DOCSLIB.ORG

Ecological Rationality: a Conceptual History

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Ecological Rationality: a Conceptual History Ecological Rationality: A conceptual history Erwin Dekker & Blaž Remic Erasmus University Rotterdam Draft, May 2017 Introduction Ecological rationality is a term used by an increasing number of economists to refer to an alternative conception of rationality from behavioral economics. Behavioral economics of the Kahnemann and Tversky type, often referred to as the ‘heuristics and biases’ program, has become widely accepted as the way of integrating psychology and economics (Grüne- Yanoff, Marchionni, and Moscati 2014). The behavioral economics program presents itself as a serious challenge to the neoclassical picture of rational economic man, and argues that a serious reconsideration is necessary, since individuals are only boundedly rational (Tversky and Kahneman 1974; Kahneman 2003; Camerer, Loewenstein, and Rabin 2004; Mullainathan and Thaler 2000). The proponents of ecological rationality do not seek to challenge this claim of bounded rationality, in fact sometimes they go even further in emphasizing the cognitive limitations of individuals, but argue that in their interaction with their (social) environment individuals are nonetheless able to make reasonably good or even rational decisions. This is because they are able to use the environment to their advantage through cues or institutional features of that environment. The two main proponents of ecological rationality are Gerd Gigerenzer and Vernon Smith. On the surface they share the concept of ecological rationality. And both authors refer to each other’s work repeatedly to suggest that they are talking about the same thing (Smith 2003, 469; Gigerenzer 2015, 115–16). What is perhaps even more striking, they both point to Herbert Simon as an important influence on their work. In his most substantive work on rationality Vernon Smith argues that his distinction between constructivist and ecological rationality is in principle related to Herbert Simon’s distinction between objective and subjective rationality. The former meaning rationality from the experimenter’s point of view, and the latter rationality given the perceptual and evaluation premises of the subject. Hence, he argues that ecological rationality simply develops subjective rationality as Simon defined it. Gigerenzer, too, suggests that he is developing this neglected branch of Simon’s work, although he labels it slightly differently. He argues that the second component of Simon’s view on bounded rationality was the structure of the environment, which can help explain why simple heuristics work well, and when they work well. Despite these surface similarities we will demonstrate in this paper that Gigerenzer and Smith have developed distinct notions of ecological rationality, which are partially at odds with each other. Vernon Smith in his Nobel lecture describes ecological rationality as “an un-designed ecological system that emerges out of cultural and biological evolutionary processes: home grown principles of action, norms, traditions, and ‘morality’” (Smith, 2002). Gerd Gigerenzer argues that: “ecological rationality refers to the study of how cognitive strategies exploit the representation and structure of information in the environment to make reasonable judgments and decisions” (Gigerenzer 2000). From these two statements it should be fairly clear that they are talking about quite different research programs, which not only differ in what they study — Gigerenzer mostly heuristics, Smith mostly institutional environments — but also differ in what they seek to explain. Gigerenzer is much closer to psychology and modern decision sciences, which attempt to explain individual choices and decisions, whereas Smith is primarily interested in processes of social interaction and social systems. For Gigerenzer the central puzzle is how individuals manage to achieve their tasks given their limited cognitive abilities. For Vernon Smith the central puzzle is much closer to that of the other Smith, Adam — how can socially beneficial results emerge from actions which are self-centered and based on very limited knowledge. The second goal of our paper is to demonstrate that both types of ecological rationality present alternative combinations of psychology and economics. Especially Vernon Smith’s notion of ecological rationality seems prima facie devoid of psychology, a view recently reinforced by Don Ross (2014). In this paper we show, instead, that Gigerenzer’s and Vernon Smith’s concepts are much better understood as resulting from two rival perspectives in psychology. Gigerenzer’s is a functionalist psychology deeply indebted to the work of Egon Brunswik as he himself acknowledges. The psychology in Vernon Smith’s conception of ecological rationality is that of a situated and embodied cognition. This ‘embodied cognition’ perspective has recently challenged the cognitivist psychology, which has so influenced behavioral economics. This paper will proceed as follows, in the first section we outline what ecological rationality entails and how it is different from the bounded rationality conception in the behavioral economics program. In particular we will highlight how they give different interpretations of what is sometimes called Herbert Simon’s scissors: the cognitive abilities of the individual and the structure of the environment. This will set the stage for the different perspective on psychology we present in section two. In this section we will contrast the cognitive psychology of Simon and later Kahneman and Tversky with both the functionalist psychology of Brunswik and the modern perspective of ‘embodied’ cognition, which underlie the perspectives on ecological rationality. These different psychological perspectives will allow us to differentiate far more clearly between the two types of ecological rationality, and their differences with mainstream views on bounded rationality. In particular, we show that the mainstream perspective on bounded rationality results from a particular type of individualist economics with a particular type of cognitive and individualist psychology. An economics which places more emphasis on institutions and social interaction is in need of a different psychological underpinning. We conclude with implications for thinking about rationality in economics. 