Sunday, October 07, 2012

Better Than Rational

Cosmides and Tooby explain how humans are better than rational.
natural selection's invisible hand created the structure of the human mind, and the interaction of these minds is what generates the invisible hand of economics.
the human mind is not worse than rational (e.g., because of processing constraints)-but may often be better than rational. On evolutionarily recurrent computational tasks, such as object recognition, grammar acquisition, or speech comprehension, the human mind greatly outperforms the best artificial problem-solving systems that decades of research have produced, and it solves large classes of problems that even now no human engineered system can solve at all.
For the problem domains they are designed to operate on,specialized problem-solving methods perform in a manner that is better than rational; that is, they can arrive at successful outcomes that canonical general-purpose rational methods can at best not arrive at as efficiently, and more commonly cannot arrive at all. Such evolutionary considerations suggest that traditional normative and descriptive approaches to rationality need to be reexamined.
It matters a great deal that economists are, more often than not (though they are improving some, thanks to the efforts of people like Daniel Kahneman and Vernon Smith) using a version of "rationality" that is, quite frankly, extremely irrational. Our instincts matter. And the ways in which those instincts get expressed in different ways in different cultures matter. HT: Roger Koppl

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