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We don't have a hundred biases, we have the wrong model
- mstipetic 4y ago40% of US believes the earth was created in the last 10,000 years. Any model relying on rationality has no chance here
- csours 4y agoI'm not sure I understand. It seems like the author is looking for "learned behavior" as the model for human decision making.
- deleted 4y ago[deleted]
- leobg 4y agoMy reading of the article is an application of Chesterton’s Fence to so-called cognitive biases. Not to see them as a mere defect, or proof of our fallibility. But to instead look for the objective for which they perhaps truly are the most reasonable solution. Example from the article: > Many costly signals are inherently wasteful. Money, time, or other resources are burnt. And wasteful acts are the types of things that we often call irrational. A fancy car may be a logical choice if you are seeking to signal wealth, despite the harm it does to your retirement savings. Do you need help to overcome your error in not saving for retirement, or an alternative way to signal your wealth to your intended audience? You can only understand this if you understand the objective.
- hirundo 4y agoFor instance we have a neural-cognitive "bias" toward recognizing moving versus stationary objects. Our attention is prejudiced in favor of things-that-move. This is useful when it comes to detecting potential predators, prey, mates, etc. So a lack of a bias can be a defect to the economic actor.
- nine_k 4y agoConspicuous consumption can be rational, or at least beneficial in the evolutionary sense. If you are a lawyer with a good practice, you are expected to drive a nice large car. If you drove a battered old economy-class car, your clients might see it as a sign that something is wrong with you (there are several plausible ideas) and shun dealing with you. There go fat fees and investment savings.
- rdw 4y agoYes, I've heard this said many times about sales people. If they're not visibly wasting money, people are reluctant to hire them because they either aren't good (and thus have no money to waste), or won't be hungry (because they've saved the money they earned by not wasting it). So conspicuous consumption becomes a way to signal that the sales person is capable of reliably generating large incomes.
- throw93232 4y ago》epicycles were still not enough to describe what could be observed. Epicycles based models were far superior in practice, such as predicting planetary conjunctions. Heliocentric models did not really catched up, until Newton invented gravity and calculus. And centre of mass of solar system (barycenter in Newtonian physics), is outside of Sun, so heliocentric models technically never gave solid predictions! Stellar parallax (main prediction from Copernicus theory) was not confirmed until 19th century! Heliocentrism is mainly philosophical concept! I will stick with my primitive old thinking and biases, thank you! If I get mugged a few times in a neighbourhood, I will assume it is not safe. There is no need to overthink it!
- croes 4y agoInvented gravity?
- dataflow 4y agoThey probably mean invented gravity as a formal concept, not as a physical phenomenon. Like, say, the invention of the number 0. https://en.wikipedia.org/wiki/0 https://en.wikipedia.org/wiki/0
- deckeraa 4y agoAgreed. Prior to Newton's conception of gravity as objects attracting one another, the primary model used was the Aristotelian one, in which things tended to go to the "zone" where they belong. Things composed of earth (like a rock) tended to sink towards the center of the earth, while things composed of fire or air tended to rise towards the sky.
- throw93232 4y agoEnglish is not my native language obviously.
- andrewflnr 4y agoNot at all obvious, you did fine.
- toomim 4y agoI wrote a PhD dissertation that made this point in 2013, and proposed a new "helocentric" economic model. The key shift is to move the utility function from evaluating a future state of the world to evaluating the utility of an opportunity for attention in the present moment. All the "cognitive errors" that we humans make are with respect to predicting the future. But we all know what we find appealing in the present moment. And when we look at economics from this new perspective of the present, we get an economics of attention. We can measure, and model, for the first time, how we choose how to allocate the scarce resource of the internet age: human attention. I dropped out of academia as soon as I finished this work, and never publicized it broadly within academia, but I still believe it has great potential impact for economics, and it would be great to get the word out. https://invisible.college/attention/dissertation.html https://invisible.college/attention/dissertation.html
- snapcaster 4y agoThanks for sharing this. Very interesting idea
- toomim 4y agoThank you for saying so!
