Rational Ignorance

April 11, 2013

From Rational Wiki:  Rational ignorance occurs when a decision-maker chooses not to gain more information because the costs of doing so would likely outweigh the benefits.

Dr. Walter E. Williams, a distinguished professor of economics at George Mason University, provides an example of rational ignorance as it applies to the sugar industry (article here). He argues that, as Americans, we each pay a few dollars more per year in our sugar purchases because of price supports the sugar industry has lobbied Congress to create. These price supports are worth billions of dollars to the sugar industry. Rational ignorance comes into play when we decide that it is not worth our time or effort to lobby Congress for a mere couple of bucks. We, therefore, rationalize ignoring the few extra dollars. I am not making a judgment on the policy or its effects. It occurs in hundreds, if not thousands of industries within the United States and around the world.

As consumers, we exercise rational ignorance quite frequently. As leaders, we do it, too. Here are a few ways that rational ignorance might show up in your workplace:

1. You stay with the same provider–not out of loyalty or the high quality of that provider’s service or products, but because you don’t think the time and effort to find a new one would be worthwhile.

2. You decide not to examine a team member’s work process in minute detail. Doing so might reveal inefficient practices (potential benefit), but wouldn’t outweigh the cost of the team member feeling micromanaged (lower morale).

3. You decide not to investigate coaching for yourself or a team member.

If #3 applies to you, you might find this article of interest. In it, you’ll learn what Nations Hotel Corporation (NHC) did. A thorough analysis of ROI revealed that NHC received $2.21 for every dollar they invested in coaching–and that figure doesn’t include intangible benefits from coaching like increased job satisfaction and improved teamwork!

Needless to say, this national hotel chain no longer sees coaching as a “nice to have” but as a “must have” in their operations.

In general, if you’re operating out of respect for others or because you’ve got a firm handle on the costs and benefits involved, your rational ignorance may be justified. If you’re operating out of laziness, however, you’re probably exercising irrational ignorance.

What are you rationally ignoring? And what might you be irrationally ignoring?

Reach your next peak

We help leaders expand the change they want to see in their teams, organizations, and the wider world.