Allocation of scarce resources when rationality is one of them: some consequences of cognitive inequalities for theory and policy

Pavel Pelikan

MPRA Paper from University Library of Munich, Germany

Abstract: "Rationality" is understood in the empirical sense of cognitive abilities of human brains for solving economic problems, and consequently recognized bounded in individually unequal ways. This is shown to require treating it as a unique scarce resource, used for deciding on its own uses. This uniqueness disturbs axiomatic economics by a tangled hierarchy, and implies that rationality-allocation can approach efficiency only by means of an institutionally shaped trial-and-error evolution. Applied to the markets vs. government issue, a comparative institutional analysis of rationality-allocation yields novel insights with non-standard policy implications, and thus demonstrates that rationality-allocation matters.

Keywords: unequally bounded rationality; rationality-allocation; tangled hierarchy; institutionally shaped evolution; comparative institutional analysis (search for similar items in EconPapers)
JEL-codes: D6 D72 H1 P5 (search for similar items in EconPapers)
Date: 2007-05
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-hpe and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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