- phkahler 4y ago>> All the "cognitive errors" that we humans make are with respect to predicting the future. But we all know what we find appealing in the present moment. I like to say that most human problems are a result of the conflict between short and long term goals. This is true at all levels from individuals to small groups, companies, and states. Many, many "failures" can be framed this way. I would say it's not even a problem of predicting the future (thought that is an issue) but of failure to prioritize the future over the present.
- JoshCole 4y agoIf you apply the cognitive biases model to algorithms which have superhuman performance in various games - like AlphaZero, DeepBlue, Pluribus, and so on - the natural result is to conclude that these models are predictably irrational. The reason you get this conclusion is because it turns out to be necessary to trade off theoretical optimal answers for the sake of speed. The behavioral economic view of human irrationality ought to be considered kind of dumb in view of that result. But it is actually so much worse than that for the field, because the math shows that sacrificing optimality for speed would be something that even an infinitely fast computational intelligence would be forced to do. It isn't irrational; it is a fundamentally necessary tradeoff. In imperfect information games your strategy space is continuous, EV is a function of policy, and many games even have continuous action spaces. If you thought Go was high branching factor you thought wrong; Go is an example of a freakishly low branching factor. It is infinitely smaller than the branching factor in relatively trivial decision problems. If you've never looked at cognitive biases through the lens of performance optimization you should try it. What seems like an arbitrary list from the bias perspective becomes clever approximative techniques in the performance optimization perspective. I often think about why this isn't more commonly known among people who call themselves rationalists and tend to spend a lot of time discussing cognitive bias. They seem to be trending toward a belief that general superintelligence is of infinite power, doubling down on their fallacious and hubristic appreciation for the power of intelligence. I say this, because when you apply the algorithms that don't have these biases - the behavioral economist view wouldn't find them to be irrational since they stick to the math, they follow things like the coherence principles for how we ought to work with probabilities as seen in works by Jayne, Finett, and so on - they either don't terminate, or, if you force them to do so... well... they lose to humans; even humans who aren't very good at the task.
- brrrrrm 4y ago> apply the cognitive biases model to algorithms which have superhuman performance in various games Could you give an example of this?
- JoshCole 4y ago- Anthropic bias The algorithms have this tendency. They use counterfactual reasoning to determine that assuming a nash player alike to them is their opponent when making their decisions. Sometimes they don't have a nash opponent, but they persist in this assumption anyway. In the cognitive bias framing this tendency is error. In the game theoretic framing this corresponds with minimizing the degree to which you would be exploited. You can find times where the algorithm plays against something that isn't nash and so it was operating according to a flawed model. You can call it biased for assuming that others operated according to that flawed model. From a complexity perspective this assumption lets you drop an infinite number of continuous strategy distributions from consideration - with strong theoretical backing for why it won't hurt you to do so - since nash is optimal according to some important metrics. - Attentional bias The tendency to pay attention to some things and not other things. Some examples of times where we do that are with alpha beta pruning. You can find moves that involve sacrifice that show the existence of this bias. The conceit in the cognitive bias framing is that it is stupid because some of the things might be important. The justification is that it some things are more promising than others and we have limited computational budget. Better to stop exploring the things which are not promising since they are not promising and direct efforts to where they are promising. Something like an upper confidence bound tree search in the cognitive bias model would turn balancing the explore exploit dynamic as part of approximating the nash equillibrium into erroneous reasoning because it doesn't choose to explore everything is an example of the lesser form of anchoring effects as they relate to attentional bias. It weights the action values according to the promising rollout more highly. - Apophenia Hashing techniques are used to reduce dimensionality. There is an error term here but you gain faster reasoning speed. Seen in blueprint abstraction - the poker example I gave - since we've hashing down using similarity to help bucket similar things. This gives rise to things like selective attention (another bias, and kind of related to this general category of bias). Jumping ahead to something like confirmation bias the heuristic that all these algorithms are using are flawed in various ways. They see that they are flawed after a node expansion and update their beliefs, but they don't update the heuristic. In fact if a flawed heuristic was working well such that it won we would have greater confidence rather than lesser confidence in the bias. --- Putting all that aside I would caution against specifity in understanding my point. I think approaching it in this direction - very specific examples - is horrible because it directs attention to the wrong things; when you look at specific examples you're always in a more specific situation and if you're in a more specific situation it means that your situation is more computationally tractable than the general situation which was being handled by the algorithm. So trying to focus on examples is actually going to give you weird inversions where the rules that applied in general don't apply to the specific situation. You need to come about it from the opposite direction - from the problem descriptions to the necessary constraints on your solution. Then it happens that the error in reasoning is a natural result of trying to do well.
