How can institutions construct good decisions out of the aggregate ignorance, laziness, short-sightedness, chaos, and occasional information that we pump into them?
A flagship question is about how the market does so, finding prices (maybe) efficiently despite the boundedly rational dynamics of human decisions. 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 markets effectively turn people into rational agents, which is stronger.
Are there useful measures of “how much rationality” humans have that we can use for aggregate modelling? (as opposed to the minute and detailed ones that Kahneman and Tversky devise, that are hard to scale up.)
TBC
- Henry Farrell, in Skepticism and human reason, argues “Even if human beings are bad at (some forms) of individual reasoning, they may be able to reason quite well collectively.” A criticism of Bright (2022) via Farrell, Mercier, and Schwartzberg (2022).
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