1. Economics and Psychology, or Simon’s scissors A recurring reference point for modern bounded rationality theories are the two blades of Herbert Simon’s scissors: “the structure of task environments and the computational capabilities of the actor” (Simon 1990, 7). Both the mainstream bounded rationality program and the alternative perspectives of ecological rationality seek to find a way to incorporate the environment and the capabilities of the actor. And all three research programs seek to trace back their lineage to Herbert Simon. Historically we might wonder what Herbert Simon really meant, and to what extent his research program came to fruition, as Petracca (2017) has recently done. We instead believe it is more helpful to examine how the different research programs have conceptualized the two blades of Simon’s scissors, especially since they all acknowledge the importance of both blades of the scissors. Let us first discuss the behavioural economics program. There has emerged something of a standard narrative in portraying the history of the relationship between economics and psychology (Hands 2010). A recent historical account by two practitioners of behavioral economics, Angner and Loewenstein (2012), present what can be labeled ‘the standard account’. They divide the history of the relationship in three periods corresponding to an appropriate prevalent approach to economics: classical and early neoclassical economics, post-war neoclassical theory, and the “new” behavioral economics. They then present the attitude of the economists towards psychology through each of those. The most characteristic attitude of the classical and early neoclassical era was one of embracing hedonic psychology, where human behavior is seen as being motivated by the pursuance of pleasure and avoidance of pain (Bruni and Sugden 2007). In other words, there is a direct link between pleasure and utility, and introspection is seen as the proper method to gather the necessary evidence. However, this view gets—according to the standard account—cast out of economics by the developments build on Pareto’s vision of non- psychological economics. The central figure in this development is Paul Samuelson with his “behaviorist” theory of preferences revealed through observable choices, instead of introspection. This apparent rejection of psychology makes the Samuelsonian, or post-war neo-classical economics, the target in this standard account, and the period is often portrayed as a sort of “dark ages” where the theory of revealed preferences plays a role of a grand inquisitor out to excommunicate anybody inclined toward psychological reasoning. According to the standard view, things get finally set straight by the “new” behavioral economics, which emerges as the culmination of the early less successful developments— with old institutionalism, through Keynes’ analysis of the animal spirits, to Herbert Simon’s bounded rationality. As a result of all that has happened before, this time proponents are “cautious not to repeat mistakes committed by early twentieth-century psychologists and identified by the behaviorists” (Angner and Loewenstein 2012, 659). The new synthesis is based on the view of cognitive science that “thinking can be best understood in terms
Load more

Recommended publications
  • Provided for Non-Commercial Research and Educational Use Only. Not for Reproduction, Distribution Or Commercial Use
    Provided for non-commercial research and educational use only. Not for reproduction, distribution or commercial use. This chapter was originally published in the book Handbook of Experimental Economics Results. The copy attached is provided by Elsevier for the author’s benefit and for the benefit of the author’s institution, for noncommercial research, and educational use. This includes without limitation use in instruction at your institution, distribution to specific colleagues, and providing a copy to your institution’s administrator. All other uses, reproduction and distribution, including without limitation commercial reprints, selling or licensing copies or access, or posting on open internet sites, your personal or institution’s website or repository, are prohibited. For exceptions, permission may be sought for such use through Elsevier’s permissions site at: http://www.elsevier.com/locate/permissionusematerial Gerd Gigerenzer and Peter M. Todd, Rationality the Fast and Frugal Way: Introduction. In: C.R. Plott and V.L. Smitt, editors, Handbook of Experimental Economics Results, Volume 1. Amsterdam: North-Holland, 2008, p. 976. ISBN: 978-0-444-82642-8 © Copyright 2008 Elsevier B.V. Author’s personal copy Chapter 105 RATIONALITY THE FAST AND FRUGAL WAY: INTRODUCTION GERD GIGERENZER PETER M. TODD Max Planck Institute for Human Development, Berlin, Germany What is bounded rationality? The neoclassical answer is optimization under constraints such as information costs (e.g., Sargent, 1993). For behavioral economists, however, bounded rationality is the study of cognitive illusions and decision anomalies (e.g., Camerer, 1998; Rabin, 1998). These two interpretations make an odd couple, one pro- moting rationality, the other irrationality. Behavioral economists report that human behavior deviates from optimization models and reject these as descriptively inadequate.