- just_boost_it 4y agoI'm not so sure about this. I'm not an expert at all, but I can see in the world around me that biases are real. Sure, heuristics are important in the trade off between accuracy and speed, so I see that they are necessary. However, isn't the problem that we use the same heuristics to bet on a coin flip as we would use to bet on whether we make it past a lion to safety? It seems like the "right" is model is only correct in a small number of cases, but we can't change our unconscious biases to fit the situation. It seems that the bias model explains why we make bad decisions in many areas of our lives.
- jjk166 4y agoThe rational actor model assumes that a person will behave optimally - using all information available to make and carry out the best decision possible for their goals. I strongly suspect that a better model is that people instead of optimizing their outcomes instead optimize the ease of decision making while still getting an acceptable course of action. Most of our biases serve to either allow us to make decisions quicker or minimize the odds of catastrophically bad outcomes for our decisions, which fit nicely with this model. The fact is that indecision is often worse than a bad decision, and the evolutionary forces that shaped our brains are stochastic in nature and thus don't dock points for missed opportunities.
- spacebanana7 4y agoThe idea you’re describing sounds similar to Satisficing Theory [1]. I agree this approach does a much better job of describing real life decision making than the traditional rational actor model. Unfortunately, Satisficing rarely gets discussed (at least in my experience) in mainstream economics/psychology, despite having been around since the 1950s. [1] https://en.wikipedia.org/wiki/Satisficing https://en.wikipedia.org/wiki/Satisficing
- darkerside 4y agoSeems obvious that type 1 thinking satisfices and type 2 maximizes.
- whatshisface 4y agoNobody can maximize that's impossible, it'd involve something like making perfect stock picks.
- MereInterest 4y agoFinding the best possible choice is impossible, but selecting the choice that maximizes expectation is possible. The former would be driving a different route because you know that a specific driver would rear-end you, and is impossible because it requires knowing the future. The latter would be driving a different route because you know that there's an annoying left turn. The distinction isn't in whether your have access to all possible information for use in a decision. It's whether you use all available information in a decision.
- beefman 4y agoNo mention of ergodicity economics, which resolves a lot of this. Reinforcement learning was mentioned, which resolves all or nearly all of it.
- twawaaay 4y agoWe have some wrong models but this does not mean we don't have biases. The simplest way to disprove it: If we did not have biases but wrong models, fixing models would make us unbiased. But that works very rarely in real life.
- jhap 4y agoI thought this was kind of a lame article. The point of behavioral economics is to systematically understand the heuristics people are using. That is hard to do! Trying to describe all the heuristics together is difficult and untestable -- i.e., not that good for the experimental research which most behavioral economists practice. Still it is well-known in the field that this is an open question worth theorizing about and I think many people do[1][2], although there is not a consensus on the "best" theory as far as I know. The author like then lauds some impressive/hard to conduct/large-scale interventions which are formidable but don't really teach us about economic theory, and in fact neither were published in economics journals. Maybe the field should move in that direction, I am agnostic on the point, but the author's argument wasn't coherent in my opinion. [1] https://rajchetty.com/wp-content/uploads/2021/04/behavioral_ely.pdf https://rajchetty.com/wp-content/uploads/2021/04/behavioral_... [2] https://www.hbs.edu/ris/Publication%20Files/Selective%20Attention%20and%20Learning_0ebb2eae-9954-42ce-b625-cfab5d6b45ef.pdf https://www.hbs.edu/ris/Publication%20Files/Selective%20Atte...
