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Bounded Rationality: Heuristics, Judgment, and Public Policy
Two leaders in the field explore the foundations of bounded rationality and its effects on choices by individuals, firms, and the government.
Bounded rationality recognizes that human behavior departs from the perfect rationality assumed by neoclassical economics. In this book, Sanjit Dhami and Cass R. Sunstein explore the foundations of bounded rationality and consider the implications of this approach for public policy and law, in particular for questions about choice, welfare, and freedom. The authors, both recognized as experts in the field, cover a wide range of empirical findings and assess theoretical work that attempts to explain those findings. Their presentation is comprehensive, coherent, and lucid, with even the most technical material explained accessibly. They not only offer observations and commentary on the existing literature but also explore new insights, ideas, and connections.
After examining the traditional neoclassical framework, which they refer to as the Bayesian rationality approach (BRA), and its empirical issues, Dhami and Sunstein offer a detailed account of bounded rationality and how it can be incorporated into the social and behavioral sciences. They also discuss a set of models of heuristics-based choice and the philosophical foundations of behavioral economics. Finally, they examine libertarian paternalism and its strategies of “nudges.”
Bounded rationality recognizes that human behavior departs from the perfect rationality assumed by neoclassical economics. In this book, Sanjit Dhami and Cass R. Sunstein explore the foundations of bounded rationality and consider the implications of this approach for public policy and law, in particular for questions about choice, welfare, and freedom. The authors, both recognized as experts in the field, cover a wide range of empirical findings and assess theoretical work that attempts to explain those findings. Their presentation is comprehensive, coherent, and lucid, with even the most technical material explained accessibly. They not only offer observations and commentary on the existing literature but also explore new insights, ideas, and connections.
After examining the traditional neoclassical framework, which they refer to as the Bayesian rationality approach (BRA), and its empirical issues, Dhami and Sunstein offer a detailed account of bounded rationality and how it can be incorporated into the social and behavioral sciences. They also discuss a set of models of heuristics-based choice and the philosophical foundations of behavioral economics. Finally, they examine libertarian paternalism and its strategies of “nudges.”
552 pages, Paperback
Published July 12, 2022
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September 30, 2022
The book is a heavy, but worthwhile read. Despite the authors’ attempt to have the book appeal to non-advanced technical readers, the content does require an advanced level of knowledge of topics such as Bayesian Rationality, Behavioral Economics, and Bounded Rationality.
The work explains the nature of rationality and its supporting evidence, before moving into an argument in favor of bounded rationality (we’re not super-computer like optimizers) and spending much of the book in an extremely useful survey of behavioral models, relevant research programs (e.g., Kahneman & Tversky, Fast & Frugal Heuristics, etc.), and other, diverse methodologies.
Like many in the profession, the authors express their frustration with the continuing supremacy of the paradigm of all-knowing optimization in a world where we poor folk often just act based on our imperfect sense of what’s best for us at the time….
The work explains the nature of rationality and its supporting evidence, before moving into an argument in favor of bounded rationality (we’re not super-computer like optimizers) and spending much of the book in an extremely useful survey of behavioral models, relevant research programs (e.g., Kahneman & Tversky, Fast & Frugal Heuristics, etc.), and other, diverse methodologies.
Like many in the profession, the authors express their frustration with the continuing supremacy of the paradigm of all-knowing optimization in a world where we poor folk often just act based on our imperfect sense of what’s best for us at the time….
Displaying 1 of 1 review