Behind and beyond a shared definition of ecological rationality: A functional view of heuristics

a r t i c l e i n f o Observing human behavior in laboratories reveals time and again the undeniable influence of social components, even in the isolation of carefully designed experiments. Clearly, social and cultural constructs shape human cog-nition. The study of ecological rationality recognizes the importance of specifying these and other characteristics of the environment as a basis of cognition. In this paper, we compare the views of Vernon Smith and Gerd Gigerenzer, the founders of two leading research programs on ecological rationality, one in economics and one in psychology. Based on their written work and on interviews conducted by one of the authors, this article brings together for the first time the essence and principles of the study of ecological rationality in these two traditions. This conjoint presentation poses important questions and clarifies methodological challenges in the understanding of actual human behavior from experimental data. Smith sees ecological and constructivist rationality as two complementing versions of economic rationality, while Gigerenzer regards the study of fast-and-frugal heuristics as the appropriate scientific method for exploring real-world rationality. Drawing a connection between forms of rationality and emergence of experimental knowledge, we note that a theory of behavior cannot be deducted from observations alone. Establishing a theoretical framework for observed behavior starts with a search for norms that are sensitive to the context and content of the situation in which a choice is made. Studying the ecological rationality of heuristics, markets, and institutions reveals such norms. A shared definition Ecological rationality has been defined by Gigerenzer, Todd, and the ABC Research Group (1999) as the property of a heuristic: " A heuristic is ecologically rational to the degree that it is adapted to the structure of an environment. " Vernon Smith, father of experimental economics, adopted this definition of ecological rationality and extended it to also include individuals, markets, and institutions (Smith, 2008; Smith was a student of Chamberlin, who began investigating market forces through classroom games in his Ph.D. classes at Harvard. See Holt (1999) for a review of the origins of experiments in economics classroom .). This shared notion of ecological rationality has been explored in their two research programs in complementing areas. Smith is concerned with " adaptations that occur within institutions, markets, management , social and other associations governed by informal or formal rule systems, " where the unit under study is a group (all …