Glamor Economics

Chapter 76

Chapter 11, Section 3 Why Do You Be a Rational Fool—Bounded Rationality

In the Spring and Autumn Period, someone went to Fan's house in Jin State to steal something. When he saw a big bell hanging in the yard, he was very happy and wanted to carry this beautiful big bell back to his home.But the clock was so big and heavy that it couldn't be moved.After much deliberation, he found that there was only one way, and that was to break the clock and move them home separately.

The thief found a sledgehammer and threw it at the clock desperately, but the clock made a loud noise.The thief thought hard, and finally thought of a good way: cover his ears hard.He immediately found two cloth balls, plugged his ears, and then slammed the clock again.The sound of the bell was heard far away.It was heard that the thief had been caught.

This story satirizes the stupidity of the thief.In fact, the thief is still a rational economic man, he is good at calculating: if he wants to steal the big clock home, he must smash the big clock, but smashing the clock will make a sound, so the transmission of the bell must be stopped, so he chose to block it own ears.It can be said that the behavior of the thief is rational, but he is a rational fool.Why is a thief, a rational person, still considered a fool?Because he is not a completely rational person, he is only a limited rational person.

The concept of bounded rationality was first proposed by Arrow, who believed that bounded rationality was that human behavior "is conscious and rational, but this rationality is limited".Real-life examples of bounded rationality are also common.For example, people often have the mentality that no matter how many pieces of a set of tableware there are, but as long as one piece is damaged, people will think that the whole set of tableware is defective and should be cheap; Naturally qualified products should, of course, be priced high.It can be said that this is the irrationality of rational people, that is, limited rationality.

In life, we often make mistakes in judging gains and losses because of our limited rationality. In fact, we have all been rational fools.

There will be a concert at the Workers' Stadium, which will be attended by many stars such as Luo Dayou and Zhou Huajian. The ticket price is very high, and it costs 800 yuan. On the night of the concert, you are excited to go out, but you find that the tickets are gone.If you have to pay all over again to attend this concert, will you buy tickets again?Suppose another situation: the same concert, the ticket price is 800 yuan.But this time you didn't buy tickets in advance, you planned to buy them after you got to Workers Stadium.When you were about to leave home, you found that you had lost the MP800 worth 4 yuan you just bought.At this time, would you still spend 800 yuan to buy tickets for this concert?

Compared with those who choose to buy concert tickets again in the first situation, there are absolutely no fewer people who choose to still buy concert tickets in the second situation.Objectively speaking, there is no difference between these two situations. Both of them need to spend another 800 yuan to buy a concert ticket: it is just that the reasons for buying tickets are different.In the first case, you lost 800 yuan because you lost a ticket, and you need to buy another one, and in the second case, you lost 800 yuan because you lost the MP4 800 yuan, and this has nothing to do with your original ticket purchase plan, and will not affect your ticket purchase plan.

Why is there such bounded rationality?The first reason is that the environment is complex.In the form of impersonal exchange, people are faced with a complex and uncertain world, and the more transactions, the greater the uncertainty and the more incomplete information.The second reason is that people's judgment and understanding of the environment are limited, and it is impossible for people to know everything.Therefore, economists believe that what people are looking for in the decision-making process is not the "maximum" or "best" standard, but only the "satisfactory" standard.The third reason is that human choices are influenced by illogical behavior.Pareto once proposed that there are "illogical behaviors" in human society.These behaviors involve the realm of values, beliefs and emotions, following habits instinctively and mechanically.Logical behavior and illogical behavior are almost mixed together in real life.Only in those important but limited behaviors can the rationality of choice be kept to the greatest extent possible.

[links to related words]

Quasi-rational person There are concepts of "approximate rationality", "quasi-rationality" or "incomplete rationality" in foreign economic literature, which are used to explain the deviation of behavioral motivation from behavioral results.However, simply attribute these deviant behaviors to approximate rationality, quasi-rationality or incomplete rationality, which has weak explanatory power.Because all kinds of factors that involve rationality but deviate from rationality can be decomposed and interpreted as the motivation and rationality of the actor being constrained by the environment.In fact, "irrational" concepts such as approximate rationality, quasi-rationality or incomplete rationality can be regarded as supplementary concepts subordinate to rationality.

(End of this chapter)