis, he used the word reason, as being
complementary with each other. In Anatomy of Reality, Salk (1983) says
“Our subjective responses (intuitional) are more sensitive and more rapid
than our objective responses (reasoned). This is in the nature of the way the
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Introduction to Intuition
mind works. We first sense and then we reason why. Intuition is an innate
quality, but it can be developed and cultivated… Intuition may be seen as a
continuation or extension of ‘natural’ processes, like instinct, for example.
Reason may be seen as that which man adds to explain his intuitive sense…
Intuition must be allowed free rein and be allowed to play… The intuitive
mind establishes the parameters, the premises on the basis of which reason is
formulated to correspond to intuitively perceived patterns. The intuitive and
reasoning realms operate separately and together… I suspect that if
appropriately cultivated, the two would work best together if the intuition
were liberated from bondage and constraints, and put in charge of a
respectful thinker” (Salk, pp. 79 – 80).
As a young man he would imagine himself in the place of someone or
something else. As a scientist he did the same: “I would picture myself as a
virus, or as a cancer cell… I would also imagine myself as the immune
system, and I would try to reconstruct what I would do as an immune system
engaged in combating a virus or a cell. When I had played through a series of
such scenarios on a particular problem and had acquired new insights, I
would design laboratory experiments accordingly… Based upon the results
of the experiment, I would then know what question to ask next… When I
observed phenomena in the laboratory that I did not understand, I would also
ask questions as if interrogating myself: ‘Why would I do that if I were a
virus or a cancer cell, or the immune system?’ Before long, this internal
dialogue became second nature to me; I found that my mind worked this way
all the time” (Salk, p. 7, fn B).
James Watson’s, The Double Helix provides an excellent account of how
scientists work and make discoveries. The book is Watson’s account of how
he and Francis Crick, two young scientists who were “long shots” to discover
the structure of DNA, came upon one of the great scientific discoveries. The
account is one of two scientists working in an environment filled with
everyday human emotions and concerns, thinking analytically and open to
their intuitions. The account includes their ideas which resulted in dead ends,
their frustrations, their drinking, hiding their work from their
colleague/competitors as well as possible, and their unprofessional treatment
of Rosalind Franklin. In the Preface to the book, Watson says, “As I hope
this book will show, science seldom proceeds in a straightforward logical
manner imagined by outsiders. Instead, its steps forward (and sometimes
backward) are often very human events in which personalities and cultural
traditions play major roles” (Watson, p. 3).
Watson describes how common sense – that which is intuitively obvious
– rather than “complicated mathematical reasoning” was what set Linus
Pauling’s work apart from others. Pauling is a two time winner of the Nobel
Prize (1954 in chemistry; 1962 Nobel Peace Prize) and at the time – the early
1950’s -- a much respected scientist. Watson and Crick employed the same
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Two Minds
“technique – look for the simply common sense solution. Watson says that
“Worrying about complications before ruling out the possibility that the
answer was simple would have been damned foolishness. Pauling never got
anywhere by seeking out messes” (Watson, p. 34). Watson also speaks about
how their “best guesses” and their “chemical intuition” led them to reject
certain ideas and accept others. At the same time they also looked for data
which would be inconsistent with their hunches, guesses and intuitions. In
summary we can say that the value of harnessing a strong intellect to a strong
intuition is, as the above examples show, insight, creativity, scientific
breakthroughs.
1.2.3 As If Metaphors
Arthur Miller, in his book Insights of Genius. Imagery and Creativity in
Science and Art (22) says that analogies and metaphors make use of nonlogical reasoning often based on visual imagery. The German word for
intuition is Anschauung, which can be translated as visualization. Using
metaphors and analogies is a way to conceptualize or describe something
which seems more abstract and is less well understood in terms of something
which seems less abstract and is better understood. Thus, according to
philosopher Max Black, “Every metaphor is the tip of a submerged model”
(Miller, p. 223). The intuition is submerged, the metaphor expresses it.
