Bounded Rationality and Bounded Individuality

Research in the History of Economic Thought and Methodology, Forthcoming

19 Pages Posted: 20 Jun 2014

See all articles by John B. Davis

John B. Davis

University of Amsterdam; Marquette University

Date Written: June 19, 2014

Abstract

This paper argues that since the utility function conception of the individual is derived from standard rationality theory, the view that rationality is bounded suggests that individuality should also be seen as bounded. The meaning of this idea is developed in terms of two ways in which individuality can be said to be bounded, with one bound associated with Kahneman and Tversky’s prospect theory and the ‘new’ behavioral economics and a second bound associated with Simon’s evolutionary thinking and the ‘old’ behavioral economics. The paper then shows how different bounded individuality conceptions operate in nudge economics, agent-based modeling, and social identity theory, explaining these conceptions in terms of how they relate to these two behavioral economics views of bounded rationality. How both the ‘new’ and ‘old’ individuality bounds might then be combined in a single account is briefly explored in connection with Kirman’s Marseille fish market analysis.

Keywords: bounded rationality, bounded individuality, nudge economics, agent-based modeling, social identity theory, Marseille fish market

JEL Classification: B4, D8, Z13

Suggested Citation

Davis, John B. and Davis, John B., Bounded Rationality and Bounded Individuality (June 19, 2014). Research in the History of Economic Thought and Methodology, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2456784

John B. Davis (Contact Author)

Marquette University ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

University of Amsterdam ( email )

Amsterdam
Netherlands

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