03/04 The Great Rationality Debate

Baron (2014) Heuristics and Biases; Hertwig & Kozyreva (2021) Bounded Rationality

Instrumental rationality

Using knowledge and reasoning to attain goals and make decisions that best fit one's preferences

Epistemic rationality

Having beliefs that accurately reflect the actual world

Normative perspective

How judgments and decisions should be made

Descriptive perspective

How people actually make judgments and decisions

Prescriptive perspective

How people's decision-making can be improved

Rational actor model

Assumes stable preferences, complete information processing, and choices that maximise benefits

Expected utility theory

Evaluates uncertain choices by combining outcome probabilities and utilities

Heuristics and biases perspective

Studies how mental shortcuts lead to systematic deviations from normative standards

Heuristic

Simple mental shortcut that reduces cognitive effort and enables fast judgments

Bias

Systematic deviation from a normative standard of rationality

Framing effect

Decisions change depending on how a problem is presented, even when seemingly irrelevant factors change

Naturalistic decision-making

Studies how people make decisions in real-world settings, especially how experts use intuition

Kind environment

Environment with valid cues, predictable patterns, and frequent immediate feedback

Wicked environment

Environment with complex predictions, exploitable intuitions, and little or unclear feedback

Evolution by natural selection

Process involving variation, selection, and inheritance that favours traits supporting reproductive success

Evolutionary perspective on rationality

Explains how seemingly irrational beliefs or behaviours can sometimes support survival or reproduction

Epistemic irrationality and instrumental rationality

False beliefs can sometimes produce behaviours that help achieve goals or improve reproductive success

Bounded rationality

Rational decision-making limited by cognitive capabilities, available information, and environmental constraints

Simon's scissors

Rational behaviour results from the interaction between cognitive capabilities and environmental structure

Satisficing

Selecting an option that meets an acceptable threshold rather than finding the absolute best option

Aspiration level

Threshold defining what counts as a good-enough option when satisficing

Ecological rationality

Effectiveness of a decision strategy depends on how well it fits the environment

Fast-and-frugal heuristic

Simple strategy that uses limited information to make decisions quickly and efficiently

Recognition heuristic

Using recognition of an option as a cue to judge which of two options has a higher value on a criterion

Nudging vs. boosting

Nudging changes the choice environment; boosting improves people's decision-making skills