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Bounded Rationality and Beyond
News on the effects of bounded rationality in economics and business, relationships and politics
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Homo Heuristicus: Why Biased Minds Make Better Inferences - Gerd Gigerenzer, Henry Brighton

Gerd Gigerenzer, Henry Brighton

Abstract
Heuristics are efficient cognitive processes that ignore information. In contrast to the widely held view that less processing reduces accuracy, the study of heuristics shows that less information, computation, and time can in fact improve accuracy. We review the major progress made so far: (a) the discovery of less-is-more effects; (b) the study of the ecological rationality of heuristics, which examines in which environments a given strategy succeeds or fails, and why; (c) an advancement from vague labels to computational models of heuristics; (d) the development of a systematic theory of heuristics that identifies their building blocks and the evolved capacities they exploit, and views the cognitive system as relying on an ‘‘adaptive toolbox;’’ and (e) the development of an empirical methodology that accounts for individual differences, conducts competitive tests, and has provided evidence for people’s adaptive use of heuristics. Homo heuristicus has a biased mind and ignores part of the available information, yet a biased mind can handle uncertainty more efficiently and robustly than an unbiased mind relying on more resource-intensive and general-purpose processing strategies.

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Agent-based and macroscopic modeling of the complex socio-economic systems

The current economic crisis has provoked an active response from the interdisciplinary scientific community. As a result many papers suggesting what can be improved in understanding of the complex socio-economics systems were published. Some of the most prominent papers on the topic include (Bouchaud, 2009; Farmer and Foley, 2009; Farmer et al, 2012; Helbing, 2010; Pietronero, 2008). These papers share the idea that agent-based modeling is essential for the better understanding of the complex socio-economic systems and consequently better policy making. Yet in order for an agent-based model to be useful it should also be analytically tractable, possess a macroscopic treatment (Cristelli et al, 2012). In this work we shed a new light on our research group's contributions towards understanding of the correspondence between the inter-individual interactions and collective behavior. We also provide some new insights into the implications of the global and local interactions, the leadership and the predator-prey interactions in the complex socio-economic systems.
  
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INTUITIVE PREDICTION BIASES AND CORRECTIVE PROCEDURES

Defense Advanced Research Projects Agency - 

Decisions vital to the accomplishment of military objectives are determined in large part by the intuitive judgments and educated guesses of decision makers or experts acting in their behalf. The critical role of intuitive judgments makes it important to study the factors that limit the accuracy of these judgments and to seek ways of improving them. Previous work in ARPA's Advanced Decision Technology Program has led to the discovery of major deficiencies in the unaided, intuitive judgments of probabilities for uncertain events. Of the many significant conclusions of this research,
the following merit special mention:

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Planning for the near and distant future: How does temporal distance affec task completion predictions?

In everyday life people estimate completion times for projects in the near and distant future. How might the temporal proximity of a project influence prediction? Given that closer events elicit more concrete construals, we proposed that temporal proximity could enhance two kinds of concrete cognitions pertinent to task completion predictions: step-by-step plans and potential obstacles. Although these cognitions have opposite implications for prediction, and thus could cancel each other out, we hypothesized that temporal proximity would have a greater impact on cognitions that were relatively focal. Thus contextual factors that alter the relative focus on plans vs. obstacles should determine whether and how
temporal proximity affects prediction. Six studies supported this reasoning. In contexts that elicited a focus on planning, individuals predicted earlier completion times for close than distant projects. In contexts that prompted a focus on obstacles, individuals predicted later completion times for close than distant projects.

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Dan Ariely: What makes us feel good about our work? | Video on TED.com

What motivates us to work? Contrary to conventional wisdom, it isn't just money. But it's not exactly joy either. It seems that most of us thrive by making constant progress and feeling a sense of purpose. Behavioral economist Dan Ariely presents two eye-opening experiments that reveal our unexpected and nuanced attitudes toward meaning in our work.
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The Will and Ways of Hope

The Will and Ways of Hope | Bounded Rationality and Beyond | Scoop.it

Why is hope important? Well, life is difficult. There are many obstacles. Having goals is not enough. One has to keep getting closer to those goals, amidst all the inevitable twists and turns of life. Hope allows people to approach problems with a mindset and strategy-set suitable to success, thereby increasing the chances they will actually accomplish their goals.

