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Bounded rationality: the two cultures

Bounded rationality: the two cultures
Bounded rationality: the two cultures
Research on bounded rationality has two cultures, which I call ‘idealistic’ and ‘pragmatic’. Technically, the cultures differ on whether they (1) build models based on normative axioms or empirical facts, (2) assume that people's goal is to optimize or to satisfice, (3) do not or do model psychological processes, (4) let parameters vary freely or fix them, (5) aim at explanation or prediction and (6) test models from one or both cultures. Each culture tells a story about people's rationality. The story of the idealistic culture is frustrating, with people in principle being able to know what they should do, but in practice systematically failing to do it. This story makes one hide in books for intellectual solace or surrender to the designs of someone smarter. The story of the pragmatic culture is empowering: If people are educated to use the right tool in the right situation, they do well.
1350-178X
361-374
Katsikopoulos, Konstantinos
b97c23d9-8b24-4225-8da4-be7ac2a14fba
Katsikopoulos, Konstantinos
b97c23d9-8b24-4225-8da4-be7ac2a14fba

Katsikopoulos, Konstantinos (2014) Bounded rationality: the two cultures. Journal of Economic Methodology, 21 (4), 361-374. (doi:10.1080/1350178X.2014.965908).

Record type: Article

Abstract

Research on bounded rationality has two cultures, which I call ‘idealistic’ and ‘pragmatic’. Technically, the cultures differ on whether they (1) build models based on normative axioms or empirical facts, (2) assume that people's goal is to optimize or to satisfice, (3) do not or do model psychological processes, (4) let parameters vary freely or fix them, (5) aim at explanation or prediction and (6) test models from one or both cultures. Each culture tells a story about people's rationality. The story of the idealistic culture is frustrating, with people in principle being able to know what they should do, but in practice systematically failing to do it. This story makes one hide in books for intellectual solace or surrender to the designs of someone smarter. The story of the pragmatic culture is empowering: If people are educated to use the right tool in the right situation, they do well.

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KK JEM Mar 27 - Accepted Manuscript
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More information

Accepted/In Press date: 27 March 2014
e-pub ahead of print date: 8 October 2014
Published date: 2014
Additional Information: Special issue: Methodological perspectives on recent theories of bounded rationality
Organisations: Decision Analytics & Risk

Identifiers

Local EPrints ID: 409039
URI: http://eprints.soton.ac.uk/id/eprint/409039
ISSN: 1350-178X
PURE UUID: 01e9c244-0bac-4953-bb40-e8d9030ef295
ORCID for Konstantinos Katsikopoulos: ORCID iD orcid.org/0000-0002-9572-1980

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Date deposited: 28 May 2017 04:05
Last modified: 11 Mar 2020 01:38

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