Natural Rationality | decision-making in the economy of nature


On behavioral economics and natural rationality

In a review online at New Economic Papers (, "Who are the Behavioral Economists and what do they say?" Floris Heukelom rewiews the core of behavioral economics, that is, the work made by Kahneman, Tversky, Thaler, Camerer, Loewenstein, Rabin, and Laibson. I highly recommend this review. Interestingly, the author describes a theoretical division within the field:

The first branch considers human decision-making to be a problem of exogenous uncertainty, which can be analyzed with decision theory. It employs traditional economics as a normative benchmark and favors a normative-descriptive(-prescriptive) distinction for economics. The second branch considers human decision-making to be a problem of strategic interaction, in which the uncertainty is endogenous. Its main tool is game theory. It rejects traditional economics both positively and normatively.
The "natural rationality" approach I am trying to develop falls in the second category. The study of natural rationality is the (multidisciplinary) study, from both a descriptive and a normative point of view, of the mechanisms by which humans and other animals make decisions. Most approaches of rationality take only the descriptive or the normative side, and hence tend to describe cognitive/neuronal processes without concern for their optimality, or state ideal (and fictitious) conditions for rational behavior. For instance, while classical economics considers rational-choice theory either as a normative theory or a useful fiction, proponents of bounded rationality or ecological rationality refuse to characterize decision-making as optimization.[1] Others advocate a strong division of labor between normative and descriptive project: Tversky and Kahneman, for instance, concluded from their studies of human bounded rationality that the normative and descriptive accounts of decision-making are two separate projects that “cannot be reconciled”[2]. The perspective I suggest is that we should expect an overlap between normative and descriptive theories, and that the existence of this overlap is warranted by natural selection. On the normative side, we should ask what procedures and mechanisms biological agents need to follow in order to make effective and efficient decision given all their constraints in the economy of nature. On the descriptive side, we must assess whether a procedure succeeds in achieving goals or, conversely, what goals could a procedure aim at achieving.

While behavioral ecology analyzes the natural economy of biological agents, neuroeconomics and decision neuroscience analyses their natural rationality, i.e. the neural mechanisms by which agents value and select actions and the effectiveness of these mechanisms. Together, these research field should provide a sound picture of rationality--human or not.

[1] (Chase et al., 1998; Gigerenzer, 2004; Selten, 2001)
[2] (Tversky & Kahneman, 1986, p. s272)