200,000 shekels now or a chance to win 4 million: what would you do?
A simple survey on choosing between a certain sum and a gamble for a large prize became a heated discussion online, but behind it hides one of the defining experiments of behavioral economics. Do most people prefer certainty over a higher expected value?
Would you take hundreds of thousands of shekels on the spot or gamble on the possibility of winning a much larger sum on a coin toss? The question, one of the classics that built the field of behavioral economics, stirred up emotions in the UK and on the X network last week.
A survey conducted by the company YouPoll on the X network and viewed by 6 million people asked the exact same question: would you prefer to win £50,000 (about 200,000 shekels), or flip a coin and have a 50% chance of winning £1 million (about 4 million shekels).
In practice, 4,600 people answered the survey: 73% preferred to take the certain sum, 21% were willing to gamble on the million, and 6% could not decide.
The post generated many angry responses towards the survey participants, who apparently do not understand mathematics, statistics in particular, or life in general. "This is what is wrong with the UK," wrote Nate Silver, an American statistician and political analyst, in response to the survey. It can be assumed that he attributes low ambition and settling for less to the British. Others complained about the difficult state of statistics and mathematics education in the country. "People just don't understand game theory," said another source.
In contrast, other commenters understood the choice. "£50,000 is a life-changing sum for many people," was said several times in the comments. "It could be a down payment on a house." Others agreed: "It just shows how difficult the situation is for the British, if they cannot afford to gamble £50,000 for a 50% chance of winning a million."
Preference for certain outcomes over gambling
The question itself is a somewhat exaggerated version of a classic question, the most well-known version of which was devised by Israeli-American researchers Amos Tversky and Daniel Kahneman, who are considered the fathers of the field of "systematic deviations from rationality" in behavioral economics.
Kahneman and Tversky showed that for most human beings, the comparison of the two decisions is not purely mathematical. For example, most people hate risk and loss, and they would be sadder to give up £50,000 that, according to the way the scenario is presented, 'they already have', than not to earn £1 million that, apparently, was not theirs to begin with. Kahneman and Tversky's studies sharpened that people prefer certain outcomes over uncertain outcomes with the same expected value.
Despite the name of the phenomenon, this does not necessarily mean that they are not rational, but that the unit of comparison is not numbers, the money itself, but utility. The commenters estimate that what the survey respondents were comparing was 'the chance to change my life'. In the first case, a 100% chance to change my life, and in the second case - either yes or no. According to the comments, the assessment is that those who responded dismissively regarding the calculation made by most of the respondents are people for whom £50,000 would not change their lives, but a million would. However, the survey shows, apparently, that they are not the majority.
In the original article by Kahneman and Tversky, the amounts were much closer to each other. Thus, they showed that people are willing to pay for the certain versus the uncertain and assign different weights to loss versus gain, even in cases where no life change is at stake.
Later, a scale was developed by researchers Charles Holt and Susan Laury that attempts to test the "exchange value" for the individual and for the population. If we were offered 100 shekels against a bet, most of us would take the bet. So what should the difference be so that you would be willing to sacrifice security for the sake of risk?
When examining this question with low or similar amounts, it is a question about the risk-aversion component in personality. But in the scenario of the current question, with the option of £1 million, it is also a good way to estimate what amount of money already seems to the public like 'a lot'. A sum they would be happy to go home with and not think about the option of a larger win.
More established - gamble more
Holt and Laury also identified the findings of the current survey and to some extent also what was said in the comments - when the absolute amounts are high, and especially when the chance to win is real and not just on paper, most people are even more inclined to take the offered money for sure and run. However, the more established they are, the more willing they are to gamble. "This is the reason why the rich can always gamble on good opportunities, and in the end, they get richer," suggested one of the commenters.
And what if they had increased the chances of winning a million to 80%? Other studies have shown that human beings really struggle with statistics, and there is a number from which the bet will look to us as 'quite reasonable', and from which the whole attitude will flip. If they offer you the million with a probability of 99% or 95%, it may be that you would already be willing to take the chance. This is if you trust that someone really has a million to give you. "If I see 50 thousand, I run away with them," said one of the commenters. "Because I always assume the bet is rigged."