Analogies and metaphors often take the as if form. For example, in the
1860’s the physicist James Clerk Maxwell said that the electromagnetic field
acts as if it were “a collection of wheels, pulleys and fluids” (Miller, p. 221).
In 1905 Einstein said wrote that “Under certain circumstances light behaves
as if it were comprised of particles” (Miller, p. 246). In 1913, the physicist
Niels Bohr said that the atom behaves as if it were a “minuscule solar
system” (Miller, p. 225). In 1897 the electron was said to behave as if it is a
charged billiard ball. In each case, the (as if) metaphor creates a mapping
between a well understood subject (wheels, pulleys, fluids, or; solar system)
with a badly understood subject (electromagnetic field, or the atom). Milton
Friedman used the as if form of a metaphor to state that an expert billiard
player makes shots as if they “knew the complicated mathematical formulas
that would give the optimum directions of travel…could make lightening
calculations from the formulas,” and could do what the formulas require
(Friedman, 1953, p. 21). Friedman was arguing why a theory’s assumptions
do not matter.
1.2.4 Science Progresses Funeral by Funeral
Max Planck authored the statement, science proceeds funeral by funeral,
and Paul Samuelson sees it applying to economics (Samuelson, 1998, p.
1378). Science progresses funeral by funeral, by one idea replacing another.
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Introduction to Intuition
The problem with common sense is that it changes over time. While it may
seem counter-intuitive that common sense changes, it actually is intuitively
obvious to the casual observer that it does change! What seems
extraordinary, even ridiculous at one point in time, becomes over time,
common sense. but only to be replaced eventually by a new common sense.
Once upon a time it was common sense that the earth was at the center of the
universe. Once upon a time it was common sense that nature could not
contain a vacuum. Once upon a time it was common sense that heavier
objects fall faster than lighter objects. Galileo’s thought experiments in his
“mind’s eye,” that is his intuition, led to the new common sense (at least
among physicists) that all objects fall through a vacuum at the same speed.
Once upon a time Newtonian physics was common sense (at least among
physicists). It was replaced by the common sense of Einstein’s special theory
of relativity. Einstein believed that science is a way of transcending our
senses by allowing our intuition to transcend our senses.
1.2.5 Intuition as a Personality Type
Carl Jung, a pioneer in psychoanalysis along with Freud, listed four
major mental functions as part of identifying different personality types
(Jung, 1971). Among the four mental functions two are perceptive functions
and two are judgmental functions. The perceptive functions indicate whether
a person primarily gathers information by using the five senses, or through
intuition. Using intuition means perceiving implications and possibilities of
sensory data, the general direction of events, and the ‘big picture’ without
simultaneously perceiving the details. It also means listening to an inner
voice, as John Stuart Mill did at the onset of his famous mental crises, and
recognizing patterns, written about eloquently by Herbert Simon.
The judgment functions indicate whether we make decisions based on
thinking (logic) or feeling (emotions). The four “primary” personality types
are thus sensation, intuition, thinking, and feeling. Each of the four primary
types are then classified as either introverted (preferring the inner subjective
world) or extroverted (preferring the outer objective world), thus yielding
eight personality types. The introverted – intuitive may be either a mystic, a
dreamer, an artist, or a “crank,” often having trouble communicating their
insights. An extroverted – intuitive is more likely to be an innovator,
inventor, or entrepreneur, but a poor manager.
1.2.6 The Brain
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Two Minds
The human brain weighs three pounds and is the size of a grapefruit. It
contains approximately 180 billion cells or neurons, each of which is
physically independent of every other cell but which interact with other cells,
making the number of neuron interconnections in excess of the estimated
number of atoms in the known universe! Research on the brain dates back to
at least 450 B.C. when Hippocrates, the founder of modern medicine,
declared that the brain, and not the heart, was the source of pleasure and pain,
and judgment. Almost 2500 years before Roger Sperry, Hippocrates stated
that the brain seemed to function in two distinct ways. In 1960, Roger Sperry
showed that each of the two hemispheres of the neocortex specialize in their
functions, with the left hemisphere processing information in a logical,
reasoned, step-by-step, sequential manner, and the right hemisphere
processing information in a (complementary) nonverbal and intuitive way.
