15
Feb
15

Cognitive vs. behavioral in psychology, economics, and political science – Statistical Modeling, Causal Inference, and Social Science

See on Scoop.itBounded Rationality and Beyond

I’ve been coming across these issues from several different directions lately, and I wanted to get the basic idea down without killing myself in the writing of it. So consider this a sketchy first draft.

The starting point is “behavioral economics,” also known as the “heuristics and biases” subfield of cognitive psychology. It’s associated with various studies of cognitive illusions, settings where people systematically mispredict uncertain events or make decisions. Within psychology, this work is generally accepted but with some controversy which could be summed up in the phrase, “Kahneman versus Gigerenzer,” but it’s my impression that in recent years there’s been a bit of a convergence: for Kahneman the glass is half-empty and for Gigerenzer the glass is half-full, but whether you’re talking about “heuristics and biases” or “fast and frugal decision making,” there’s been a focus on understanding how our brains use contextual cues to decide how to solve a problem.

In economics, this work is more disputed because it seems to be in head-on conflict with models of utility-maximizing rationality from the 1930s-50s associated with the theories of Neumann and others on economic decision making. While some economists have embraced so-called “behavioral” ideas to explain imperfect markets, other economists are (a) skeptical about the relevance to real-world high-stakes behavior of laboratory findings on cognitive illusions and (b) wary of the political implications of social engineers who want to use cognitive biases to “nudge” people toward behavior they otherwise wouldn’t have done.

Within economics, I’d say that the behavioral/classical debate roughly follows left/right lines: on the left are the behaviorists who say that individuals and firms are irrational and thus we should not trust the judgment of the markets, instead we should regulate and protect people from their irrationality. On the right are the classicists who hold that people are rational when it comes to real economic decisions and thus any interference in the market, whether from governments or labor unions, will tend to make things worse.

 

See on andrewgelman.com



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