Reasoning concepts and applications

Inductive and deductive approaches to reasoning: Buying a new or used car

Different types of reasoning

Reasoning tends to be divided into two, broad categories: inductive and deductive reasoning. Inductive reasoning is the approach of the scientific method: the individual perceives the data with his or her senses and draws a conclusion, based upon his or her empirical information pertaining to a specific circumstance. Then, after repeating the experiment or comparing the results with a control group, the generalizable nature of the results is assessed regarding their applicability to other circumstances. Deductive reasoning begins with a generalization, such as 'Socrates is a man; All men are mortal' and then draws conclusions for a specific circumstance based upon this presumably valid deduction.

Problems can occur using both types of reasoning: inductive sensory information can be false or misinterpreted, while deductive premises can be incorrect or irrational. The latter may occur more frequently than might be anticipated. For example, the reasoner may have been "brought up from early childhood to believe in the validity of the rule and to respect it," even though it is based upon folklore or superstition, or "may have drifted into following the rule as an adult gradually over a period of time" (Amir & Ariely 2007, p.142). Although Americans in general like to pride themselves upon not being rule-bound, behaving according to culturally and personally constructed social and economic rules is part of the way humans function and perceive their environments. An example of a personal rule might be 'I won't pay full price for a movie ticket' even though the individual might be able to afford to do so, or is willing to pay far more for a concert ticket. The rule is partially based upon economics, but also upon a personal, emotional sense of what does or does not have value. While having such economic rules is necessary to function in society, it is important that the rules do not subsume rational and situation-specific considerations.

A personal decision: Should I buy a new car?

One rule I have always had about buying a car is 'never buy a new car.' In terms of my personal history, my family had always chosen to buy less expensive used cars. Additionally, from a rational decision-making perspective, I had always been counseled that buying a new car was foolish, because unlike other expensive assets (like an education) it decreases rather than increases in value over time. However, I recently re-evaluated this rule. I was contemplating buying a car, based upon new empirical evidence. Because of the troubles afflicting the American economy and the auto industry, car dealers have become more eager than ever before to negotiate good deals with car buyers. Secondly, interest rates are at historic lows, and are unlikely to remain this low for much longer. Thirdly, from my personal experience, I have found that used cars can be very costly in terms of repairs and the stresses dealing with their little 'quirks.' Having a reliable car is a great asset, even if the monetary value of the car does decrease once a buyer 'drives it off the lot.' On a more intangible level, having the 'right' car might convey a certain social impression that could be useful when I enter my future profession.

I researched different cars, both new and used, on the web. Many of the used cars I viewed were problematic in terms of their mileage and prices. Additionally, I had strong sensory memories of the problems I had experienced with my last used car. I did not wish to deal with such problems again: this is an example of how one's narrative about the past affects decisions in the present (Lee et al. 2006, p. 1054). I said to myself 'if I had a new car, I would have less car problems.' While my parents had always judged the value of a car based upon its price and resale value, my interpretation of my own memory and experiences was slightly different, which colored my decision-making about purchasing a new car: I recalled having to have my used car towed late at night, because it had broken down on a highway.

The more I thought about the subject, the more inductive rather than deductive reasoning came to dominate my decision-making. I used data from the immediate market environment and my personal experiences. 'Anchoring' is market phenomenon that describes the tendency to make the same or similar decisions, based upon previous decisions that yielded positive rewards, but in my case, the anchoring effect was relatively low regarding a used car (Hoeffler et al. 2006, p.216).

Personality is also an influence: my parents tend to be very number-driven regarding the purchase of cars. I am more interested in other components, like quality and design. However, while my evidence began to tip towards buying a new car, after contemplating this evidence, when the concrete decision came to be made, I began to feel a bit 'gun shy' about the prospect of spending a very large amount of money on a new car. While emotional sensory components of driving a new car, such as its appearance might have held sway during the beginning parts of my research, the desire for an attractive and perfectly reliable car began to be outweighed by the reality of expensive car payments.