The left hemisphere engages in step-by-step thinking. The right
hemisphere makes an overall view of the environment, including others’
intentions. The right hemisphere is also where our overall world view or
vision is generated, and for changes in this overall world view to account for
anomalies. The left hemisphere is more of a follower, and indifferent to
discrepancies. The left hemisphere assembles facts while the right integrates
the individual facts into an overall world view. When we communicate, the
left hemisphere processes the text, while the right hemisphere puts it within a
context to create understanding. The right hemisphere holds various
meanings of words while the left hemisphere chooses the best. It is the right
hemisphere which also understands sarcasm, nonverbal communication,
intentions, other peoples’ state of mind, humor, proverbs, and metaphors.
If you tell an individual with damage to their right hemisphere that they
need to ground themselves, they are likely to place their feet on the ground.
If you tell them to clear their mind before choosing they may put their head
under a tap of water. Ask them the meaning of the proverb, people who live
in glass houses shouldn’t throw stones, and they give you a literal meaning –
if you throw something at a piece of glass it may shatter. Because individuals
with damage to their right hemisphere lack the ability to place things into
context, they simply don’t “get it.” Far from being useful only to artists, the
right hemisphere is essential in thinking and choosing rationally. Having
made a decision and asked to explain it, individual’s with damage to their
right hemisphere will rely exclusively on their left hemisphere. The left
hemisphere will have an explanation. But when the right hemisphere is
damaged, the explanation told by the left hemisphere, regardless of how
elaborate it may be, usually doesn’t make much sense. The left hemisphere
lacks the big picture and so, “the left hemisphere alone generally makes a
mess of reality, not seeing the whole picture” (Ornstein, 127). In other words,
left to its own devices, no one would want to live with only a left
hemisphere. And, from the point of view of the brain’s division of labor
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Introduction to Intuition
perspective, arguing against intuition is arguing against the brain’s normal
functioning. Economics is not and never has been (exclusively) a left-brained
activity. Without the right – intuitive - hemisphere, economists would make
absolutely no sense.
1.2.7 The Unconscious.
The development of cognitive science in the 1970’s has also brought
with it the discovery that perhaps 95% or more of our thoughts (mental
activity) are unconscious and inaccessible to our conscious mind. What
followed was the idea that intuition is the result of unconscious and rapid
pattern recognition, or identifying the key features of the environment
(Norretranders, 1998). While intuition is the result of pattern recognition,
drawing conscious inferences of these patterns is the result of analytical
skills. Hence, creativity can be thought of as the product of a combination of
conscious and unconscious mental activity. Jacques Hadamard in his book
The Psychology of Invention in the Mathematical Field (13) presents a theory
of creativity containing four stages: preparation, incubation, illumination, and
further conscious analysis. Preparation is a (long) period of study. Incubation
is a period of time in which you stop consciously thinking about the problem
and allow it to reside solely in the subconscious.
Illumination is, illumination, a sudden flash of insight, an intuition. The
final stage, further conscious analysis, is the time to translate the intuition
into a coherent statement. Hadamard shows that this process of work – relax
– insight also applies to Henri Poincare, Carl Gauss, and Hermann von
Helmholtz. This four-stage process begins and ends with conscious thoughts
with unconscious mental activity in between. It is this middle stage of
unconscious mental activity which many economists ignore and/or associate
with non-rationality. The fact that intuition is the product of unconscious
mental activity has led many economists to associate intuition with nonrationality. Keynes was not among this group.
