Bounded Rationality: Heuristics, Judgment, and Public Policy, Cass R. Sunstein and Sanjit Dhami
This book is an excellent resource for anyone interested in the concept of bounded rationality and its practical applications, including scholars and policymakers. It provides a formal treatment of the fundamental principles of rationality in various contexts such as static, dynamic, and uncertain environments. Additionally, the book examines alternative frameworks that offer explanations for empirical evidence, such as the research on heuristics and biases pioneered by Daniel Kahneman and Amos Tversky. The authors also explore policy-relevant themes from a behavioral economics perspective, including behavioral public economics and behavioral industrial organization.
The book’s presentation has a seamless flow, starting with an intuitive and formal portrayal of the rational paradigm, then moving onto empirical evidence that questions its relevance and alternative frameworks, before finally concluding with practical applications.
The authors uncover the main ideas behind rationality in a clear, concise, and parsimonious way. Technicalities are accessible, well explained, and kept at a minimum, conveying the gist of ideas. Plausibility of rationality axioms have been discussed through the lens of the empirical literature. The bottom line is that modern economics needs behavioral economics to make better predictions and decisions. For instance, th
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