Bounded Rationality in Education

I am inspired most by the cognitive deflect and the fortune control of the last- qualification while cultivation this course. Having been engaged in the financial industry for years, I am deep aw ar of the fact that most exclusive investors tend to perform those bound rationalities for qualityistics of finding-making while making enthronisation, but I potfult sense out the reason for their humans.After learning this course, however, I feel suddenly enlightened. The phenomenon that has fazed me so long is caused at a lower place the solve of the cognitive deflect and feeling which tether affect the risk assessment and judgment made to the investiture object. In western countries, most families curb enthronement mainly in dominant financial assets including shopworn, bond, real estate and insurance and set out plastered aw arness of the risk averse in above fields.Meanwhile, thitherre many organizations and books tumesce-nigh the decision-making that atomic number 18 referred to by the individual investor. In Chinese families, in addition to the above investment of the financial assets, the investment of the family didactics, as a supererogatory form which involves all Chinese pack, assumes a astronomical proportion. This is because a long-term funding is made by p bents ever since their kids are born as a result of the non-free bringing up in China. neer let children lose at the starting line and statement is the largest investment are two popular genteelness ideas in our country, which comprehensively intone the current situation of Chinese families investment to the children reproduction. As parents put the sinless earning into their kids, a severe return is surely expected. But since income is companied with risk, Chinese education investment, therefore, belongs to the risk investment and, meanwhile, has the ad hoc characteristic that is not covered in western guess.The invest object in this es enounce is mainly ab out(predicate) the education domain in China, I think its as well as necessary to apply the theory of this course to avoiding the crop of the cognitive preconceived notion as well as the mental trap and the irrationality in the education investment. By introducing the appearanceal motive of the education investors, I point to master its pattern and bind judgment of the irrational behavior, which, I believe, pass on help protect the interest of the family investor. FindingThe misunderstanding of the family education investment in China is generated mainly because investors, i. e. parents, operate blind investment without thinking about their economic conditions, the investment risk as well as the individualise offshoot of their children. In traditional Chinese finishing, parents education investment to their children is flat and selfless, which lead to a lack of scientific and rational prep as well as decision in the education investment in many families and, meanwhile, ca use some misunderstandings.The following blindly phenomenon of purely engage soaring and abroad education is becoming more and more violent. Considering the cognitive bias of investors, the education investment with high expectation and input, instead of manner of speaking expected return to the family members, leads to extra economic burden and, at the resembling time, index influence the growth of the students career in the in store(predicate).As attention has been compensable to the generation of the misunderstanding of the education investment behavior, many scholars make abridgment in terms of the government policies, the social environment, the high education and other(a) macro level. Through learning the course, I, on the other hand, would like to say that the education investment is mainly from the cognitive bias while investors make their decision. The cognitive bias includes all kinds of decision-making bias caused by the restraint of investors cognitive psychol ogical science and external environment.The cognitive bias of the decision-making of the family education investment is generated under the influence of the external environment and socio-cultural background with the asymmetric friendship as well as the cognitive level and personal p name of investors, which causes the break away on Heuristic. Bazerman argued that the misapplication of heuristics to inappropriate situations leads people astray. Its difficult to omen the specific input and outfit of the family education investment in a quantitative way, resulting in the ambiguity of the assessment of the government retire of the education investment.As therere a large number of variables of the non-monetary cost-benefit in the education investment, our approximation has to be adopted to judge the cognitive part SYSTEM 1. analysis Despite the difference in the investment object between the education and the traditional investment, the behavior of the education investment of a family which is as a micro investor, is subject to the risk of the expected return of the investment, the risk as well as the influence of other corresponding factors, which has common character with the investment behavior in the decision-making.The science of behavior and decision-making, as a course between the marginality of the psychology and the economics, tries to involve the behavior of the irrational multiplex investors into the standard theory of the decision-making by making amendment to the assumption of the traditional attention theory according to the research findings in the psychology. In our sight, we find the decision-making theory localizeing more emphasis on peoples move rationality.It explains the investor behavior and makes it more close to reality based on the theories of the cognitive psychology and the behavioral science as well as related principles of the economics. Under the condition of uncertainty, some cognitive factors pass on influence people t o make their decision. The most common way is to make decision by adopting the elicitation method by investors. Its not flabby to make a rational investment while facing the risk mainly because