1.3 Are Intuitions Always Correct?
“There is a simple intuitive logic to the notion that the members of the
Organization of Petroleum Exporting Countries – particularly the oil-richest
of them all, Saudi Arabia – want to push oil prices ever higher. They have
lots of oil. We buy lots of oil. The higher the price, the more money they take
from us. Simple, intuitive – and wrong”
(David Wessel, Wall Street Journal, May 27, 2004)
Based on Wessel’s quote, the notion that OPEC wants lower prices for
oil is counterintuitive. That is, it doesn’t make sense. However it is intuitive
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Two Minds
that FED Chair Alan Grenspan’s intuition about future interest rates should
be taken more seriously than the intuitions about interest rates made by his
favorite waiter at his favorite New York delicatessen. So should the
intuitions of Linus Pauling on organic chemistry be taken much more
seriously than my intuitions on organic chemistry! In other words, ceteris
paribus, intuitions of an expert can be considered more reliable than those of
a novice. At the same time, Daniel Kahneman and the late Amos Tversky
have shown quite conclusively that the every-day intuitions of ‘average’
people is subject to error.
A serious problem arises when we consider intuitions as not possibly
subject to error. The assumed infallibility of intuition is assumed by many
intuitionists, those adhering to the philosophy that humans have an intuitive
faculty which allows us to sense or intuit the truth just as the sense of sight
allows us to perceive objects and colors. A troubling aspect of intuitionism is
that it can lead to authoritarianism. John Stuart Mill spent a good part of his
intellectual energy arguing this very point. Mill argued that what some
believed was intuition was inferences or bad memory. There is also a practice
for some to say that if your intuition is incorrect then it wasn’t your intuition.
If it’s incorrect then it was your fear, or your desire “speaking” to you, or you
were tired at the time, or anything but the conclusion that your intuition is
wrong. Of course, this turns the concept of intuition into one which is not
falsifiable. It turns intuition into a concept similar to the concept that
individuals are always maximizing, whereby if your data shows that they are
not then you are not correctly defining and including all the arguments in
their utility function. My answer to the question, is intuition always correct,
is a resounding, No. I wholeheartedly reject intuitionism as defined here,
even as I wholeheartedly believe that intuition – whatever it may be – is a
valuable resource.
1.3.1 Heuristics and Biases
Intuition is a foundation for heuristics -- for short cut or “perceptual
routines” (Earl, 1990, 723), because it bypasses all conscious thinking
processes and hence all (conscious) perceptual routines. In their preface to
Hueristics and Biases, Gilovich, Griffin, and Kahneman state, “The core idea
of the heuristics and biases program is that judgment under uncertainty is
often based on a number of simplifying heuristics rather than more formal
and extensive algorithmic processing. These heuristics typically yield
accurate judgments but can give rise to systematic error” (Gilovich, Griffin,
and Kahneman, 2002, xv). In other words, intuition is accurate, often
complementing analysis, but is subject to systematic error. At the same time,
the focus of Daniel Kahneman and Amos Tversky’s research agenda in the
biases caused by heuristics (intuition). The result is that intuition at best can
only as good as logic, but never better than logic. At the same time,
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Introduction to Intuition
Kaheneman and Tversky refer to intuition as a “natural assessment”
(Kahenman and Tversky, 2002), and one with some advantages over reason.
First, because intuitions are the product of work in the subconscious, the
conscious mind is left free for other work. Second, because the process
leading to an intuition occurs in the subconscious, it seems faster than reason.
Third, given uncertainty, intuition is the (second) best method for
subjectively evaluating the probability of events. Between intuition and
reason, humans make the most use of -- both.
Evaluating intuitive based judgments implies a standard of comparison.
Our standard often used is how well intuitive judgments compare to those
made by analytical methods such as the rules of probability. For example,
surveys show that people often ignore and/or violate both the extension rule - if A >B, then P(A) ≥ P(B) – and the conjunction rule -- P(A&B) ≤ (B),
preferring to use intuition rather than either rule. Comparing actual intuitions
to rules of probability creates a bias against intuitive judgments. In fact, since
rules of probability are statements of logic, they are, well, logical. Since
nothing can be more logical than logic, intuitions can never be superior to the
rules of probability. In any contest between intuition and logic, intuition’s
best outcome is a tie.
