From Bounded Rationality to Behavioral Economics

The paper provides an brief overview of the “state of the art” in the theory of rational decision making since the 1950’s, and focuses specially on the evolutionary justification of rationality. It is claimed that this justification, and more generally the economic methodology inherited from the Chicago school, becomes untenable once taking into account Kauffman’s Nk model, showing that if evolution it is based on trial-and-error search process, it leads generally to sub- optimal stable solutions: the ‘as if’ justification of perfect rationality proves therefore to be a fallacious metaphor. The normative interpretation of decision-making theory is therefore questioned, and the two challenging views against this approach , Simon’s bounded rationality and Allais’ criticism to expected utility theory are discussed. On this ground it is shown that the cognitive characteristics of choice processes are becoming more and more important for explanation of economic behavior and of deviations from rationality. In particular, according to Kahneman’s Nobel Lecture, it is suggested that the distinction between two types of cognitive processes – the effortful process of deliberate reasoning on the one hand, and the automatic process of unconscious intuition on the other – can provide a different map with which to explain a broad class of deviations from pure ‘olympian’ rationality. This view requires re-establishing and revising connections between psychology and economics: an on-going challenge against the normative approach to economic methodology.Bounded Rationality, Behavioral Economics, Evolution, As If

Life is an Adventure! An agent-based reconciliation of narrative and scientific worldviews\ud

The scientific worldview is based on laws, which are supposed to be certain, objective, and independent of time and context. The narrative worldview found in literature, myth and religion, is based on stories, which relate the events experienced by a subject in a particular context with an uncertain outcome. This paper argues that the concept of “agent”, supported by the theories of evolution, cybernetics and complex adaptive systems, allows us to reconcile scientific and narrative perspectives. An agent follows a course of action through its environment with the aim of maximizing its fitness. Navigation along that course combines the strategies of regulation, exploitation and exploration, but needs to cope with often-unforeseen diversions. These can be positive (affordances, opportunities), negative (disturbances, dangers) or neutral (surprises). The resulting sequence of encounters and actions can be conceptualized as an adventure. Thus, the agent appears to play the role of the hero in a tale of challenge and mystery that is very similar to the "monomyth", the basic storyline that underlies all myths and fairy tales according to Campbell [1949]. This narrative dynamics is driven forward in particular by the alternation between prospect (the ability to foresee diversions) and mystery (the possibility of achieving an as yet absent prospect), two aspects of the environment that are particularly attractive to agents. This dynamics generalizes the scientific notion of a deterministic trajectory by introducing a variable “horizon of knowability”: the agent is never fully certain of its further course, but can anticipate depending on its degree of prospect

Anatomy of the attraction basins: Breaking with the intuition

olving combinatorial optimization problems efficiently requires the development of algorithms that consider the specific properties of the problems. In this sense, local search algorithms are designed over a neighborhood structure that partially accounts for these properties. Considering a neighborhood, the space is usually interpreted as a natural landscape, with valleys and mountains. Under this perception, it is commonly believed that, if maximizing, the solutions located in the slopes of the same mountain belong to the same attraction basin, with the peaks of the mountains being the local optima. Unfortunately, this is a widespread erroneous visualization of a combinatorial landscape. Thus, our aim is to clarify this aspect, providing a detailed analysis of, first, the existence of plateaus where the local optima are involved, and second, the properties that define the topology of the attraction basins, picturing a reliable visualization of the landscapes. Some of the features explored in this article have never been examined before. Hence, new findings about the structure of the attraction basins are shown. The study is focused on instances of permutation-based combinatorial optimization problems considering the 2-exchange and the insert neighborhoods. As a consequence of this work, we break away from the extended belief about the anatomy of attraction basins

Cancer progression models and fitness landscapes: A many-to-many relationship

Motivation The identification of constraints, due to gene interactions, in the order of accumulation of mutations during cancer progression can allow us to single out therapeutic targets. Cancer progression models (CPMs) use genotype frequency data from cross-sectional samples to identify these constraints, and return Directed Acyclic Graphs (DAGs) of restrictions where arrows indicate dependencies or constraints. On the other hand, fitness landscapes, which map genotypes to fitness, contain all possible paths of tumor progression. Thus, we expect a correspondence between DAGs from CPMs and the fitness landscapes where evolution happened. But many fitness landscapes - e.g. those with reciprocal sign epistasis - cannot be represented by CPMs. Results Using simulated data under 500 fitness landscapes, I show that CPMs' performance (prediction of genotypes that can exist) degrades with reciprocal sign epistasis. There is large variability in the DAGs inferred from each landscape, which is also affected by mutation rate, detection regime and fitness landscape features, in ways that depend on CPM method. Using three cancer datasets, I show that these problems strongly affect the analysis of empirical data: fitness landscapes that are widely different from each other produce data similar to the empirically observed ones and lead to DAGs that infer very different restrictions. Because reciprocal sign epistasis can be common in cancer, these results question the use and interpretation of CPMs.This study was supported by BFU2015-67302-R (MINECO/FEDER, EU

Centralization and Decentralization of Public Policy in a Complex Framework

The public economic literature of the past century is characterized by a traditional paradigm that ascribes little attention to the spatial dimension. However, contemporary globalization requires that researchers and economists expand their perspectives to consider space conceptualization. What is required in the 21st century is a richer and more realistic framework that broadens existing concepts of socio-economic analysis while overcoming narrow national borders. Although national governments will remain prominent performers in the global market, regional and local governments cannot be ignored because citizens worldwide are exerting greater self-determination in influencing governmental decisions. This paper is focused on the opportunity to analyze the governance of decentralization by the new optimizing procedures provided by complex system theory. The first section of the paper explores the positive and normative issues related to centralization and decentralization in a globalized framework as well as the increased interdependence in power sharing among different jurisdictional level. In the second section, Kauffman’s (1993) contributions are examined as a means of determining if the fitness landscape allows combining the institutional evolution. Finally, this paper concludes highlighting that complex system theory is one of the possible tools useful to redesign the map of institutional sharing power in an era of globalization, considering that it allows catching Pareto improving in the level of welfare