Risk Savvy: How to Make Good Decisions by Gerd Gigerenzer

An intermediate amount of knowledge about a set of objects can result in the highest proportion of correct decisions, an example of the “less-is-more effect” [6]. In other words, fast and frugal heuristics explain human behavior based on the human rationality of making a decision. In a similar vein, Gigerenzer (2002) provides an explanation of why fast and frugal heuristics work. Humans use heuristics that are matched to particular environments and make adaptive decisions, taking into account a combination of accuracy, speed and frugality. In other words, humans are ecologically rational.

The rationality of individuals is limited, however, by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make a decision. To account for these limitations, alternative models of decision making offer different views of how people make choices.

The exploratory data show that peer endorsement may be more important than formal authorities for user generated information sources, such as Wikipedia, which calls for further research. Alongside his research on heuristics, Gigerenzer investigates risk communication in situations where risks can actually be calculated or precisely estimated. He has developed an ecological approach to risk communication where the key is the match between cognition and the presentation of the information in the environment. For instance, lay people as well as professionals often have problems making Bayesian inferences, typically committing what has been called the base-rate fallacy in the cognitive illusions literature. Gigerenzer and Ulrich Hoffrage were the first to develop and test a representation called “natural frequencies”, which helps people make Bayesian inferences correctly without any outside help.

Gigerenzer: “The Bias Bias in Behavioral Economics,” including discussion of political implications

Their findings are in accordance with the dual-process theories in that peripheral cues affect the credibility judgments of information when people do not have either high motivation or the necessary cognitive ability to evaluate information (Chen and Chaiken, 1999; Petty and Wegener, 1999). In particular, researchers have examined how Internet users assess the credibility of Web information, and which factors affect their credibility judgments. The literature shows that Internet users rarely use the traditional checklist method, whereby users scrutinize the author, source or currency in evaluating Web information (Hughes, et al., 2010).

The above studies suggest that similar phenomena may be observed regarding users’ credibility judgments of Wikipedia. That is, peripheral cues may affect the credibility judgments of college students concerning Wikipedia. Based on dual-process theories, Reinhard and Sporer (2010) conducted a series of experiments to test whether there were relationships between the use of source cues and the levels of task involvement in making credibility judgments. One of their experiments used the attractiveness of images as a source cue, which can be considered as a peripheral cue. They found that only peripheral cues influenced the credibility judgments of participants with low-task involvement, whereas both central and peripheral cues had an impact on the credibility judgments of participants with high-task involvement.

The presently dominant account of practical rationality in the social and behavioral sciences such as economics and psychology, rational choice theory, maintains that practical rationality consists in making decisions in accordance with some fixed rules, irrespective of context. Ecological rationality, in contrast, claims that the rationality of a decision depends on the circumstances in which it takes place, so as to achieve one’s goals in this particular context. What is considered rational under the rational choice account thus might not always be considered rational under the ecological rationality account.

Is anyone else struggling to understand Gigerenzer’s point about regression towards the mean, with respect to risk estimation? Regression to the mean is a consequence of X and Y-X being negatively correlated if X and Y are independent, right?

For this reason, Todd (2002) states, “simplicity is a virtue, rather than a curse” [5]. In fact, human heuristics are selected to achieve speed by using a few cues that provide enough information to guide adaptive behavior in many situations (Todd, 2002). In particular, Todd’s (2002) ignorance-based decision mechanism (one class of fast and frugal heuristics regarding human information behavior) provides a useful explanation for why people take shortcuts. That is, if people recognize one object, but not the other, they tend to choose the recognized object.

gerd gigerenzer wiki

Efficient decision heuristicsEdit

I agree with the author in the point that it’s our civil right that we should be provided with objective facts, be risk-literacy educated so that we could make informed decisions for our lives. For my part, I am more determined to ask doctors who treat my child about the grounding of their treatment. Doctors in Japan treat patients with tenderness but often with paternalism, they tell us what(the sickness), how(how to cure, what medicine to take) ( and only if I ask), hardly ever why or what are the alternatives. The type of rationality we assume in economics – perfect, logical, deductive rationality – is extremely useful in generating solutions to theoretical problems.

Cognitive maps are internal representations of our physical environment, particularly associated with spatial relationships. These internal representations of our environment are used as memory as a guide in our external environment.

gerd gigerenzer wiki

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