    [Show full text]
  • An Interview with Gerd Gigerenzer
    Ecological rationality and citizenship education: an interview with Gerd Gigerenzer Danilo R. StreckI Abstract The subject of this interview is the research on ecological rationality carried out at the Max-Planck Instuitute for Human Development, in Berlin, and its implications for education, especially for citizenship education. The studies on ecological rationality focus on the processes of decision making in a world in which human activity happens in a context of uncertainties, where a complete evaluation of factors is practically impossible. The assumption of the research is that cognitive processes cannot be dissociated from social and cultural realities, and that therefore the identification of the heuristics used in making decisions can be an important instrument for the formation of autonomous thinking. Of special interest from the pedagogical perspective is promoting the development of the capacity to understand and deal with the limits and possibilities of the scientific logic on which educational processes are largely based, and the development of forms of knowing that are as much or more determinant than that one. Gigerenzer emphasizes the role of collective and interdisciplinary work to promote creativity in research and teaching, as well as to make decisions in daily life. Keywords Ecological rationality — Citizenship — Heuristics — Uncertainty. I- Universidade do Vale do Rio dos Sinos, São Leopoldo, RS, Brasil. Contact: [email protected] Educ. Pesqui., São Paulo, v. 40, n. 3, p. 829-842, jul./set. 2014. http://dx.doi.org/10.1590/S1517-97022014400300201 829 Racionalidade ecológica e formação de cidadania: entrevista com Gerd Gigerenzer Danilo R. StreckI Resumo A entrevista tem por tema as pesquisas sobre racionalidade ecológica e suas implicações para a educação, especialmente para a formação da cidadania, pesquisas essas desenvolvidas no Max- Planck Institute for Human Development, em Berlim.
    [Show full text]
  • Ecological Rationality; Error Management; Evolutionary Psychology; Fallacies; Fast & Frugal Heuristics; Irrationality; Locus Shifts
    To appear in Consciousness & Cognition (http://www.journals.elsevier.com/consciousness-and-cognition/) Can evolution get us off the hook? Evaluating the ecological defence of human rationality Keywords: adaptation; cognitive bias; ecological rationality; error management; evolutionary psychology; fallacies; fast & frugal heuristics; irrationality; locus shifts Authors: DR. MAARTEN BOUDRY (corresponding author) Ghent University - Department of Philosophy & Moral Sciences St.-Pietersnieuwstraat 49 - room 204 - 9000 Ghent – Belgium DR. MICHAEL VLERICK University of Johannesburg – Department of Philosophy - Po Box 524 Auckland Park 2006 - South Africa DR. RYAN MCKAY Royal Holloway, University of London – ARC Centre of Excellence in Cognition and its Disorders, Department of Psychology – Egham, Surrey TW20 0EX – United Kingdom Correspondence: [email protected] Ghent University - Department of Philosophy & Moral Sciences St.-Pietersnieuwstraat 49 - room 204 - 9000 Ghent – Belgium 1 Can evolution get us off the hook? Evaluating the ecological defence of human rationality* Abstract This paper discusses the ecological case for epistemic innocence: does biased cognition have evolutionary benefits, and if so, does that exculpate human reasoners from irrationality? Proponents of ‘ecological rationality’ have challenged the bleak view of human reasoning emerging from research on biases and fallacies. If we approach the human mind as an adaptive toolbox, tailored to the structure of the environment, many alleged biases and fallacies turn out to be artefacts of narrow norms and artificial set-ups. However, we argue that putative demonstrations of ecological rationality involve subtle locus shifts in attributions of rationality, conflating the adaptive rationale of heuristics with our own epistemic credentials. By contrast, other cases also involve an ecological reframing of human reason, but do not involve such problematic locus shifts.