The fact is that in everyday and most other affairs we do not use either
the extension or the conjunction rule. We use heuristics – intuition -- which
we have observed over time to work reasonably well. In Kahneman and
Tversky’s prospect theory, intuitive judgments are shown to take many forms
including creating similarities or making associations between two or more
events or people, by perceptions of causality, and thinking about salient
characteristics or archtype of events or people. In each case, people are
attempting to turn a difficult question into an easier one. During a hiring
seminar a tenured faculty member is really trying to answer a difficult
question – whether a candidate will remain intellectually active and is good
enough to receive tenure. A simpler question is asked – how good is their
presentation. In attempting to answer the difficult question whether a
particular person is an elementary school teacher or a CIA agent, people
answer the easier question whether the known characteristics of that person
are more similar to an elementary school teacher or a CIA agent. Intuitive
judgments are made by our use of imagery; intuition is the result of mental
model building.
The mental model used and the form of the intuition is dependent upon
the question being answered. For example, in answering the question what
percentage men with a heart attack are over 60, we ask ourselves to picture
the typical (exemplar, archetype) heart attack victim from memory of stories
we have seen and/or read. This is known as the availability heuristic. If we
are asked to choose an occupation for someone we do not know based only
on a sketch of their personality, we look for similarities between the
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Two Minds
personality sketch and the representative personality of a person in a
particular occupation. Hence, the term representative heuristic. If we are
asked to make an assessment of something we know nothing about – the
number of countries in the U.N., we draw upon whatever data we are given.
This is known as anchoring. Paul Slovic has described another important
heuristic – the affect heuristic (Slovic, Finucane, Peters, MacGregor, 2002).
The affect heuristic refers to decisions being determined by affective
considerations, i.e., our feelings of good and bad, like or dislike. Damasio
(1994) provides a complementary explanation for the effect of affect from a
neurobiological perspective.
Intuitions are a natural assessment or judgment mechanism of the human
brain. Especially when no other means of judgment is available, intuition is
at least or at best, a second best. No one expects models to be accurate and
full of detail. In fact, the “model as map” analogy states that the power of a
map or a model is that it does not have too much detail. In turning difficult
questions into simpler ones, and in building a generalized mental map of the
environment, people would seem to be rational in using their intuition!
Unfortunately, the mental image of the world and the “real” world are
not always consistent with each other. And just as models don’t always
accurately predict, neither does intuition. At the same time, when people
attempt to think logically they often fail. It seems intuitive, therefore, that the
true comparison should be between intuitive judgments and actual judgments
when people are trying to be logical. At the very least, intuition may be a
second best way of making decisions. At the same time, the series of
experiments by psychologists Amos Tversky and Daniel Kahnemann have
been acknowledged by economists as demonstrating that human decision
making deviates significantly from the predictions of economic theory. For
example, in Rethinking Intuition, Tamara Horowitz (1998), a philosopher,
argues that the results of the Tversky and Kahnemann experiments
demonstrates that people’s intuitions produce decisions which are at odds
with economic theory.
Errors in judgment due to the use of intuition/heuristics are not limited to
say, undergraduates. Individuals of all levels of education and skill make
such errors. Under and over-optimism in the predictions (diagnosis) of
doctors, weather forecasters, lawyers, sports commentators and professional
gamblers, economists and stock brokers (Koehler, Brenner, and Griffin,
2002). Werner DeBondt and Richard Thaler (DeBondt and Thaler, 2002)
studied the one and two year earnings per share forecasts among a group of
professional forcasters in the IBES International database. The results of their
(statistical) analysis is that forecasters overreact, and that earnings per share
forecasts are unrealistically optimistic. The same overreaction has been
reported in the literature for exchange rate, and macroeconomic forecasts.
DeBondt and Thaler conclude that the analysts surveyed are “decidedly
human. The same pattern of overreaction found in the predictions of naïve
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Introduction to Intuition
undergraduates is replicated in the predictions of stock market professionals.
Forecasted changes are simply too extreme to be considered rational…When
practitioners describe market crashes as panics, produced by investor
overreaction, perhaps they are right” (ibid., 685). Bottom line: intuitions are
not always correct.