- darkerside 4y ago> Many costly signals are inherently wasteful. Biological proof of work, heh
- josefrichter 4y ago“dominant model … is the rational-actor model.” – is that so? In my discipline, experience design, it’s definitely not.
- hgomersall 4y agoIt is in economics. Basically the problem here is orthodox economics - it's not just the behavioural model that includes a few epicycles.
- Nursie 4y ago> I will close with a belated defense of the rational-actor model. > Evolution is ruthlessly rational. Yes, but that doesn't mean its products or their behaviour are mostly or even partly rational, just that whatever strategy they adopted has worked to ensure survival. If this is your definition of what's 'rational', that seems a very low bar to set. That said I enjoyed the article. Frankly it's long seemed to me that economic models based around the idea of the human as a rational actor are fundamentally wrong, because people are not rational (and I include myself in this, more's the pity). Look out at the world, see all the self-sabotage, the unfounded hatred, the violence, the retribution, the temporarily embarrassed millionaires who vote to keep themselves in the gutter. Can we stretch the idea of "rational" behaviour by looking at evolutionary impulses and saying "well, at X point in the past, this impulse may have helped tribal cohesion and increased the chances of group survival, even at the cost of blah blah blah". Sure we can, sure. But that behaviour is not then "rational" in the society we live in today. So yeah, modelling of populations based on rational self interest really does look like it has a foundational error. An economics based around a much more chaotic model of human behaviour, with some rationalities built in, is probably needed.
- throwaway14356 4y agoMy own model is pretty good. (pun of the decade) I could fully explain it but it says it wouldn't be understood. (lame I know) But we can start with dismissing the rational actor. It was something I loved to pretend to be true. This was irrational. There is nothing to suggest people act rationally! We all have heads full of nonsense. Just wait 1000 years and the common man will be laughing his ass off. There is no reason to think we are the exceptional generation. We ponder all these errors we believe to be facts and "rationally" arrive at erroneous conclusions. Then, now that we've figured things out it will be a rare exception for us to implement it. In stead we do what we always did and stubbornly defend our actions even if we know its wrong. It is astonishing to see what we've accomplished despite these rather large shortcomings. If you disagree, how do you know this emotion isnt triggered by what you would like to be real? When convinced of anything one grows a bias blind spot of biblical volume. It is a tremendous struggle to look around it.
- analog31 4y agoI have several problems with this. First, we seem to be assuming that we can figure out what someone's optimum choice should be. Second, the "biases" seem to come from studies of heavily contrived situations. Third, some people could be rationally inclined but just have weak reasoning ability. In short, I'm still mildly skeptical that we've really disproven the rational actor model. Maybe the rational actor model is the heliocentrism we're looking for. People want it to be false, in order to justify paternalism. I once read that in the century after Newton, the French Academy offered a prize for evidence that disproved Newtonian mechanics, and they awarded it several times before finally giving up. The disproofs were all flawed.
- stkdump 4y agoAnd nowadays Newtonian mechanics are disproven and we still apply it broadly, because it's still useful. It just doesn't paint the full picture. Same for the geocentric world view. We all know that the earth isn't the center of the solar system, but we still measure days, years, seasons, etc. as if it were. Why? Because for most uses, it is the simpler and more helpful model. I think something similar could happen here. We come up with a more accurate model that requires fewer exceptions, but is harder to apply/work with day-to-day.