    [Show full text]
  • The Interpretation of Uncertainty in Ecological Rationality
    Synthese (2021) 198:1517–1547 https://doi.org/10.1007/s11229-019-02140-w The interpretation of uncertainty in ecological rationality Anastasia Kozyreva1 · Ralph Hertwig1 Received: 3 September 2018 / Accepted: 11 February 2019 / Published online: 28 February 2019 © The Author(s) 2019 Abstract Despite the ubiquity of uncertainty, scientifc attention has focused primarily on probabilistic approaches, which predominantly rely on the assumption that uncer- tainty can be measured and expressed numerically. At the same time, the increas- ing amount of research from a range of areas including psychology, economics, and sociology testify that in the real world, people’s understanding of risky and uncertain situations cannot be satisfactorily explained in probabilistic and decision-theoretical terms. In this article, we ofer a theoretical overview of an alternative approach to uncertainty developed in the framework of the ecological rationality research pro- gram. We frst trace the origins of the ecological approach to uncertainty in Simon’s bounded rationality and Brunswik’s lens model framework and then proceed by out- lining a theoretical view of uncertainty that ensues from the ecological rationality approach. We argue that the ecological concept of uncertainty relies on a systemic view of uncertainty that features it as a property of the organism–environment sys- tem. We also show how simple heuristics can deal with unmeasurable uncertainty and in what cases ignoring probabilities emerges as a proper response to uncertainty. Keywords Uncertainty · Risk · Probability · Ecological rationality · Decision making · Heuristics 1 Introduction: the challenge of uncertainty in decision‑making research “All things that are still to come lie in uncertainty; live straightaway” (Seneca 49/1990, p.
    [Show full text]
  • Environments That Make Us Smart Ecological Rationality Peter M
    CURRENT DIRECTIONS IN PSYCHOLOGICAL SCIENCE Environments That Make Us Smart Ecological Rationality Peter M. Todd1,2 and Gerd Gigerenzer1 1Center for Adaptive Behavior and Cognition, Max Planck Institute for Human Development, Berlin, Germany, and 2Program in Cognitive Science, Indiana University ABSTRACT—Traditional views of rationality posit general- prevailing explanations of behavior are still expressed most often purpose decision mechanisms based on logic or optimiza- in terms of personality traits, cognitive styles, brain-region acti- tion. The study of ecological rationality focuses on un- vation patterns, preferences and utilities, and other assumed covering the ‘‘adaptive toolbox’’ of domain-specific simple entities ‘‘inside’’ the mind. heuristics that real, computationally bounded minds em- The research program on ecological rationality aims to ex- ploy,and explaining how these heuristics produce accurate plicate the mind–world interactions underlying good decision decisions by exploiting the structures of information in the making. We build on the foundations from Darwin, Brunswik, environments in which they are applied. Knowing when Simon, and others to create a framework for understanding how and how people use particular heuristics can facilitate the environment structure—in the form of useful patterns of avail- shaping of environments to engender better decisions. able information in the world—can be exploited by heuristics in the head to produce adaptive behavior (Gigerenzer, Todd, & KEYWORDS—ecologicalrationality;decision making;adap- the ABC Research Group, 1999; Todd, Gigerenzer, & the ABC tive toolbox; simple heuristics; environment structure; Research Group, in press). Heuristics—simple decision algo- bounded rationality rithms that can work well in appropriate environments—gen- erate both routine behavior and important decisions, for The importance of looking at the world to understand the mind inference, choice, group deliberations, and even moral issues.
    [Show full text]
  • The Interpretation of Uncertainty in Ecological Rationality
    Synthese https://doi.org/10.1007/s11229-019-02140-w The interpretation of uncertainty in ecological rationality Anastasia Kozyreva1 · Ralph Hertwig1 Received: 3 September 2018 / Accepted: 11 February 2019 © The Author(s) 2019 Abstract Despite the ubiquity of uncertainty, scientifc attention has focused primarily on probabilistic approaches, which predominantly rely on the assumption that uncer- tainty can be measured and expressed numerically. At the same time, the increas- ing amount of research from a range of areas including psychology, economics, and sociology testify that in the real world, people’s understanding of risky and uncertain situations cannot be satisfactorily explained in probabilistic and decision-theoretical terms. In this article, we ofer a theoretical overview of an alternative approach to uncertainty developed in the framework of the ecological rationality research pro- gram. We frst trace the origins of the ecological approach to uncertainty in Simon’s bounded rationality and Brunswik’s lens model framework and then proceed by out- lining a theoretical view of uncertainty that ensues from the ecological rationality approach. We argue that the ecological concept of uncertainty relies on a systemic view of uncertainty that features it as a property of the organism–environment sys- tem. We also show how simple heuristics can deal with unmeasurable uncertainty and in what cases ignoring probabilities emerges as a proper response to uncertainty. Keywords Uncertainty · Risk · Probability · Ecological rationality · Decision making · Heuristics 1 Introduction: the challenge of uncertainty in decision‑making research “All things that are still to come lie in uncertainty; live straightaway” (Seneca 49/1990, p. 313). Even though the Roman philosopher Seneca wrote these words almost two millennia ago, they still ring true to the modern ear.