1.4 Is Intuition an Inherently Metaphysical Concept?
Intuition is not an inherently metaphysical or spiritual concept. It has
been and still is discussed as part of the ‘spiritual’ aspect of life, but it is at
the same time part of a scientific agenda. Let me briefly discuss the work of a
great scientific mind’s attempt to bridge the worlds of science and
metaphysics. Rupert Sheldrake has a Ph.D. in biochemistry from Cambridge,
and was a Research Fellow of the Royal Society. His 1981 book, A New
Science of Life: The Hypothesis of Formative Causation has been described
by the journal Nature as “the best candidate for burning there has been for
many years” (Schwartz and Russek, 1999, p. 123). In his book, The Presence
of the Past: Morphic Resonance and the Habits of Nature, Sheldrake
(Sheldrake, 1989) hypothesizes that memory is inherent in nature and hence
the past is available to us directly rather than indirectly through memories
stored in the brain. Sheldrake’s explanation is that all members of a species
inherit a “collective memory” from all previous members of their own
system, regardless of where or when they lived.
All members of the same system are connected with each other and can
“communicate” with and through each other, “tune-in” to each other as if
time and space were not obstacles to communication. The reason is that we
are connected to each other through our common “data base”, the “collective
unconscious”, or what Sheldrake calls a “morphogenic field.” Morphogenic
comes from the Greek words morphe, meaning form, and genesis, meaning
coming-into-being. Each system has its own morphogenic field which
“surrounds” the system it organizes and assists the organisms in unfolding
into their various forms. Sheldrake believes that this may be a scientific
explanation of the ancient Hindu concept of the “akashic records. The
akashic records is the memory of every moment of the past, held by nature
and available to all minds. Enlightened people and gurus are said to “tap
into” the akashic records with their intuitive mind. I’m not saying that the
akashic records exist or do not exist. I’m not saying that it is possible to tap
into these records or not. The point is, in this book I am not going to
speculate about either this or any other metaphysical – spiritual aspects of
intuition.
1.5 Some Scientific Studies on Intuition
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Two Minds
Two broadly defined intuition related issues studied by scientists are the
somatic markers hypothesis of Antonio Damasio, and ‘women’s intuition.’
1.5.1 Somatic Markers
In his book Descartes’Error. Emotion, Reason, and the Human Brain,
neurobiologist Antonio Damasio shows that intuition, emotions and feelings
play a positive role in rational decision making. A very important reason is
that, “The strategies of human reason probably did not develop, in either
evolution or any single individual, without the guiding force of the
mechanisms of biological regulation, of which emotion and feeling are
notable expressions” (Damasio, 1994, p. xii). Not all human decisions
involve choosing and reasoning in the sense used by economists – conscious
evaluation of the costs and benefits of various options.
First, there are automatic bodily processes by which the body moves to a
state of equilibrium. For example, a drop in blood sugar triggers physical
changes in your body leading to a state of hunger. We are neither conscious
of, nor have any control of these physical changes. Second, we engage in
survival strategies which are also automatic or instinctive. For example,
when we see an oncoming car we automatically move away from it. We
know that an oncoming car (stimulus) is dangerous and that the appropriate
response or choice is to move. While we are conscious of what is going on,
the movement away from the car is automatic. Third, there are many choices
we make in our life – career, family, friendships, recreation, saving, voting –
which require that we reason and choose in the usual sense of the terms.
These choices involve short and long run costs and benefits, all of which are
shrouded by complexity and uncertainty. Descartes referred to the first two
as being part of our “animal spirit,” while the third is characteristic of our
“human spirit” (ibid., 165-68). The third category of decisions are
traditionally believed to be optimized through logic – “rationality” – and in
the absence of emotions.
The difficulty with rational decision making is that calculating costs and
benefits to maximize subjective expected utility will take too much time and
is subject to too much error due to the facts that the human attention span is
too short, and the capacity of our working memory is too small. There is
another difficulty of sorts with emotionless rational decision making. The
difficulty is that the lack of emotion in decision making is the way in which
people with damage of their prefrontal lobe make decisions. I for one, always
use emotion in making decision! According to Damasio, the human mind at
the beginning of a decision making process is not a “blank slate.” The mind
contains numerous images gleaned from experience. Depending upon the
circumstances surrounding the decision, a subset of the available images will
be automatically activated. Even before reasoning takes place, when the
mind considers an option with a bad outcome the individual experiences an
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Introduction to Intuition
intuition, an unpleasant gut feeling in the body.
