Claire A. Hill

Abstract

People making decisions under uncertainty may need to justify those decisions to their reputational community. This Essay considers when and how the potential need for justification may lead a decision-maker to choose a methodology that is better suited to yielding a defensible choice rather than the best choice. When uncertainty is present, outcomes and probabilities are unknown, and broad consensus on what constitutes a “good” decision-making methodology may be lacking. Yet norms often emerge regarding acceptable methodologies—those that will be viewed as justifiable if justification becomes necessary. These norms develop considerable “stickiness,” as the easiest way to demonstrate that something is appropriately done is to show that others do it. This Essay identifies a particular pathology arising when decision-makers favor a justifiable decision over a genuinely good one and argues that this dynamic can produce significant negative consequences. The primary example examined is the volume of subprime securities purchased, with additional examples including how CEOs are selected and how contract terms are chosen in complex business agreements.

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