The parallelism of cognitive economy and physiological economy: A rationality-based dual process theory

Khalil, Elias L.; Amin, Azzam

doi:10.1007/s12144-022-03554-5

Cited by 11 publications

(9 citation statements)

References 39 publications

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“…It can be argued that the analytical study of habitsas-heuristics applies to habits-as-routines, as if they lie along the same continuum. However, this argument falls outside the scope of this paper (see Khalil & Amin, 2022).…”

Section: Defining Habitsmentioning

confidence: 87%

“…In any case, researchers who consider his early work as a fundamental critique of rational choice must subscribe to the "two Kahnemans" idea, as they would be surprised upon reading his 2011 book. Namely, Kahneman explains the heuristics and their associated biases as the working of "mental economy," the efficient operation of cognition when cognitive cost matters (see Khalil & Amin, 2022).…”

Section: What Is the Question?mentioning

confidence: 99%

“…In this case, we do not have cognitive collapse but what can be called a "cognitive illusion." A cognitive illusion or mistake is the occasional ex post error, which is an inevitable cost of using optimal heuristics (Khalil & Amin, 2022).…”

Section: Erroneous and Non-erroneous Heuristics Cognitive Illusions O...mentioning

confidence: 99%

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The information inelasticity of habits: Kahneman’s bounded rationality or Simon’s procedural rationality?

Khalil

2022

Synthese

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Why would decision makers (DMs) adopt heuristics, priors, or in short “habits” that prevent them from optimally using pertinent information—even when such information is freely-available? One answer, Herbert Simon’s “procedural rationality” regards the question invalid: DMs do not, and in fact cannot, process information in an optimal fashion. For Simon, habits are the primitives, where humans are ready to replace them only when they no longer sustain a pregiven “satisficing” goal. An alternative answer, Daniel Kahneman’s “mental economy” regards the question valid: DMs make decisions based on optimization. Kahneman understands optimization not differently from the standard economist’s “bounded rationality.” This might surprise some researchers given that the early Kahneman, along with Tversky, have uncovered biases that appear to suggest that choices depart greatly from rational choices. However, once we consider cognitive cost as part of the constraints, such biases turn out to be occasional failures of habits that are otherwise optimal on average. They are optimal as they save us the cognitive cost of case-by-case deliberation. While Kahneman’s bounded rationality situates him in the neoclassical economics camp, Simon’s procedural rationality echoes Bourdieu’s “habitus” camp. To abridge the fault line of the two camps, this paper proposes a “two problem areas hypothesis.” Along the neoclassical camp, habits satisfy wellbeing, what this paper calls “substantive satisfaction.” Along the Bourdieu camp, habits satisfy belonging, love, and bonding with one’s environment, what this paper calls “transcendental satisfaction.”

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Section: Defining Habitsmentioning

confidence: 87%

Section: What Is the Question?mentioning

confidence: 99%

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The information inelasticity of habits: Kahneman’s bounded rationality or Simon’s procedural rationality?

Khalil

2022

Synthese

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“…This account is clearly in the tradition of neoclassical economics. While this statement may surprise a few researchers, it is fully defended in other papers (Khalil, 2022(Khalil, , 2024cKhalil & Amin, 2023). 2 Herbert Simon offers an alternative theory of heuristics, what he calls "procedural rationality" (Simon, 1976).…”

Section: Kahneman's Mental Economymentioning

confidence: 90%

Mental accounting, heuristics, and the second‐best: Solving the calculator‐jacket puzzle

Khalil

2024

Manage Decis Econ

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This paper conceives mental accounting along Kahneman's “mental economy,” specifically as a heuristic. This mental‐accounting‐as‐heuristic conception allows us to solve the calculator‐jacket puzzle. The opportunity cost of time is not constant but roughly varies with the variation of the item's value. As the value of the item rises, the decision maker (DM) should be more attentive. However, the measurement of the opportunity cost of time at each point of purchase is cognitively costly. To reduce such cost, the DM adopts a heuristic, the item's price itself, as a rough proxy of the varying opportunity cost of time.

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“…According to bounded rationality, DMs adopt habits to economize on the cost of case‐by‐case evaluation of choices. Habits are supposed to be efficient on average (see Khalil, 2022c; Khalil & Amin, 2022). In contrast, obsessions and addictions are about the pursuit of excessive transcendental preferences, that is, incurring bonding costs beyond bonding rewards.…”

Section: Modeling Lovementioning

confidence: 99%

The cost of love: Solving the gift anomaly

Khalil

2023

Kyklos

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Friendship‐and‐love affords bonding that satisfies what can be called “transcendental preferences”—in contradistinction of “substantive preferences” afforded by, for example, food, clothes, and shelter. Substantive preferences involve ordinary “substantive cost,” whereas transcendental preferences involve “bonding cost” that includes heartaches, obsession, and emotional turmoil. What about the cost of gifts such as flowers, time, and other carriers of friendship‐and‐love? The greater is the expenditure on gifts, the greater the bonding cost. This paper investigates the following question: How should we model bonding cost, which includes the cost of gift, in relation to substantive cost? Given bonding cost and substantive cost share the same budget, neoclassical economists treat them as commensurable and, hence, transcendental and substantive preferences make up a unidimensional objective function. This treatment, however, originates the “gift anomaly”: If people easily substitute between the two genera of preferences, why do they consider the demand of payments for visiting their grandmothers—or payments for voting and sexual intercourse—as repugnant (taboo)? To solve the gift anomaly, this paper is critical of the standard economist's entry point. This paper proposes bonding and substantive costs as incommensurable and, corollary, transcendental and substantive preferences as incommensurable as well. This paper further shows how, without undermining the incommensurability thesis, the incommensurability is up to a limit: the two genera of costs and, corollary, the two genera of preferences are still linked via the income effect—as opposed to the substitution effect.

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The parallelism of cognitive economy and physiological economy: A rationality-based dual process theory

Cited by 11 publications

References 39 publications

The information inelasticity of habits: Kahneman’s bounded rationality or Simon’s procedural rationality?

The information inelasticity of habits: Kahneman’s bounded rationality or Simon’s procedural rationality?

Mental accounting, heuristics, and the second‐best: Solving the calculator‐jacket puzzle

The cost of love: Solving the gift anomaly

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