Two Paradigms Explaining Cognitive Bias in Decision-Making: "Behavioral Economics" and "Ecological Rationality"

In this paper the authors review a variety of empirical findings, research directions and tenets of two paradigms in heuristics and bias research: of behavioral economics (following Kahneman and Tversky's findings), and of the "less-is-more", i.e. ecological rationality research (which follows findings by G. Gigerenzer). While explaining empirical research in behavioral economics (BE), the authors describe a "classical economic" model of rationality, the rational choice theory, which is contradicted by results in behavioral economics. BE researchers use rational choice theory as a norm, so their findings are typically explained or documented by "insufficient adjustment" to, or by a bias from the rational norm. The second paradigm, however, typically documents "sufficiently good" decisions made while using "simple, frugal and smart" heuristics, such as "take-the-best". It claims that "irrationality" in decision-making stems from the inappropriate application of the given heuristics in ecologically unsuitable situations.