WP 2011-08 Cognitive Variables and Parameters in Economic Models

Posted On January 8, 2011
Categories Working Papers, WP 2011 Tags

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Published in 2012 as a book chapter in R. Sun (ed.) Grounding Social Sciences in Cognitive Sciences. Further information on the publication can be found through the MIT Press website.

ABSTRACT. The paper critically reviews the impact of models of cognitive architecture on economics. A historical survey is provided that indicates the reasons for most economists’ non‐participation, as either producers or consumers, in the cognitive revolution. The remainder of the paper shows, partly by means of a case study of economists’ models of temporally inconsistent consumption, that economists continue to bypass cognitive architectural considerations, even when modeling a phenomenon that they recognize as implicating representational and framing idiosyncrasies. This is not attributed to economists’ alleged disinterest in empirical facts or over‐commitment to normative rationality. Rather, it stems from the fact that, on the one hand, most behavioral economists and neuroeconomists remain strongly committed to methodological individualism; while, on the other hand, experimental economists who follow Vernon Smith in emphasizing ecological rationality are so far mainly interested in aggregate responses. This divergence of assumptions and interests results in neglect among economists of Marr’s ‘algorithmic’ level of cognitive task analysis –precisely the ground on which people’ strategic problems might be considered in tandem with the biological restrictions on the computations they perform.