Institutions for Intuitive Man
By its critics, the rational choice model is routinely accused of being unrealistic. One key objection has it that, for all nontrivial problems, calculating the best response is cognitively way too taxing, given the severe cognitive limitations of the human mind. If one confines the analysis to consciously controlled decision-making, this criticism is certainly warranted. But it ignores a second mental apparatus. Unlike conscious deliberation, this apparatus does not work serially but in parallel. It handles huge amounts of information in almost no time. It only is not consciously accessible. Only the end result is propelled back to consciousness as an intuition. It is too early to decide whether the rational choice model is ultimately even descriptively correct. But at any rate institutional analysts and institutional designers are well advised to take this powerful mechanisms seriously. In appropriate contexts, institutions should see to it that decision-makers trust their intuitions. This frequently creates a dilemma. For better performance is often not the only goal pursued by institutional intervention. Accountability, predictability and regulability are also desired. Sometimes, clever interventions are able to get them both. Arguably, the obligation to write an explicit set of reasons for a court decision is a case in point. The judge is not obliged to report the mental processes by which she has taken her decision. Justification is only ex post control. Intuitive decision-making is even more desirable if the underlying social problem is excessively complex (NP hard, to be specific), or ill-defined. Sometimes, it is enough for society to give room for intuitive decision-making. For instance, in simple social dilemmas, a combination of cheater detection and punishing sentiments does the trick. However, intuition can be misled. For instance, punishing sentiments are triggered by a hurt sense of fairness. Now in more complex social dilemmas, there are competing fairness norms, and people intuitively choose with a self-serving bias. In such contexts, institutions must step in so that clashing intuitions do not lead to social unrest.
|Date of creation:||Aug 2007|
|Contact details of provider:|| Postal: Kurt-Schumacher-Str. 10 - D- 53113 Bonn|
Phone: +49-(0)228 / 91416-0
Fax: +49-(0)228 / 91416-55
Web page: http://www.coll.mpg.de/
More information through EDIRC
References listed on IDEAS
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.:
- Hoffman, Elizabeth & McCabe, Kevin A & Smith, Vernon L, 1998. "Behavioral Foundations of Reciprocity: Experimental Economics and Evolutionary Psychology," Economic Inquiry, Western Economic Association International, vol. 36(3), pages 335-352, July.
- Reinhard Selten & Michael Mitzkewitz & Gerald R. Uhlich, 1997.
"Duopoly Strategies Programmed by Experienced Players,"
Econometric Society, vol. 65(3), pages 517-556, May.
- Selten,Reinhard & Mitzkewitz,Michael & Uhlich,Gerald, "undated". "Duopoly strategies programmed by experienced players," Discussion Paper Serie B 106, University of Bonn, Germany.
- Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
- Ernst Fehr & Simon Gaechter, "undated". "Cooperation and Punishment in Public Goods Experiments," IEW - Working Papers 010, Institute for Empirical Research in Economics - University of Zurich.
- Ernst Fehr & Simon Gaechter, 1999. "Cooperation and Punishment in Public Goods Experiments," CESifo Working Paper Series 183, CESifo Group Munich.
- Itzhak Gilboa & David Schmeidler, 1995. "Case-Based Decision Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 605-639.
- Itzhak Gilboa & David Schmeidler, 1992. "Case-Based Decision Theory," Discussion Papers 994, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Itzhak Gilboa & David Schmeidler, 1995. "Case-Based Decision Theory," Post-Print hal-00753144, HAL.
- Engel, Christoph, 2008. "Learning the law," Journal of Institutional Economics, Cambridge University Press, vol. 4(03), pages 275-297, December.
- Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
- Edward E. Leamer, 1982. "Let's Take the Con Out of Econometrics," UCLA Economics Working Papers 239, UCLA Department of Economics.
- Engel, Christoph & Weber, Elke U., 2007. "The impact of institutions on the decision how to decide," Journal of Institutional Economics, Cambridge University Press, vol. 3(03), pages 323-349, December.
- Christoph Engel & Elke U. Weber, 2006. "The Impact of Institutions on the Decision How to Decide," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2006_19, Max Planck Institute for Research on Collective Goods.
- Cowan, Robin & David, Paul A & Foray, Dominique, 2000. "The Explicit Economics of Knowledge Codification and Tacitness," Industrial and Corporate Change, Oxford University Press, vol. 9(2), pages 211-253, June.
- Cowan Robin & David Paul & Foray Dominique, 1999. "The Explicit Economics of Knowledge Codification and Tacitness," Research Memorandum 025, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
- Robin Cowan & Paul A. David & Dominique Foray, 1999. "The Explicit Economics of Knowledge Codification and Tacitness," Working Papers 99027, Stanford University, Department of Economics.
- Gerhard Wegner, 1997. "Economic Policy From an Evolutionary Perspective: A New Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(3), pages 485-485, September.
- Christoph Engel, 2004. "Social Dilemmas, Revisited from a Heuristics Perspective," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2004_4, Max Planck Institute for Research on Collective Goods.
- Gerd Gigerenzer & Christoph Engel (ed.), 2006. "Heuristics and the Law," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072750, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:mpg:wpaper:2007_12. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marc Martin)
If references are entirely missing, you can add them using this form.