it basint avoid the heuristic bias in the decision of the family education investment.The effect of the demonstration by example of the education investment income and the representativeness heuristic. Family investors usually care too much about the prominent, specific and typical education while neglecting the abstract and complex data. Therefore, parents often take typical cases learned through media as the home and reference for the decision-making, which might be influenced by the representativeness heuristic bias.For example, some families help their children study abroad considering the successful cases they know, though overseas study might not fit them at all. It is believed that people end find familiar modes to make judgment by assuming that the circumstance in the future is sympathetic to that in the past without thinking about the reason of how those modes happen or the repeat hazard of those modes. Decisions and judgments made under the condition of uncertainty are not accurately calculated and analyzed by using the probability theory in the assumption of the Rational Man.It is firmly convinced(p) by investors with representativeness bias in the stock market that a good company can surely produce good stock, as well as some parents will believe that a good school can foster good students, which typically embodies the representativeness bias. The limitation of searching entropy by investors and the availability heuristic. Regarding the availability heuristic, some people think that it is generated due to the overpowering retrospection and search bias, that is to say, not all information will be searched unbiasedly while related information is searched in memory.Decision makers of families tend to use information that is easy to access, so the li mitation in searching information is fatal since people cant have a comprehensive knowledge about the professional quality of education standrs, the demand for the education products in future market as well as the state of educatees endeavor and intelligence. We can say that the characteristics of the information insufficiency and dissymmetry really stand out.Besides, theres a distinct dissymmetry in the cost and benefit of the education investment caused by the hysteretic personality of the decision-making effectiveness of the education investment. The decision-making of the education investment, built based on the future expectation, is a subjective expected value by people. Information that is searched from memory in the origin place will become the major bringation for people to make judgment and decision as this information has return in the stimulus frequency, novelty and vitality.For example, high education means high income. Studying at college is, on a whole, posit ively correlated to the income obtained by children in the future. Parents tend to compare their children with the group of the same age in the education level, usually with those accessible ones such as relatives, colleagues or those inform in news media. Compared with the complicated and boring calculation and divination as well as the omnibearing information search that waste time and energy, people would rather picking common reference object as the decision foundation.Though it can simplify the work at of decision-making and reduce its difficulty, the availability information has coc discovered one-sidedness and bias can be agnisen in the behavior that the decision-makers pick the information itself. We can see from the above that the availability bias is a key factor not to be neglected in the misunderstanding of the family education investment. The competitive psychology and anchoring effect of the education investment.We often develop estimates by starting with an initi al anchor that is based on whatever information is provided and adjust from the anchor to yield a final answer (Epley, 2004 Epley & Gilovich, 2001). Mussweiler and Strack (1999) showed that the existence of an anchor leads people to think of information that is consistent with that anchor. The competition in the education investment shows parents expectation for their children while the competitive psychology can influence decision-makers normal investment behavior owing to the negative effect caused by the anchoring effect.Decision-makers, for lack of the quantitative analysis, usually refer to the obscure reference foundation obtained from former experience and make comparison as well as judgment of the input and income from one or several points of view, which will become the key point in the decision-making of the education investment. The competitive psychology is necessary for the achievement of higher value in ones life.Many families, however, ignoring the specific circumstan ce of educatees, take the education investment as an impossible comparison caused by the anchoring effect which influences the investors to rationally adjust the anchored object. The family decision-makers will nail down the investment direction and level according to the anchored assessment result by choosing external reference objects which distract their normal decision-making. Therefore, an irrational conclusion is generated. The bias produced by the education investment object can direct influence the decision of the investee.That is to say, the cognitive bias of the decision of obtaining physical exercise appears among graduates, which consequently lead to the output of the education investment that is less than the expected return. Firstly, We can see the bounded rationality of the graduate employment from their overconfidence. The overconfidence might be the most stable psychological feature of human being since it is indicated in many evidences that people tend to be ove rconfident for the estimation of the circumstance probability of uncertain events while making decision.Thus bolstered by the availability of verificatory evidence, we overestimated the accuracy of our knowledge and the truth of our tentative hypotheses (Koriat, Lichtenstein, & Fischhoff,1980) This feature, however, can lead to an overestimate of their knowledge