Proceedings of the

           1st Conference Herbert Simon Society

BOUNDED RATIONALITY UPDATED

New York (USA), April 8th-10th 2013

8th-9th April 
Italian Cultural Institute
686 Park Avenue, New York, NY 10065

10th April
The Italian Academy for Advanced Studies in America, Columbia University
1161 Amsterdam Avenue, New York, NY 10027

The Herbert A. Simon Society brings together some of the most important economists and cognitive scientists critical of contemporary economic models and theory of rationality. It aims at reformulating economic theory by starting from the many non-neoclassical directions based on bounded rationality theory that have been developed in recent years. This conference is focused on three themes that were identified as particularly relevant in order to apply Simon's ideas to the contemporary debate: duality of mind, creativity, and alternative models of rational expectations.

MONDAY April 8th Afternoon
Italian Cultural Institute, 686 Park Avenue, New York, NY 10065

5.30 pm: Welcoming Remarks
Natalia Quintavalle (Consul General)
Riccardo Viale (Director Italian Cultural Institute) and Massimo Egidi (Herbert Simon Society), 

5.45 pm Introduction
Katherine Simon Frank 

1st Herbert Simon Honorary Lecture
Gerd Gigerenzer 
(Max Planck Institute for Human Development, Berlin)

Homo Heuristicus: Why biased minds make better inferences

Chair: Richard Nelson 

TUESDAY April 9th Morning (Rational Expectations)
Italian Cultural Institute, 686 Park Avenue, New York, NY 10065

9.00-9.30 am: Introductory Key Speech. Chair: Alan Kirman

Roy Radner 
(Leonard N. Stern School Professor of Business at New York University)

Bounded Rationality: In Search of a Definition

9.30-9.45 am Discussion

10.00-11.00 am Parallel sections

11.00-11.20 am coffee break

11.20-12.20 am Parallel sections

12.30 am-1.00 pm: Conclusive Key Speech. Chair Giovanni Dosi

Alan Kirman 
(Professeur émerite  de Sciences Economiques à l'Université d'Aix-Marseille III and Directeur d'Etudes à l'Ecole des Hautes Etudes en Sciences Sociales)

Is it rational to have rational expectations?

1.00-1.15 pm Discussion

TUESDAY April 9th Afternoon (Slow and fast thinking)
Italian Cultural Institute, 686 Park Avenue, New York, NY 10065

2.30-3.00 pm: Introductory Key Speech. Chair James J. Staszewski

Ron Sun 
(Rensselaer Polytechnic Institute, Troy)

On implicit vs. explicit and fast vs. slow processes
 
3.00-3.15 pm Discussion

3.30-4.30 pm Parallel Sections

4.30-4.50 pm Coffee break

4.50-6.20 pm Parallel Sections

6.30-7.00 pm Conclusive Key Speech. Chair Roy Radner

David Over 
(Emeritus Professor in the Department of Psychology, Durham University)

New paradigm psychology of reasoning and rationality

7.00-7.15 pm Discussion

WEDNESDAY  April 10th Morning (Creativity)
The Italian Academy for Advanced Studies in America, Columbia University
1161 Amsterdam Avenue, New York, NY 10027

9.00-9.30 am: Introductory Key Speech. Chair: David Over
Laura Macchi 
(Professore di Psicologia, Università di Milano Bicocca)

The interpretative function of thinking in insight problem solving

10.30-11.30 am Parallel sections

11.30-11.50 am coffee break

11.50-12.50 am Parallel sections

13.00 am-1.30 pm: Conclusive Key Speech. Chair  Riccardo Viale

Jonathan W. Schooler 
(Professor of Psychology at the University of California, Santa Barbara)

Keeping the mind open for inspiration

1.30-1.45 pm Discussion

WEDNESDAY April 10th Afternoon
The Italian Academy for Advanced Studies in America, Columbia University
1161 Amsterdam Avenue, New York, NY 10027

16.30-17.30 pm
Discussion on
Keith Frankish’s
Getting to the heart od the dual-system disitinctions
Watch video
Download handout

5.30-6.30 pm Round Table: Bounded rationality updated

Chair Riccardo Viale
Introduction by Marco Novarese
with Massimo Egidi, Laura Macchi, David Over, Roy Radner, Jonathan W. Schooler, Ron Sun

6.30 pm: 2nd Herbert Simon Honorary Lecture

Joseph Stiglitz 
(Columbia University)

Rethinking Macroeconomics: What Went Wrong and How to Fix It

Chair Massimo Egidi
***********
******

The following invited papers are confirmed for publication in a Special issue on “Bounded Rationality Updated” to appear in the journal Mind & Society, planned for June 2014:
 