If the option contains a positive outcome the gut feeling is pleasant.
Because the feeling is in the body, Damasio uses the term somatic (soma
being the Greek word for body). The gut feeling in the body “marks” an
image, hence the term somatic marker. Damasio says that somatic markers
are an example of “feelings generated from … emotions. Those emotions and
feelings have been connected, by learning, to predicted future outcomes of
certain scenarios” (ibid., 174). Feelings and emotions are not identical. An
emotion is a physical phenomenon with bodily correlates. For example, fear
affects the heart rate, and facial and/or other muscles. Emotions are often
automatic and prompted by the subconscious. Emotions, and affect, give rise
to feeling. You can be angry and feel angry. You can also be angry (with all
the physical correlates) without feeling angry. However, your facial
expression may contort with anger and a person next to you may see anger
on your face.
The somatic marker creates a feeling in the body which “forces attention
on the … outcome and to which a given action may lead, and functions as an
automated alarm signal which says: Beware of danger ahead if you choose
the option which leads to this outcome… The automated signal protects you
against future losses, without much ado, and then allows you to choose from
among fewer alternatives” (ibid., 173). Somatic markers, having screened
alternatives, allows any subsequent cost-benefit calculations to be more
accurate, and allows the decision making process to be more efficient. There
are two important implications. First, somatic markers make use of both
attention and working memory, but it is our values which drives the process.
After all, pleasant and unpleasant gut feelings imply values or preferences.
Second, there is an optimal level of emotion because emotions can be
either beneficial or costly in the process of decision making. Third, emotion
and logic, or intuition and analysis are complements rather than substitutes.
While Pascal said, “the heart has reasons that reason does not know at all,”
Damasio says, “The organism has some reasons that reason must utilize”
(ibid., 200). We are not always conscious of somatic markers. Somatic
markers also act subconsciously, affecting those parts of the brain which
control our appetites. Thus, for, no apparent reason we would feel drawn to
or away from some particular behavior. He says that “This covert mechanism
would be the source of what we call intuition, the mysterious mechanism by
which we arrive at the solution of a problem without reasoning toward it”
(ibid., 188).
Damasio reports the results of gambling experiments illustrating his somatic
market hypothesis. The experiment involves players turning over cards from
four decks of cards. Some cards in decks A & B paid the player $100, but
others required payments in excess of $1,000. In decks C & D, some cards
paid $50, while other cards required payments of less than $100 on average.
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Two Minds
Players without frontal lobe brain damage began by sampling cards from all
four decks. Seeing high rewards from decks A & B they showed a preference
for these decks. As the game continued and they were forced to pay large
sums from cards in decks A & B, they switched to decks C & D. Players with
frontal lobe brain damage began by sampling cards from all four decks, then
showed a preference for high reward decks A & B. However, having lost
large sums of money they return to their preference for decks A & B, went
bankrupt and forced to borrow more (play) money.
Despite being attentive, risk averse, intelligent and possessing a
preference to win, frontal lobe damaged individuals act “irrationally.”
Damasio’s explanation is that those with frontal lobe damage lack somatic
markers, thereby lacking an association between a stimulus and an
appropriate somatic response. They act, therefore, as if they have an
inappropriate preference for the present at the expense of the future. They
have in Damasio’s terms, a “myopia for the future” (ibid., 218). It is as if
they do not retain what they learned through education or experience; they do
not have a theory of their own mind.
