Chapter 109 Cognitive Illusions Reconsidered

Behavioral economists have done a great service in connecting psychology and economics. Up to now, however, most have focused on cognitive illusions and anomalies, in order to prove the descriptive failure of neoclassical economic models. The key problems in the cognitive illusions literature can be summarized in two terms: narrow norms and vague heuristics. The fact that the cognitive illusions they have dealt with can be reduced by efficient representations, or turn out to be no illusions at all, should not lead to the conclusion that people make no errors. By definition, any intelligent system that can operate in an uncertain world will make errors. When one defines precise models of heuristics, one can predict in which tasks people who use them will fail and where they will succeed.