Behavioral and heuristic models are as-if models too — and that’s ok

Ivan Moscati

No 22177, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: I examine some behavioral and heuristic-based models of individual decision making, and argue that the diverse psychological mechanisms these models posit are cognitively too demanding to be implemented, consciously or unconsciously, by actual decision makers. Accordingly, and contrary to what their advocates typically claim, behavioral and heuristic models are best understood as “as-if models†that account for the observable choices that individuals make, but do not pretend to capture the actual psychological mechanisms that generate those choices. In this respect, behavioral and heuristic models are just like neoclassical models, whose as-if status is generally acknowledged. I then sketch a local version of scientific antirealism that justifies the practice of as-if modelling in the theory of decision making. The antirealism on offer emphasizes the role that mechanistic explanations play in decision analysis, and therefore goes beyond traditional instrumentalism.

Keywords: Decision theory; Expected Utility theory; Cumulative Prospect Theory; Priority Heuristic model; Scientific antirealism; Mechanistic explanation (search for similar items in EconPapers)
Pages: 27
Date: 2022
New Economics Papers: this item is included in nep-cwa, nep-evo, nep-hpe and nep-upt
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