Maps of Bounded Rationality (I)

Abstract

Economists often criticize psychological research for its propensity to generate lists of errors and biases, and for its failure to offer a coherent alternative to the rational-agent model. The present treatment distinguishes two modes of thinking and deciding, which correspond roughly to the everyday concepts of reasoning and intuition. In the examples discussed, intuition was associated with poor performance, but intuitive thinking can also be powerful and accurate. A defining property of intuitive thoughts is that they come to mind spontaneously, like percepts. The evaluation of stimuli as good or bad is a particularly important natural assessment. A general property of perceptual systems is that they are designed to enhance the accessibility of changes and differences. Perception is reference-dependent: the perceived attributes of a focal stimulus reflect the contrast between that stimulus and a context of prior and concurrent stimuli. The assumption that preferences are not affected by inconsequential variations in the description of outcomes has been called extensionality and invariance, and is considered an essential aspect of rationality.