Symbolic Systems 202:
The Rationality Debate
Winter Quarter, 2003-2004
Stanford University, 3 units

Syllabus  (retrospective)

Meeting time: Wednesdays, 6:30-9:00 p.m. (please arrive promptly)
Location: 420-050 (Jordan Hall, outside entrance near math courtyard)
Instructor: Todd Davies (t-d-a-v-i-e-s-@-c-s-l-i-.-s-t-a-n-f-o-r-d-.-e-d-u, x3-4091)
Office hours: Tues, Weds., Thurs. 10:30-12:00 in 460-040C
Course website: www.stanford.edu/class/symbsys202

This course will explore evidence and perspectives from different disciplines bearing on the general question of whether human behavior is, or should be called, "rational". The springboard for debate on this question was the incorporation of axiomatic probability and utility theory into economic models of individual choice behavior, as a formal way of modeling the self-interest maximizing homo economicus of classical economic theory.

A critique of probability and utility theories as models of human behavior was developed beginning in the 1960s by cognitive psychologists, especially by Amos Tversky (d. 1996) and Daniel Kahneman, who developed the view that the human mind normally operates using heuristic and systematically biasing principles that cannot be reconciled with principles of rational choice and judgment. Related work done by Peter Wason, Philip Johnson-Laird, and Jonathan Evans indicated that people also employ heuristics in logical reasoning tasks that lead to systematic departures from logic.

We will begin by reviewing experimentally-based critiques of logic, probability, and utility theory as models of human reasoning, judgment, and decision making, along with the counter-claims of those such as Leda Cosmides and John Tooby, Nick Chater and Mike Oaksford, Gerd Gigerenzer, and Duncan Luce, who defend the essential adaptiveness of human behavior.  We will  review the history of how discrepencies between most people's intuitions and the prescriptions of axiomatic theories led some theorists to conclude that people should, in the words of Paul Samuelson, "satisfy their preferences and let the axioms satisfy themselves" --  implying that it is the theories, and not widespread human intuitions, that violate rationality.   Recently, some psychologists have argued that neither the theories nor the behavior of experimental subjects can be faulted, but that, instead, researchers who claim discrepencies between the two have misinterpreted what people are really doing in experiments.   We will consider this perspective as well.

In the last four weeks of the course, we will examine further aspects of rationality and behavior, including game theory, hedonics, and social preferences.  We will also read the most recent perspectives of two pioneers of the experimental approach representing different sides in the rationality debate: Daniel Kahneman and Vernon Smith, each of whom was awarded the Nobel Memorial Prize for Economic Science in December, 2002.   Class sessions will feature discussions of each week's readings and preparatory mini-lectures designed to prepare students for the next week's topics.  The schedule is subject to change depending on the composition of the class.

SCHEDULE:

Week 1 (Jan. 7) - Overview of the course and introductions.


Week 2 (Jan. 14) - Logical reasoning: Main results with challenges from evolutionary psychologists and rational analysts

[1] Baron, J. (2000), "Logic" (chapter 4), Thinking and Deciding (Third Edition), Cambridge University Press, pp. 67-87.
[2] Cosmides, L. & Tooby, J. (1992), "Cognitive Adaptations for Social Exchange," in Barkow, J.H., Cosmides, L., & Tooby, J. (Eds.), The Adapted Mind: Evolutionary Psychology and the Generation of Culture, Oxford University Press, 1992, pp. 163-225.
[3] Chater, N. & Oaksford, M. (1998), "Ten Years of the Rational Analysis of Cognition," Trends in Cognitive Sciences, 3(2):57-65 (pdf).
(discussion leader: Todd Davies)


Week 3 (Jan. 21)  - Statistical judgment I: Tversky/Kahneman versus Gigerenzer

[4] Tversky, A. & Kahneman, D. (1974), "Judgment Under Uncertainty: Heuristics and Biases," Science, 185:1124-1131 (requires Stanford connection).
[5] Tversky, A. & Kahneman, D. (1983), "Extensional Versus Intuitive Reasoning: The Conjunction Fallacy in Probability Judgment," Psychological Review, 90(4):293-315.
(discussion leader: Alison Appling)

[6] Gigerenzer, G. (1991), "How to Make Cognitive Illusions Disappear: Beyond `Heuristics and Biases'," in Stroebe, W. & Hewstone, M. (eds.), European Review of Social Psychology, Volume 2, John Wiley & Sons, pp. 83-115.
[7] Kahneman, D. & Tversky, A. (1996), "On the Reality of Cognitive Illusions," Psychological Review, 103:582-591 (pdf, requires Stanford connection).
[8] Gigerenzer, G. (1996), "On Narrow Norms and Vague Heuristics: A Reply to Kahneman and Tversky (1996)," Psychological Review, 103:592-596 (pdf, requires Stanford connection).
(discussion leader: Nicholas Williams)


Week 4 (Jan. 28) - Statistical judgment II: The camps go in separate directions

[9] Tversky, A. & Koehler, D. (1994), "Support Theory: A Nonextensional Representation of Subjective Probability," Psychological Review, 101:547-567 (pdf, requires Stanford connection).
[10] Brenner, L.A., Koehler, D.J., & Rottenstreich, Y. (2002), "Remarks on Support Theory: Recent Advances and Future Directions," in Gilovich, T., Griffin, D., & Kahneman, D. (Eds.), Heuristics and Biases: The Psychology of Intuitive Judgment, Cambridge University Press, 2002, pp. 489-509.
(discussion leader: Michael Frank)

