Rationality - Not So Much
At the outset, I stated that mainstream economics made a wrong turn when it assumed that people are rational. While we aren’t irrational all the time, there is a lot of evidence to show that we make plenty of mistakes.
On Wikipedia there is a page that lists dozens of cognitive biases, logic mistakes that people often make (link here). A quick skim of the list makes me wonder how it is that we get anything right. It seems that many of the tricks that our brains use to understand the world are flawed. When we use these tricks, we make decisions that won’t have the outcomes we are hoping for.
To be rational, we would have to be on constant lookout for the types of errors that we are prone to make. We would have to avoid simplifying issues in ways that lead to poor decisions. However, since most situations we face in day-to-day life are complex, avoiding simplifications is difficult or even impossible. We inevitably have to simplify problems. When we do, we make mistakes.
When not making mistakes is important, the solution usually isn’t to focus on rationality. The solution is testing. Since it is too difficult to reliably predict the effects of the things we do, we try to test our ideas in ways that keep the cost of failure low. The best situation is to find someone else who has done something similar to what we are considering and see what happened to them. When developing infrastructure policy for the Ontario government in my previous job, we usually looked to see what other jurisdictions were doing. It is far safer to copy someone else’s successful policy than to develop one from scratch.
We have what I would like to call rear-view-mirror rationality. We aren’t very good at predicting the effects of our actions. Good decision-making is mostly about avoiding making the mistakes that have been made in the past.
We are not all-knowing beings. We aren’t even close. Most of our appearances of intelligence are the result of learning, not reasoning. Reasoning is at best a weak tool for understanding real-world problems.
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