Hope is not just a feel-good emotion, but a dynamic cognitivemotivational system. Under this conceptualization of hope, emotions follow cognitions, not the other way round. Hope-related cognitions are important. Hope leads to learning goals, which are conducive to growth and improvement. People with learning goals are actively engaged in their learning, constantly planning strategies to meet their goals, and monitoring their progress to stay on track. A bulk of research shows that learning goals are positively related to success across a wide swatch of human life—from academic achievement to sports to arts to science to business.

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New applied rationality workshops (April, May, and July) - Less Wrong

New applied rationality workshops (April, May, and July) - Less Wrong | Bounded Rationality and Beyond | Scoop.it

In the early days of the Center for Applied Rationality, Anna Salamon and I had a disagreement about whether we were ready to run our first applied rationality workshops in six weeks. My inside view said "No way"; Her inside view said "Should be fine"; My outside view noted that Anna had more relevant experience than I did, and therefore cowed my inside view into grudgingly shutting up.

 
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Being and Feeling in Sync with an Adaptive Virtual Partner: Brain Mechanisms Underlyin Dynamic Cooperativity

Cooperation is intrinsic to the human ability to work together
toward common goals, and depends on sensing and reacting to dynamically changing relationships between coacting partners. Using
functional magnetic resonance imaging (fMRI) and a paradigm in
which an adaptive pacing signal simulates a virtual partner, we
examined the neural substrates underlying dynamic joint action.
A single parameter controlled the degree to which the virtual partner
adapted its behavior in relation to participant taps, thus simulating
varying degrees of cooperativity. Analyses of fMRI data using objective and subjective measures of synchronization quality found the
relative balance of activity in two distinct neural networks to
depend on the degree of the virtual partner’s adaptivity. At lower
degrees of adaptivity, when the virtual partner was easier to synchronize with, cortical midline structures were activated in conjunction with premotor areas, suggesting a link between the action
and socio-affective components of cooperation. By contrast, right
lateral prefrontal areas associated with central executive control
processes were recruited during more cognitively challenging interactions while synchronizing with an overly adaptive virtual partner.
Together, the reduced adaptive sensorimotor synchronization paradigm and pattern of results illuminate neural mechanisms that may
underlie the socio-emotional consequences of different degrees of
entrainment success.

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3 things to know about behavioral economics | Need to Know | PBS

3 things to know about behavioral economics | Need to Know | PBS | Bounded Rationality and Beyond | Scoop.it

In understanding the distinction between behavioral and theoretical economics, it’s important to understand that within the ‘traditional’ view of economic theory, it is assumed individuals behave in a vacuum. In practice, however, the attitudes and wants of individual actors is well, human. In an interview with Yale professor Robert Shiller, Nigel Warburton clarifies this: So what you’re saying is that traditional economics has focused on a kind of ideally rational individual: what would they do if they behaved in their own best interests based on the information available? But behavioral economics brings in the fact that we don’t always behave in our own best interests.

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A live google hangout to answer your questions about memory and the brain.

A live google hangout to answer your questions about memory and the brain. | Bounded Rationality and Beyond | Scoop.it
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The Inevitable Ups and Downs in Life

The Inevitable Ups and Downs in Life | Bounded Rationality and Beyond | Scoop.it
Life isn't about the exact quantity of ups and downs, but rather how smoothly we ride between these inevitable ups and downs.
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Who would have thought Turkers could do this?

Who would have thought Turkers could do this? | Bounded Rationality and Beyond | Scoop.it
This is one of the most amazing things we've seen in a while. What does the text block above say? You have no idea, right?
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A Fun DIY Science Goodie: The Behavioral Economics of Agreement (and Why Negotiations Fail) | Guest Blog, Scientific American Blog Network

A Fun DIY Science Goodie: The Behavioral Economics of Agreement (and Why Negotiations Fail) | Guest Blog, Scientific American Blog Network | Bounded Rationality and Beyond | Scoop.it
Why do people have such a hard time reaching a compromise? Blame fairness.



