Tuesday, September 20, 2011


How do you value a hug? Or an act of kindness? Or a day at home? Or a new friend? In this time of recession, it becomes very important to understand what has underlying value for us.

We find it easy to put a value on items that are sold in shops or on the internet. We can simple look up the price, and assume that this is the 'going rate'. But for decades psychologists have found it problematic to analyze precisely how people make their individual decisions about values. Many decision theorists - some even Nobel prize winners - have assumed that people make decisions in a mathematical way, setting a value on an outcome, and taking into account the probability of that outcome. We can see how that might work for purely financial decisions such as gambles. Although, even with gambling, something else seems to be going on which the psychologists find it very hard to account for with their formulae and tables.

It seems that , however much we try to explain decisions on a rational basis, people don't behave like computer programs. When we are weighing things up, we tend to do it qualitatively rather than quantitatively. Otherwise, how do we account for a person giving up everything to look after a sick relative? Or giving up a life of profit just to learn something new?
One interesting task you might like to try, is an activity called 'Non-monetary Exchange Rating'. The idea is that, first, you choose something which is NOT money, that you wish for. Then, think of something which is NOT money, that you have available to give away, and decide how much of it you would sacrifice to gain what you wish for. For example, imagine your house or flat is messy today, and you wish it was tidy...

How many hours of sleep tonight would you sacrifice tonight for a tidy house tomorrow?

A sample reply from an acquaintance was 30 minutes.

Then you can think of other things that you would like to gain or achieve - for yourself or another person, and value that instead, in terms of what you would give away. The person who did the above task found that, in terms of sleep tonight sacrificed:

1. A tidy house was worth 30 minutes sleep sacrificed
2. An evening at the theatre was worth 150 minutes sleep sacrificed
3. A visit to a restaurant was worth 120 minutes sleep sacrificed
4. A meal for a homeless person was worth 180 minutes sleep sacrificed

The value of this kind of task is in the learning, not in any quantifying per se. We find out what our priorities are, and what we consider to make up the quality of our life. We might even be surprised by what we discover, and may change some of our decisions on the basis of what we find!