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Summary:
In a complex and uncertain world, humans and animals make decisions under the constraints of limited knowledge, resources, and time. Yet models of rational decision making in economics, cognitive science, biology, and other fields largely ignore these real constraints and instead assume agents with perfect information and unlimited time. About forty years ago, Herbert Simon challenged this view with his notion of "bounded rationality." Today, bounded rationality has become a fashionable term used for disparate views of reasoning. This book promotes bounded rationality as the key to understanding how real people make decisions. Using the concept of an "adaptive toolbox," a repertoire of fast and frugal rules for decision making under uncertainty, it attempts to impose more order and coherence on the idea of bounded rationality. The contributors view bounded rationality neither as optimization under constraints nor as the study of people’s reasoning fallacies. The strategies in the adaptive toolbox dispense with optimization and, for the most part, with calculations of probabilities and utilities. The book extends the concept of bounded rationality from cognitive tools to emotions; it analyzes social norms, imitation, and other cultural tools as rational strategies; and it shows how smart heuristics can exploit the structure of environments.
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Human Rationality and Evolution
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This edited volume is an important addition to the work on human decision-making under conditions of uncertainty, in which people use "rules of thumb" to produce cost-effective decisions that are not strictly "rational." From the psychological literature, the work of Kahneman and Tversky is well know (and has been rewarded with international recognition). However, they do not explicitly link such behavior (often referred to as "heuristics") to evolution and biology. And they tend to define these "rules of thumb" as rather poor guides to decision making.
The essays in this edited volume provide a different--and more optimistic picture--of such heuristics. The contributors provide evidence and logic to suggest that evolution has led to the development of decision making shortcuts that "work" reasonably well.
One can disagree with certain aspects of this work (they may be a bit harsh on Kahneman and Tversky and their peers; they may be overly optimistic about some of the heuristics that they mention). Nonetheless, this work is a wonderful introduction to a literature on how humans actually think and decide--rather than relying on abstract conceptualizations often prevalent in the social sciences, including the simplistic "rational choice" theory ascendant in several social science disciplines. This book represents a welcome corrective to such perspectives.
State of the Art on Behavioral Choice Theory
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Suppose we wanted to predict how an expert billiards player would hit a certain shot. We would measure the angles and distances, get the coefficients of elasticity of the balls and the bumpers, and we would solve a set of differential equations. But is that how the billiards player figures out what to do? Of course not! We don't know exactly what he would do, but if the authors of this book had their way, we'd give up on the differential equations (optimization theory) and find the "fast and frugal heuristic" actually used by the billiards player.
This book is the product of a conference of experts in the field. It includes wonderful contributions by the editors and their coworkers on how decisions are actually made, and argues persuasively that fast and frugal is almost as good as full optimization, and at much lower cost.
But the volume is a lot broader than that. It includes contributions on the role of emotions in decision-making (Dan Fessler), learning in animal societies (Keven Laland) and social insects (Thomas Seeley), and a lot of material on the role of culture in human societies (Boyd, Richerson, McCabe, Smith, Henrich, and others). This is important new material, very up to date.
Gigerenzter and Selten go to great lengths to cast aspersions on the old-fashioned "optimization subject to constraints" perspective, but their arguments are not persuasive. They make a category error: they maintain that models that use optimization assume that the agents the models describe use optimization. This is just silly. Just as the billiards player does not solve differential equations, decision-makers do not do complete optimization, even though we may use such models to describe their behavior.
The editors believe that optimization subject to constraints is dead in behavioral theory, but they're dead wrong. That's in fact what they are doing, but they prefer to call it "bounded rationality."
Finally, I should note that the work of Eduardo Zambrano (look up his home page) shows that the SEU (Subjective Expected Utility model---the enemy of all bounded rationalers) actually is behaviorally universal, in the sense that one can always find a set of Bayesian priors for which an observed set of behaviors is optimal.
But don't let these petty methodological issues get you down. The book is a great collection by the authors of major work in behavioral theory.
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