[11] Gigerenzer, G. & Goldstein, D.G. (1996), "Reasoning the Fast and Frugal Way: Models of Bounded Rationality", Psychological Review, 10:650-669 (pdf, requires Stanford connection).
[12] Chater, N., Oaksford, M., Nakisa, R. & Redington, M. (2003). "Fast, Frugal and Rational: How Rational Norms Explain Behavior," Organizational Behavior and Human Decision Processes, 90:63-86.
(discussion leader: Tiffany Chao)


Week 5 (Feb. 4)  - Individual decision making I: Subjective expected utility versus prospect theory

[13] Savage, L.J. (1954), "Historical and Critical Comments on Utility" (section 5.6), The Foundations of Statistics, Dover Publications, 1972, pp. 91-104.
[14] Ellsberg, D. (1961), "Risk, Ambiguity, and the Savage Axioms," Quarterly Journal of Economics, 75:643-669 (requires Stanford connection).
[15] Raiffa, H. (1961), "Risk, Ambiguity, and the Savage Axioms: Comment," Quarterly Journal of Economics, 75:690-694 (requires Stanford connection).
(discussion leader: Ben Patton)

[16] Tversky, A. & Kahneman, D. (1981), "The Framing of Decisions and the Psychology of Choice," Science, 211:453-458 (requires Stanford connection).
[17] Tversky, A. & Kahneman, D. (1987), "Can Normative and Descriptive Analysis Be Reconciled?," Working Paper RR-4, Institute for Philosophy and Public Policy, University of Maryland.
(discussion leader: Katie Hotchkiss)


Week 6 (Feb. 11)  - Individual decision making II: Rank-dependent linear utility versus cumulative prospect theory

[18] Luce, R.D. (1992), "Where Does Subjective Expected Utility Fail Descriptively?," Journal of Risk and Uncertainty, 5:5-27.
(discussion leader: Christopher Cox)

[19] Tversky, A. & Kahneman, D. (1992), "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, 5:297-323.
[20] Camerer, C.F. (2000), "Prospect Theory in the Wild," in Kahneman, D. & Tversky, A. (eds.), Choices, Values, and Frames, Cambridge University Press, pp. 288-300 (pdf).
(discussion leader: A.J. Magnuson)

 
Week 7 (Feb. 18) - Interactive decision making I: cooperation and game theory

[21] Colman, A.M., and replies (2003), "Cooperation, Psychological Game Theory, and Limitations of Rationality in Social Interaction," Behavioral and Brain Sciences, 26:139-198 (pdf, requires Stanford connection).
(discussion leader: David Abecassis)


Week 8 (Feb. 25) - Interactive decision making II: fairness norms and social preferences

[22] Sen, A.K. (1976-77), "Rational Fools: A Critique of the Behavioural Foundations of Economic Theory," Philosophy and Public Affairs, 6:317-344.
[23] Miller, D.T. (1999), "The Norm of Self-Interest", American Psychologist, 54:1053-1060 (pdf).
[24] Henrich, J., Boyd, R., Bowles, S., Camerer, C., Fehr, E., Gintis, H.,&  McElreath, R., (2001), "In Search of Homo Economicus: Behavioral Expermients in 15 Small-Scale Societies," American Economic Review, 91:73-79 (pdf).
(discussion leader: Eve Phillips)

[25] Arrow, K.J. (1967), "Values and Collective Decision Making," in Laslett, P. & Runciman, W.G. (Eds.), Philosophy, Politics and Society, Third Series, Blackwell, pp. 215-232.
[26] Davies, T. & Shah, R. (2004), "Intuitive Preference Aggregation: Tests of Independence and Consistency," revised after presentation at the 2003 Annual Meeting of the Public Choice Society, working paper.
(discussion leader: Danny Oppenheimer)


Week 9 (Mar. 3) - Hedonics and the brain

[27] Loewenstein, G., O'Donoghue, T., & Rabin, M. (2003), "Projection Bias in Predicting Future Utility," The Quarterly Journal of Economics, 118:1209-1248 (pdf).
[28] Camerer, C., Loewenstein, G. & Prelec, D. (2003), "Neuroeconomics: How Neuroscience Can Inform Economics," working paper (pdf).
(discussion leader: Ben Newman)


Week 10 (Mar. 10) - "Experimental economics" versus "behavioral economics"

[29] Smith, V.L. (2003), "Constructivist and Ecological Rationality in Economics," American Economic Review, 93:465-508 (pdf).
[30] Kahneman, D. (2003), "Maps of Bounded Rationality: A Perspective on Intuitive Judgment and Choice," revision of Nobel Prize Lecture, working paper (pdf).
[31] Kahneman, D. (2003), "A Psychological Perspective on Economics," American Economic Review, 93:162-168.
(discussion leader: Ryan Ellis)


FORMAT AND REQUIREMENTS:

Each class session, after week 1, will typically consist of (a) about 90 minutes of discussion of that week's assigned reading, and (b) 20-30 minutes of remarks by me in preparation for the next week's reading.  The preparatory remarks will provide additional background material that is not in the readings. 

The course is open to any student, unless we reach a size of 20 or more, in which case I may have to limit it.  To get the most out of the course you should have taken a course including probability theory (e.g. Stat 116), and at least one course in each of the following: (a) philosophy other than logic, and (b) psychology or linguistics.  The course is intended for juniors, seniors, or graduate students who are interested in the rationality debate.

Each student is required to help lead a discussion during one of the nine weeks of reading discussion (weeks 2-10). I will interject comments when I think they are appropriate, and will serve as an interlocutor along with other students in the class. Emphasis will be on participation by everyone over the course of the quarter. Please contact me if you would like help in preparing to lead a discussion.

The main written work required is (a) a 5-7 page paper on a topic of your choice that is closely related to the course, and (b) two short (1-2 pages each) commentaries, one on each of two sets of grouped articles (with no vertical space between them) in the list of readings.