Friday, February 3, 2012

Individual Rationality (now also in Romanian)

I'll be lecturing on models of individual choice today, which reminds me that not too long ago I received the following email from Alexandra Seremina:

"I've made a translation of 'Individual Rationality as a Useful Approximation: 
Comments on Tversky's "Rational Theory and Constructive Choice"
page to Romanian. It is available at:

" Profesorul Tversky prezintă o scurtă descriere a a creterii permanente de  dovezi experimentale, la care el a fost unul dintre cei mai influenţi contribuabili... "

And here are the opening paragraphs (in English):

"Professor Tversky presents a quick overview of an ever growing body of experimental evidence, to which he has been one of the most influential contributors. This evidence demonstrates that human behavior deviates in systematic ways from the idealized behavior attributed to expected utility maximizers in particular, and to "rational economic man" in general. One of the most striking things about this substantial body of evidence is that, starting at least as early as the work of Allais [1953] and May [1954], it has been collected over the same period of years in which expected utility theory has come to be the dominant model of individual behavior in the economics literature. This adds force to the question Tversky raises in his concluding remarks: what accounts for economists' "reluctance to depart from the rational model, despite considerable contradictory evidence"?

"I'll attempt to outline a two-track answer to this question.

"First, I'll argue that there are quite defensible reasons for a reluctance to abandon theories of rationality in favor of psychological theories. In particular, I think most economists view the rational model as a useful approximation, rather than as a precise description of human behavior. Experimental demonstrations that people deviate from the model do not strike at the heart of the belief that the approximation is a useful one, since all approximations are false at some level of detail. In view of this, some kinds of evidence, and alternative models, are likely to be more successful than others in attacking the central role of rationality assumptions in the economic literature.

"Second, I'll note that, in fact, there is a growing attempt by economists to move away from an overdependence on idealized models of hyper-rationality."

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