A similar article on the same topic appeared in Science (Vogel, 1997) in
which the author states that “Intuition may deserve more respect than it gets
these days. Although it’s often dismissed along with emotion as obscuring
clear, rational thought, a new study suggests that it plays a critical role in
humans’ ability to make smart decisions” (ibid., 1269). Four neuroscientists
from the University of Iowa College of Medicine studied patients with
damage to their ventromedial prefrontal cortex. People with damage to this
part of the brain score high on IQ tests and memory tests as often as nonbrain damaged persons. However, they tend to be more indecisive and make
poor choices in real life situations. Brain damaged patients and a control
group were given four decks of cards, two “good” decks and two “bad”
decks. Each person was given $2,000, and each card listed an amount of
money they won or lost. The bad decks offered lower payoffs while the
penalty cards contained lower penalties. In the long run, choosing from the
bad deck led to net losses, while the good deck led to net gains. The brain
damaged patients showed no emotion (measured by no changes in
physiology which accompanies nervousness) after their net losses continued
to increase and did not tend to switch towards the good deck. Members of the
control group showed signs of nervousness after a series of losses and
switched towards the good decks. They also began switching to the good
decks even before they could articulate to the researchers that the good decks
were a better long term strategy. In other words, members of the control
group had a hunch about which deck to choose from even before their
conscious mind could formulate a reason. An explanation for the result is that
the ventromedial prefrontal cortex is a part of the brain which stores
memories of past rewards and punishments and creates an unconscious
response to current rewards and punishments which we call a hunch, or an
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Introduction to Intuition
intuition. The brain damaged patients lack this intuitive ability and hence
make poor decisions.
1.5.2 Women’s Intuition
Women are said to possess more intuitive abilities than men. Some
believe it is because women have traditionally had the care-giver role which
requires sensitivity to those around them. Another explanation is that women
have more connecting fibers between the two hemispheres of the neocortex.
In the studies on women’s intuition reviewed here, intuition is also referred
to as “empathic accuracy,” “spontaneous communication,” and “knowledgeby-acquaintance” (Ickles, 1997). These are believed by some to be biological
in nature. Buck and Ginsburg (Buck and Ginsburg, 1997) describe it in these
terms: We know directly certain inner meanings in others – certain
motivational-emotional states – because others are constructed to express
directly such states and we are constructed so that when we attend, we ‘pick
up’ that expression and know its meaning directly. This knowledge is based
upon
phylogenetic
adaptation
and
is
conferred
through
inheritance…Therefore, the individuals involved in spontaneous
communication literally constitute a biological unit…One’s knowledge of the
motivational-emotional states of others via spontaneous communication is as
direct and biologically based as one’s knowledge of the feel of one’s shoe on
one’s foot” (ibid, p. 28).
The evidence, reported in Graham and Ickles, 1997), for the existence of
women’s intuition is mixed. The evidence is sorted according to three
criteria. First, “vicarious emotional responding,” or “emotional matching.”
Second, “nonverbal decoding ability,” and third, “empathic accuracy.” For
purposes of simplicity all three will be referred to as empathy or intuition.
The first criteria, vicarious emotional responding, is the ability for one person
to experience the same emotions as a ‘target’ person in an emotionally
provoking situation. In many studies females score as more empathic than
males. The problem is, females evaluate themselves as more empathetic and
disposed to emotional matching than males. In other words males and
females’ own evaluation are consistent with gender stereotypes on this issue.
In the studies on emotional matching, males and females reported their
reactions verbally to the experimenter raising the possibility that both
females and males were expressing themselves consistent with stereotypes.
However, when they reported their reactions ‘privately’ via writing their
responses, gender differences disappeared.
1.6 The Plan for the Remainder of the Book
I discovered, without looking, that Smith gave a central role to intuition.
However, he preferred the word sympathy. I then discovered, by looking,
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Two Minds
that Mill, Marshall, Keynes, Knight, and Herbert Simon also spoke about
intuition. Chapters two through six focus exclusively on Adam Smith, John
Stuart Mill, Alfred Marshall, John Maynard Keynes, and Frank Knight,
respectively. Chapter seven focuses on Herbert Simon, but also includes
Friedrich von Hayek, George Shackle, and Harvey Leibenstein. Finally, in
Chapter 8, I illustrate a renewed acceptance of the concept of intuition by
reviewing a portion of the very large number of articles in economic journals
using the words intuition and intuitive.
viewing a por