and ability, an underestimation of the existing risk as well as the exaggeration of their control ability of events and, whats worse, the decision bias. Besides, the Sheep-Flock Effect that are based on information, reputation and reward can be found among graduates as a result of the herd mentality, which might influence graduates decision-making of obtaining employment as well.Second is the stubbornness bias. The so-called self-control means the control of emotion. Without the self-control, no rational decision can be made and, meanwhile, individuals tend to holding success to themselves while trouble to others or ob jective conditions. In obtaining employment, the failure is usually attributed to non-self factors such as the recruitment policy of enterprises or the surder wing of others instead of to students themselves or to the fact of whether they fit such enterprise culture and work environment.With such bias, students, even though be hired by certain enterprise, will finally be eliminated due to their weak adaptation. Solutions owe to the feature of the family education investment, the investor is not exactly the beneficiary. The beneficiary of parents education investment is their children while its decision-makers are parents, so the quality and cognitive level of parents have an important influence to the investment behavior. With the strategies of our writings (Bazerman, Chapter 11), I supposed to provide three of them to solve our problem and increase the effectiveness of investors decision-making processes.In our case, parents should firstly DEBIAS JUDGEMENT to unfreeze their bas ic knowledge and psychology about the education investment and, by making analysis of typical cases, be manoeuver to know the source and harm of various blind education investment as well as to think about the decision process and behavioral characteristic of themselves so as to avoid the herd mentality. The support solution should be provide to those administration department of the public.They should strengthen the informatization micturateion, lay stress on the policy advocacy and the public opinions influence to the family education investment as well as construct the rational environment of the education investment. Provided investors have enough accurate information, it will help avoid the generation of the bias and reduce the frequency of bias behavior. Meanwhile, the public opinion department should increase the information channels as well as the number of information issued and its promptness and accuracy so that media can correct the bias of investors behavior.Finally, Using expertise or winning a outsiders view can be a good choice for our investors. The planning and consulting industry of personal career and finicky agency of the family financial management should be rapidly developed to make up the lack of the science of investors. Owing to the long period duration and the irreversibility of the education investment, family decision-makers have no chance to learn and improve their behavior one more time. In that case, a special agency should be adopted to guide decision-makers to be more rational by making analysis of their psychology.As the decision-making of the family education investment is traditionally seen as a family issue that can only be decided by family members, a special agency is needed to make planning and guidance of the behavior with strong sense of subjectivity and irrationality. In some developed countries, the career planning companies as well as the assessment and testing agencies for the personality development of stud ents are set up to make up the limitation of decision-makers cognition about the educated.There are a large number of institutional investors in the financial field which grasp detailed and accurate information as well as solid professional theoretical knowledge since they are professional investment organizations operated by technical investment staff with bountiful experience, so they usually can secure their ends in the market by their advantages compared to those medium and small investors. The latter has more irrational factors than institutional investors.Every individual decision of the family education investment is like the private investor in the stock market while enquiry agencies equipped with professionals and technical evaluation software program are like the institutional investor which can make put fore the advice of the rational education investment as well as the prediction of the future return on the basis of fully respecting the individualization growth of st udents through the scientific analysis made by professionals and the systematic evaluation with the help of professional software, in which way the misunderstanding of the behavior can be effectively avoided.Conclusion In this essay, we have introduced the investment of the education in China, as a special investing form which involves all Chinese people, belongs to the risk investment and, meanwhile, has the specific characteristic that is not covered in western culture. Since its difficult to calculate the specific input and output of the family education investment in a quantitative way, I interpret five typical cognitive biases to evaluate the misunderstanding in our investment. The first three biases the representativeness heuristic, availability heuristic and anchoring belong to the investor.But the bias above produced by the education investors can direct influence the decision of the investee. The overconfidence and self-control bias become the main biases of the students w hen they graduated from school. With such biases, the utilities of the output unceasingly take disappointment. Owing to the biases, I also provide some strategies of our literature to solve our investing problem and increase the effectiveness of investors decision-making processes. By using expertise or taking a outsiders view and debias judgment, investors are able to unfreeze their mindset and provide their children a better decision in education.References 1 Max H. 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