Numbers Are Just Numbers

Making good choices about retirement involves the processing of numbers. In particular, consumers must have easily available, accurate, and timely numbers, and they must also use them. Contrary to the consumer-driven approach, however, the evidence demonstrates that having an abundance of information does not always translate into it being used to inform choices. The challenge is not merely to communicate accurate information to consumers, but to understand how to present that information so that it is actually used in decision making. How do decision makers process information and what formatting strategies increase the likelihood that information will be used in judgments and decisions? Where economists usually assume decision makers are well-informed, farsighted, and rational, psychologists who study judgment and decision making assume that individuals are “boundedly rational,” and may or may not have the cognitive resources or motivation available to process information at the moment of a decision. In other words, while we are capable of great feats of intellect, our intellectual capacity is nonetheless limited. Decision makers are able to process and use only a limited number of variables in any one choice. As the number of options and information increases, the ability to use all of it in choice declines. Although our market economy assumes that more information is better, evidence from decision-making research demonstrates that more information does not always improve decision making, and can in fact undermine it (Gabardino & Edell, 1997; Iyengar & Lepper, 2000; Slovic, 1982; Tversky & Shafi r, 1992). We know, for example, that people have limited resources to deal with complex decisions and the great quantity of information with which they are sometimes faced. As a result, they rely on mental shortcuts to deal with such complexity. The use of mental shortcuts is frequently adaptive