#toreview #rate5 - [[value-based decision making]], [[brain valuation system]] - [[rational choice theories]], [[efficiency of markets]] - [[decision risk vs ambiguity or uncertainty]], [[expected-utility theory]], [[prospect theory]], [[probability weighting]] - [[time or temporal discounting]] # Idea Many decision problems we face are because we are using "equipment for the old life" to solve problems in "a different milieu"—a civilization that is drastically different from that which prevailed when the equipment for the old life evolved. Behavioral findings from psychology and neuroscience have challenged bedrock assumptions within economics: that decision making is a unitary process—a simple matter of integrated and coherent utility maximization. However, some economists reject the infiltration of psychology. They reject the "new phrenology" and argue that neural data cannot refute economic models, which make predictions about behavior rather than underlying processes. ![[Pasted image 129.png]] ## Decision making under risk and uncertainty People fear outcomes that aren't objectively serious but experience little trepidation towards outcomes that they know are seriously threatening (e.g., phobics, air crashes). The risk-as-feelings hypothesis ([[Loewenstein 2001]]) suggests people react to risks at two levels: evaluating them in the dispassionate fashion by unitary models, and at an emotional level. The [[somatic marker hypothesis]] was also an influential account of how emotions affect decision. ## Intertemporal choice and dual systems Discounted utility model ([[discounted utility functions]]) is the dominant model of [[time or temporal discounting]]. Research has focused on whether behavior can be better explained by multiple or single systems ([[dual-process models]]). Some have argued that [[time or temporal discounting]] reflects the operation of two fundamentally different systems. ## Social decision making How should people behave toward others? There are no normative benchmarks. Again, [[dual-process models]] provide clues and explain behavior in [[trolley dilemmas]] and [[ultimatum game]]. # References - [[Tugwell 1922 human nature in economic theory]] # Quotes > p649. More specifically, some economists have come to appreciate a distinction between automatic processes, which roughly correspond to what Tugwell called the “equipment for the old life,” and controlled processes, which correspond to what Tugwell referred to as the “power of reflecting.”