Coping with unpleasant surprises in a complex world: Is rational choice possible in a world with positive information costs?
AbstractThis paper provides a rational choice-based analysis of the causes and consequences of surprise events. The paper argues that ignorance may be rational, but nonetheless produce systematic mistakes, inconsistent behavior, and both pleasant and unpleasant surprises. If ignorance and unpleasant surprises are commonplace and relevant for individual and group decisionmaking, we should observe standing institutions for dealing with them - and we do. Insofar as surprises are consistent with rational choice models, but left outside most models, it can be argued that these methodological choices mistakenly limit the scope of rational choicebased research. --
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Bibliographic InfoPaper provided by University of Münster, Center for Interdisciplinary Economics (CIW) in its series CIW Discussion Papers with number 6/2011.
Date of creation: 2011
Date of revision:
Ignorance; Rational Ignorance; Natural Ignorance; Bounded Rationality; Rational Choice; Biased Expectations; Crisis Management; Social Insurance; Bailouts; Economics of Information;
Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- D6 - Microeconomics - - Welfare Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-09 (All new papers)
- NEP-CBE-2011-10-09 (Cognitive & Behavioural Economics)
- NEP-IAS-2011-10-09 (Insurance Economics)
- NEP-MIC-2011-10-09 (Microeconomics)
- NEP-NEU-2011-10-09 (Neuroeconomics)
- NEP-UPT-2011-10-09 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roger Congleton, 2007. "Informational limits to democratic public policy: The jury theorem, yardstick competition, and ignorance," Public Choice, Springer, vol. 132(3), pages 333-352, September.
- Roger Congleton, 2001.
"Rational Ignorance, Rational Voter Expectations, and Public Policy: A Discrete Informational Foundation for Fiscal Illusion,"
Springer, vol. 107(1), pages 35-64, April.
- Congleton, Roger D, 2001. " Rational Ignorance, Rational Voter Expectations, and Public Policy: A Discrete Informational Foundation for Fiscal Illusion," Public Choice, Springer, vol. 107(1-2), pages 35-64, April.
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