That was the message of behavioral economist George Loewenstein of Carnegie Mellon University ...
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Subtracting “Ought” From “Is”: Descriptivism Versus Normativism in the Study of the Human Thinking

Abstract: We propose a critique of normativism, defined as the idea that human thinking reflects a normative system against which it should be measured and judged. We analyze the methodological problems associated with normativism, proposing that it invites the controversial is-ought inference, much contested in the philosophical literature. This problem is triggered when there are competing normative accounts (the arbitration problem), as empirical evidence can help arbitrate between
descriptive theories, but not between normative systems. Drawing on linguistics as a model, we propose that clear distinction between normative systems and competence theories is essential, arguing
that equating them invites an ‘is-ought’ inference; to wit, supporting normative ‘ought’ theories with empirical ‘is’ evidence. We analyze in detail two research programs with normativist features, Oaksford and Chater’s rational analysis, and Stanovich and West’s individual differences approach, demonstrating how in each case equating norm and competence leads to an is-ought inference.
Normativism triggers a host of research biases in psychology of reasoning and decision making: focusing on untrained participants and novel problems, analyzing psychological processes in terms of their normative correlates, and neglecting philosophically significant paradigms when they do not supply clear standards for normative judgment. For example, in a dual-process framework, normativism can lead to a fallacious ‘ought-is’ inference, in which normative responses are taken as diagnostic of analytic reasoning. We propose that little can be gained from normativism that cannot be achieved by descriptivist computational-level analysis, illustrating our position with Hypothetical Thinking Theory and the theory of the suppositional conditional. We conclude that descriptivism is a viable option, and that theories of higher mental processing would be better off freed from normative considerations.

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Bootstrap Methods for the Empirical Study of Decision-Making and Information Flows in Social Systems

We characterize the statistical bootstrap for the estimation of information-theoretic quantities from data, with particular reference to its use in the study of large-scale social phenomena. Our methods allow one to preserve, approximately, the underlying axiomatic relationships of information theory---in particular, consistency under arbitrary coarse-graining---that motivate use of these quantities in the first place, while providing reliability comparable to the state of the art for Bayesian estimators. We show how information-theoretic quantities allow for rigorous empirical study of the decision-making capacities of rational agents, and the time-asymmetric flows of information in distributed systems. We provide illustrative examples by reference to ongoing collaborative work on the semantic structure of the British Criminal Court system and the conflict dynamics of the contemporary Afghanistan insurgency.
 
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How Can Decision Making Be Improved?

The optimal moment to address the question of how to improve human
decision making has arrived. Thanks to fifty years of research by judgment
and decision making scholars, psychologists have developed a detailed picture of the ways in which human judgment is bounded. This paper argues that the time has come to focus attention on the search for strategies that will improve bounded judgment because decision making errors are costly and are growing more costly, decision makers are receptive, and academic insights are sure to follow from research on improvement. In addition to calling for research on improvement strategies, this paper organizes the existing literature pertaining to improvement strategies, highlighting promising directions for future research.

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The Cognitive Science of Rationality - Less Wrong

The Cognitive Science of Rationality - Less Wrong | Bounded Rationality and Beyond | Scoop.it

The last 40 years of cognitive science have taught us a great deal about how our brains produce errors in thinking and decision making, and about how we can overcome those errors. These methods can help us form more accurate beliefs and make better decisions.

 

Long before the first Concorde supersonic jet was completed, the British and French governments developing it realized it would lose money. But they continued to develop the jet when they should have cut their losses, because they felt they had "invested too much to quit"1 (sunk cost fallacy2).

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Study: There Seems to Be a Universal Brain Response to Music

Study: There Seems to Be a Universal Brain Response to Music | Bounded Rationality and Beyond | Scoop.it
People who listened to classical music inside an fMRI machine had remarkably synchronized brain patterns that aren't seen in other contexts.
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Missing the Trees for the Forest - Less Wrong

Missing the Trees for the Forest - Less Wrong | Bounded Rationality and Beyond | Scoop.it

Politics is the mind-killer. A while back, I gave an example: the government's request that Kelloggs [EDIT: General Mills, thanks CronoDAS] top making false claims about Cheerios. By the time the right-wing and left-wing blogospheres had finished with it, this became everything from part of the deliberate strangulation of the American entrepreneurial spirit by a conspiracy of bureaucrats, to a symbol of the radicalization of the political right into a fringe group obsessed with Communism, to a prelude to Obama's plan to commit genocide against all citizens who disagree with him. All because of Cheerios!
Why? What drives someone to hear about a reasonable change in cereal advertising policy and immediately think of a second Holocaust?

