Bounded Rationality

The Adaptive Toolbox

In a complex and uncertain world, humans and animals make decisions under the constraints of limited knowledge, resources, and time. Yet models of rational decision making in economics, cognitive science, biology, and other fields largely ignore these real constraints and instead assume agents with perfect information and unlimited time. About forty years ago, Herbert Simon challenged this view with his notion of "bounded rationality." Today, bounded rationality has become a fashionable term used for disparate views of reasoning.

This book promotes bounded rationality as the key to understanding how real people make decisions. Using the concept of an "adaptive toolbox," a repertoire of fast and frugal rules for decision making under uncertainty, it attempts to impose more order and coherence on the idea of bounded rationality. The contributors view bounded rationality neither as optimization under constraints nor as the study of people's reasoning fallacies. The strategies in the adaptive toolbox dispense with optimization and, for the most part, with calculations of probabilities and utilities. The book extends the concept of bounded rationality from cognitive tools to emotions; it analyzes social norms, imitation, and other cultural tools as rational strategies; and it shows how smart heuristics can exploit the structure of environments.

Table of Contents

  1. The Dahlem Konferenzen
  2. List of Participants
  3. 1. Rethinking Rationality

    Gerg Gigerenzer and Reinhard Selten

  4. 2. What Is Bounded Rationality?

    Reinhard Selten

  5. 3. The Adaptive Toolbox

    Gerd Gigerenzer

  6. 4. Fast and Frugal Heuristics for Environmentally Bounded Minds

    Peter M. Todd

  7. 5. Evolutionary Adaptation and the Economic Concept of Bounded Rationality—A Dialogue

    Peter Hammerstein

  8. 6. Group Report: Is there Evidence for an Adaptive Toolbox?

    Abdolkarim Sadrieh, Werner Güth, Peter Hammerstein, Stevan Harnad, Ulrich Hoffrage, Bettina Kuon, Bertrand R. Munier, Peter M. Todd, Massimo Warglien and Martin Weber

  9. 7. The Fiction of Optimization

    Gary Klein

  10. 8. Preferential Choice and Adaptive Strategy Use

    John W. Payne and James R. Bettman

  11. 9. Comparing Fast and Frugal Heuristics and Optimal Models

    Laura Martignon

  12. 10. Group Report: Why and When Do Simple Heuristics Work?

    Daniel G. Goldstein, Gerg Gigerenzer, Robin M. Hogarth, Alex Kacelnik, Yaakov Kareev, Gary Klein, Laura Martignon, John W. Payne and Karl H. Schlag

  13. 11. Emotions and Cost-benefit Assessment: The Role of Shame and Self-esteem in Risk taking

    Daniel M. T. Fessler

  14. 12. Simple Reinforcement Learning Models and Reciprocation in the Prisoner's Dilemma Game

    Ido Erev and Alvin E. Roth

  15. 13. Imitation, Social Learning, and Preparedness as Mechanisms of Bounded Rationality

    Kevin N. Laland

  16. 14. Decision Making in Superorganisms: How Collective Wisdom Arises from the Poorly Informed Masses

    Thomas D. Seeley

  17. 15. Group Report: Effect of Emotions and Social Processes on Bounded Rationality

    Barbara A. Mellers, Ido Erev, Daniel M. T. Fessler, Charlotte K. Hemelrijk, Ralph Hertwig, Kevin N. Laland, Klaus R. Scherer, Thomas D. Seeley, Reinhard Selten and Philip E. Tetlock

  18. 16. Norms and Bounded Rationality

    Robert Boyd and Peter J. Richerson

  19. 17. Prominence Theory as a Tool to Model Boundedly Rational Decisions

    Wulf Albers

  20. 18. Goodwill Accounting and the Process of Exchange

    Kevin A. McCabe and Vernon L. Smith

  21. 19. Group Report: What is the Role of Culture in Bounded Rationality?

    Joseph Henrich, Wulf Albers, Robert Boyd, Gerg Gigerenzer, Kevin A. McCabe, Axel Ockenfels and H. Peyton Young

  22. Subject Index
  23. Name Index