    [Show full text]
  • Models of Ecological Rationality: the Recognition Heuristic
    Psychological Review Copyright 2002 by the American Psychological Association, Inc. 2002, Vol. 109, No. 1, 75–90 0033-295X/02/$5.00 DOI: 10.1037//0033-295X.109.1.75 Models of Ecological Rationality: The Recognition Heuristic Daniel G. Goldstein and Gerd Gigerenzer Max Planck Institute for Human Development One view of heuristics is that they are imperfect versions of optimal statistical procedures considered too complicated for ordinary minds to carry out. In contrast, the authors consider heuristics to be adaptive strategies that evolved in tandem with fundamental psychological mechanisms. The recognition heuristic, arguably the most frugal of all heuristics, makes inferences from patterns of missing knowledge. This heuristic exploits a fundamental adaptation of many organisms: the vast, sensitive, and reliable capacity for recognition. The authors specify the conditions under which the recognition heuristic is successful and when it leads to the counterintuitive less-is-more effect in which less knowledge is better than more for making accurate inferences. What are heuristics? The Gestalt psychologists Karl Duncker combined values (misaggregation hypothesis) or misperceived and Wolfgang Koehler preserved the original Greek definition of probabilities (misperception hypothesis). The view of cognitive “serving to find out or discover” when they used the term to processes as defective versions of standard statistical tools was not describe strategies such as “looking around” and “inspecting the limited to Edward’s otherwise excellent research program. In the problem” (e.g., Duncker, 1935/1945). For Duncker, Koehler, and 1970s, the decade of the ANOVA model of causal attribution, a handful of later thinkers, including Herbert Simon (e.g., 1955), Harold Kelley and his colleagues suggested that the mind at- heuristics are strategies that guide information search and modify tributes a cause to an effect in the same way that experimenters problem representations to facilitate solutions.
    [Show full text]
  • A Neuroscientific Perspective on Cognitive Biases JE
    A neuroscientific perspective on cognitive biases J.E. (Hans) Korteling, A.-M. Brouwer, A. Toet* TNO, Soesterberg, The Netherlands * Corresponding author: Alexander Toet TNO Kampweg 5 3769DE Soesterberg, The Netherlands Email: [email protected] Abstract Human reasoning shows systematic and persistent simplifications (‘heuristics’) and deviations from ‘rational thinking’ that may lead to suboptimal decisional outcomes (‘cognitive biases’). There are currently three prevailing theoretical perspectives on the origin of heuristics and cognitive biases: a cognitive-psychological, an ecological and an evolutionary perspective. However, none of these viewpoints provides an overall explanatory framework for the underlying mechanisms of cognitive biases. Here we propose a neuroscientific framework for cognitive biases, arguing that many cognitive biases arise from intrinsic brain mechanisms that are fundamental to biological neural networks and that originally developed to perform basic physical, perceptual, and motor functions. Keywords cognitive biases, heuristics, decision making, neural networks, neural information processing, human irrationality 1 Introduction In daily life, we constantly make judgments and decisions (either conscious or unconscious) without knowing their outcome. We typically violate rules of logic and probability and resort to simple and near-optimal heuristic decision rules (‘mental shortcuts’) to optimize the likelihood of an acceptable outcome, which may be effective in conditions with time-constraints, information overload, or when no optimal solution is evident (Gerd Gigerenzer & Gaissmaier, 2010). We are also inclined to use heuristics when problems appear familiar and when we do not feel the need to gather additional information. Although heuristics can result in quite acceptable outcomes in everyday situations, and when the time cost of reasoning are taken into account, people often violate tenets of rationality in inadvisable ways (Shafir & LeBoeuf, 2002).
    [Show full text]