Bounded rationality

and miscellaneous non-von Neumann-Morgenstern rationality postulates


Prospect theory, Kahnemann-and-Tversky style. Rational Heuristics, Gigerenzer-and-Todd style. Docility, Herbert-Simon-wise. Friedrich Hayek on information aggregation in markets, and the rest of those Austrian Economists. Behavioural economics more generally.

How can we handle a market in the large where the boundedly rational dynamics of human decisions are in effect? Does it even matter? Are markets systems for fabricating rational-like behaviour from irrational agents? (Hayek might argue this, and I think also Gode and Sunder of Zero Intelligence Agents fame. Friedman argued that in fact that markets effectively turn people into rational agents, which is yet stronger.)

Are there useful measures of “how much rationality” humans have that we can use for aggregate modelling? (as opp. the minute and detailed ones that Kahnemann and Tversky devise, that are hard to scale up.) Would statistical learning theory help us here? Even computational complexity?

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