The evaluation of a decision maker’s degree of rationality has to do with the way in which (s)he collects and processes ‘relevant’ information. However, while the efficiency of information processing procedures is a relatively unambiguous notion, the same cannot be said of the judgements of relevance as to the information to be processed. In this paper we argue that individual decision-making processes are necessarily based on a set of meta-empirical assumptions that we call subjective metaphysics.
Subjective metaphysics in turn induce the individual’s causal psychology through which (s)he interprets the observed evidence. The relationship between causal psychology and individual rationality is discussed with special reference to a simple infinite horizon model of choice under uncertainty.
Article by Pier Luigi Sacco
Published in Journal of Economic Psychology 17 (1996) 221-244
From the Conclusions (excerpt)
That different subjective metaphysics may be at work, say, in the context of stock market trading, could seem surprising. After all, the representative stock market trader is a graduate with a likely training in ‘rational’ decision-making techniques; as a consequence, the trend should point toward homogeneity rather than heterogeneity of cognitive frames and ‘basic’ beliefs.
The cognitive homogeneity of ‘educated’ people, however, is more apparent than real. The slow processes of cultural selection that have led to old traditional societies, based on relative isolation and environmental stability, have now given way to an ever accelerating development of new ‘post-modern’ cultures and to a turbulent cross-fertilization of existing ones.
Modern corporations and markets are indeed a fertile field of cultivation of new, eclectic blends of various types of ‘scientific’ and ‘magical’ thinking (the abuse of terminology should be apparent at this point). It is then not difficult to come upon stockbrokers whose trading strategies are essentially driven by their ‘feel for the signs of fate’, or personnel selection experts who take individual astrological profiles as a prominent criterion for choice. Should we take all these behaviors as evidence of ‘superstitious’ irrationality? Are there any such ‘new’ systems of thought which are coherent and systematic enough to aspire to an ‘alternative form of rationality’? This is an open point that needs careful scrutiny. A serious positive approach to human decision-making processes cannot overlook these issues.
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