Read on Twitter
Came across post on Gigerenzer's "The Bias Bias in Behavioral Economics." Know Gigerenzer's work well - teach it in my classes. While agree on some points, my sense is he 1) creates strawman of BE/JDM research that is strange/nonexistent 2) overclaims https://statmodeling.stat.columbia.edu/2019/07/14/gigerenzer-the-bias-bias-in-behavioral-economics-including-discussion-of-political-implications/#comments 1/n
To start, "irrational" != "people are stupid" Rationality defined relative to normative benchmark: e.g. people violate independence axiom in this decision problem. That is not claim about stupidity! Irrationality is here contextual, `people are stupid’ is a global statement. 2/n
Aside: can have conv whether particular axiom makes sense at all as benchmark for rationality, & many people do. 3/n
Don't know of serious BE/JDM research making claim “people are stupid.” The program is to identify heuristic & document whether/*when* it leads to systematic bias (again, relative to some norm. benchmark). This is not statement about whether heuristic is adaptive in *general* 4/n
Aside, much of BE concerned w/ when seemingly anomalous behavior can be classified as mistake in first place. 5/n
There is a big debate in BE as to whether/how behavior can be classified as mistake (Rabin has diff viewpoint than Bernheim/Rangel). But let's abstract from that. Let's say identify `mistake.' Few arguing that heuristic that generated is maladaptive in *general* 6/n
Going back to Simon, heuristic can be adaptive under bounded rationality. In particular contexts it can lead to mistake, much of BE is documenting whether mistake 1) pervasive & 2) large. Heuristic itself may be perfectly adaptive 90% of time, but not adaptive 10% of the time.7/n
If 90% heuristic is adaptive but 10% it's not, q is why study the 10%? Question similar to if person walks fine 90% and falls 10% of the time, why study falling? Falling once can lead to a big problem. Similarly, heuristic leading to sig. bias 10% of time can --> big problem 8/n
Example: heuristic that leads to status quo bias may be adaptive most of time, but for retirement savings or selling house, potentially lead to large issues. Default effects are systematic and large: https://www.cambridge.org/core/journals/behavioural-public-policy/article/when-and-why-defaults-influence-decisions-a-metaanalysis-of-default-effects/67AF6972CFB52698A60B6BD94B70C2C0 9/n
Note two ex's involve decisions that are 1) infrequent & 2) w/ potentially large consequences. These are conditions identified ex ante in BE where biases are potential issue. @R_Thaler has written a lot about this. Also Hogarth's work on wicked vs kind learning environments.10/n
This is where scope for policy comes in. Back to walking ex. Don't think anyone, including G, would raise issue w/ railings at high elevations. People walk fine 99% of time, but when in unfamiliar environment, conseq. for mistake high, we are comfortable w/ outside guidance. 11/n
Should note several ex’s of biases for frequent decisions — sales tax salience ( https://are.berkeley.edu/SGDC/Chetty_Looney_Kroft_AER_2010.pdf) and disposition effect in finance ( https://www.aalto.fi/sites/g/files/flghsv161/files/2018-12/disposition_effect.pdf). Here, biases likely persist because feedback that X is mistake is noisy/infrequent (wicked env., Hogarth). 12/n
To end, I agree w/ Gigerenzer that lots of evidence from cog. psych + JDM that heuristics are adaptive. Also agree that pop press and some researchers can overclaim re biases, which is harmful. 13/n
But it would help a lot if G's work engaged with actual BE/JDM programs, rather than strawman that is foreign/strange to practitioners. Fin. n/n