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The neurochemistry of music - Mona Lisa Chanda and Daniel J. Levitin

Music is usedto regulatemoodand arousal in everyday life and to promote physical and psychological health and well-being in clinical settings. However, scientific inquiry into the neurochemical effects of music is still
in its infancy. In this review, we evaluate the evidence that music improves health and well-being through the engagement of neurochemical systems for (i) reward, motivation, and pleasure;

(ii) stress and arousal;
(iii) immunity; and

(iv) social affiliation. We discuss
the limitations of these studies and outline novel approaches for integration of conceptual and technological advances from the fields of music cognition and
social neuroscience into studies of the neurochemistry of music

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250 calories, 2.6 miles of walking, or 78 minutes of walking: which would cause you to eat less?

250 calories, 2.6 miles of walking, or 78 minutes of walking: which would cause you to eat less? | Bounded Rationality and Beyond | Scoop.it

In this study we examined the effect of physical activity based labels on the calorie content of meals selected from a sample fast food menu. Using a web-based survey, participants were randomly assigned to one of four menus which differed only in their labeling schemes (n = 802): (1) a menu with no nutritional information, (2) a menu with calorie information, (3) a menu with calorie information and minutes to walk to burn those calories, or (4) a menu with calorie information and miles to walk to burn those calories. There was a significant difference in the mean number of calories ordered based on menu type (p = 0.02), with an average of 1020 calories ordered from a menu with no nutritional information, 927 calories ordered from a menu with only calorie information, 916 calories ordered from a menu with both calorie information and minutes to walk to burn those calories, and 826 calories ordered from the menu with calorie information and the number of miles to walk to burn those calories. The menu with calories and the number of miles to walk to burn those calories appeared the most effective in influencing the selection of lower calorie meals (p = 0.0007) when compared to the menu with no nutritional information provided. The majority of participants (82%) reported a preference for physical activity based menu labels over labels with calorie information alone and no nutritional information. Whether these labels are effective in real-life scenarios remains to be tested.

 
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Neural Decoding of Visual Imagery During Sleep

Visual imagery during sleep has long been a topic of persistent speculation, but its private nature has hampered objective analysis. Here, we present a neural decoding approach in which machine learning models predict the contents of visual imagery during the sleep onset period given measured brain activity, by discovering links between human fMRI patterns and verbal reports with the assistance of lexical and image databases. Decoding models trained on stimulus-induced brain activity in visual cortical areas showed accurate classification, detection, and identification of contents. Our findings demonstrate that specific visual experience during sleep is represented by brain activity patterns shared by stimulus perception, providing a means to uncover subjective contents of dreaming using objective neural measurement.

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How actions create – not just reveal – preferences

The neo-classical economics view that behavior is driven by – and reflective of – hedonic utility is challenged by psychologists’ demonstrations of cases in which actions do not merely reveal preferences but rather create them.
In this view, preferences are frequently constructed in the moment and are susceptible to fleeting situational factors; problematically, individuals are insensitive to the impact of such factors on their behavior, misattributing
utility caused by these irrelevant factors to stable underlying preferences. Consequently, subsequent behavior might reflect not hedonic utility but rather this erroneously imputed utility that lingers in memory. Here we review the roles of these streams of utility in shaping preferences, anddiscusshow neuroimaging offersunique possibilities for disentangling their independent contributions to behavior.

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Daniel Kahneman: The riddle of experience vs. memory | Video on TED.com

Using examples from vacations to colonoscopies, Nobel laureate and founder of behavioral economics Daniel Kahneman reveals how our "experiencing selves" and our "remembering selves" perceive happiness differently.
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