- galaxyLogic 4y agoIt's not only that we can't know what the optimal choice is. We also can't know how far the benefits of our choice are from the benefits of the optimal choice. And what would be the expense of figureing out what the optimal choice is. I got into this way of thinking this morning starting with what is the definition of "Technical Debt". I would say it is the cost of moving from the current implementation to the optimal implementation. But we don't know what would the optimal implementation. That means we can't even begin to estimate how much it would cost to refactor the current implementation into the optimal implementation. Therefore I conclude that "Technical Debt" is consultant-speak. Something you can sell without clearly explaining what you are selling.
- Animats 4y agoFor the amount of effort put into customer tracking, big data, and using machine learning to crunch on the results, the advertising and marketing industry should have this nailed by now. If they don't, maybe it's impossible.
- tgv 4y agoEconomists rediscovering 1980s cogsci, and it's problems, or am I missing something? If not, they should really be ashamed.
- hgomersall 4y agoApparently. I'm not sure e.g. Kahneman would accept the essentially rational but with biases model.
- dalbasal 4y agoWhat he's describing a marketing model moreso than an economic one. This a theme with behavioural economics. I doubt they'll find one. The "homo economicus" model has become somewhat of a straw man for behavioural economics to disprove. Realistically the model was never claimed to apply in the types of domains where it's being disproved. Consumers of the modern world are bombarded with choices and attempts to influence these choices. That's not a world, IMO, that can be "modelled" in the same way that a medieval village can be modelled. If the discipline must be scientific, maybe the better model is "engineering science" where you have to try and build the thing in order to study it. Computation may exist, in various forms, in nature. But, the way to do computer science isn't observing nature. It's building computers, at least on paper.
- andrew-jack 4y agoWhat he is talking about is more of a marketing model than an economic one. This is a common theme in the study of how people act. I don't think they will.
- mihaic 4y agoObligatory quote: "All models are wrong, but some are useful". I realized about myself that I became better at decision-making the easier I could switch to the "appropriate model" for a give situation. Not even physics can get a unified model, and the primitives in social sciences (humans, memories, desires, education) are all as fuzzy as can be. The article does mention that "rational-actor" might actually be the best we can come up with, but that's if we always have to always work with the same model. We could have a newtonian/relativistic style pair of models for people, based on urgency or marginal utility threshold (different rules apply to your last dollar), but that threshold has to be subjective, and we seem to have lost all hope in anything subjective.
- mellavora 4y ago"All models are wrong, some are useful" The efficient market hypothesis ("homo economicus") model is a prime example. Of course it is wrong. It is a model. That doesn't mean it is not useful. Howard Marks (highly successful investor over many decades) has this to say about it > if you ignore the efficient market hypothesis, you’re going to be very disappointed, because you’re going to find out that very few of your active investment decisions work. But if you swallow it whole, you won’t be an investor, and you’ll give up on active success. So the truth, if there is one, has to lie somewhere in between, and that’s what I believe. https://www.oaktreecapital.com/insights/memo/conversation-at-panmure-house https://www.oaktreecapital.com/insights/memo/conversation-at...
- YeGoblynQueenne 4y ago>> If your body of knowledge is a list of unconnected phenomena rather than a theoretical framework, you lose the ability to filter experimental results by whether they are surprising and represent a departure from theory. Sorry to make everything about AI and machine learning, but for a moment there, I thought this was precisely about AI and machine learning.
- josefrichter 4y agoMaybe we need better theory of rationality (I assume there is something like that). The author says "understanding objectives is important" - since objectives can drastically differ, so would the definition of "rationality" differ. So we might still have a "rational actor", only our assumptions about rationality might be wrong.
- rawgabbit 4y agoEven the Business Roundtable doesn't follow the "rational model". In 2019, the Business Roundtable, which consists of America's largest companies, said corporations should focus not only on making profits, but to: - Delivering value to our customers. - Investing in our employees. - Dealing fairly and ethically with our suppliers. - Supporting the communities in which we work. - Generating long-term value for shareholders. https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans https://www.businessroundtable.org/business-roundtable-redef...