Kathie Simon Frank
In memory of Herbert A. Simon

Massimo Egidi
Title to be defined

Alan Kirman
Is it rational to have rational expectations?
Abstract: In economics in situations where there is uncertainty one has to attribute some attitude to handling this uncertainty to individuals. The original idea was to assume that "people do not make systematic mistakes" for which Muth coined the term "Rational Expectations". This was replaced by a much more formal vision which suggested that people fully understand how the economy evolves. In this paper I will argue that the foundations of the “Rational Expectations” hypothesis which has underpinned most recent modern macroeconomic models, which have, in turn, been used for policymaking, are unsound. From a philosophical point of view the idea that agents can not only forecast the evolution of their environment  but also their own evolution seems unjustified. If agents do manage to coordinate on specific expectations these may not be rational and can be self fulfilling. From an econometric point of view, when there are changes in the evolution of the economy, it is not rational to satisfy the hypothesis. Furthermore the empirical and experimental evidence suggests that we should abandon this route.

Laura Macchi & Maria Bagassi
The interpretative function of thinking in insight problem solving

Abstract: The study of insight problem solving could well become one of the most important topics in the contemporary debate on thought. Dealing with insight problems today requires of necessity reconsidering the concept of bounded rationality. Simon's work has inspired us to reflect on the specific quality of the type of boundaries which, by limiting the search, allow and guarantee the act of creativity; finding the solution to insight problems is emblematic of this creativity and provides a paradigmatic case. According to Simon, the solution to insight problems requires a search for an alternative space. He considered the "Notice Invariants Heuristic" to be a powerful tool for focusing this search which must always be guided by salience. Therefore, in the case of insight problems the heuristic is not a weak method of solving problems; indeed, it is the only way, an innovative and creative approach to reach the solution. In our view, the solution to these problems is not attained by abstraction, in fact success can only be achieved by a pertinent interpretation of the context (interpretative heuristic) in the light of the goal, allowing the problem solver to abandon the default representation. We therefore propose that this interpretative heuristic is inherent to all insight problem solving processes and, in more general terms, is an adaptive characteristic of the human cognitive system; this of course implies that the dual process theory will have to be challenged and discussed.

Ron Sun
On implicit vs. explicit and fast vs. slow processes

Abstract: The goal of this research is to explore implicit and explicit processes in shaping an individual’s characteristic behavioral patterns, that is, personality. The questions addressed are how psychological processes may be separated into implicit and explicit types, and how such a separation figures into personality.  In particular, it focuses on the role of instinct and intuition (two kinds of mostly implicit processes) in determining personality. This paper argues that personality may be fundamentally based on instincts resulting from basic human motivation, along with related processes, within a comprehensive cognitive architecture. This approach is implemented within a computational model. Various tests and simulations show that this model captures major personality traits and accounts for empirical data. The work shows how a cognitive architecture with the implicit-explicit distinction may capture instinct, intuition, and personality.

Parallel sections
Rational Expectations, bounded rationality, markets and investments
April 9th 
10.00-12.20

Expectations (chair: A. Baldi) Conference Room
Flexibility of inflation expectation formation process under adaptive learning	E. Stanisławska	
Inflation targeting and macroeconomic stability with heterogeneous inflation expectations 	G. T. Lima, M. Setterfield, J. J. da Silveira	
Decoupling Markets and Individuals: Rational Expectations Equilibrium Outcomes from Minimally Intelligent Heuristic Traders	K. Jamal, M. Maier, S. Sunder	
Optimism and Pessimism in Insurance and Hedging Markets: A Rational Departure from Rational Expectations	P. J. Gutierrez, C. R. Palmero	

Markets and investment (chair: D. Bögenhold) Library
Buyer Power In The Kreps‐Scheinkman Model: Experimental Evidence	A. Orland, R. Selten	
Information processing and asset trade specialization	M. Eboli	
Overconfidence, risk aversion and individual financial decisions in experimental asset markets	J. Michailova 	
A model of business angel investing	A. Klabunde	

Evolutionary models (R. Mabsout) Gallery
Heterogeneous Banks and Sovereign Debt in an Evolutionary Model of Endogenous Growth and Fluctuations	G. Dosi, G. Fagiolo, M. Napoletano, A. Roventini, T. Treibich	
Who gets more profit on a market? Heterogenous agents in varying market contexts	H. Nobuyuki, J. Rouchier 	
The Emergence of Trust in Uncertainty: ‘Reason’, ‘Expectation’, ‘imitation’ and ‘Calculation’	Y. Zhang, W. Elsner 	
The dynamics of organizational structures and performances under diverging and distributed cognitions and capabilities	G. Dosi, L. Marengo	

Slow and fast thinking
April 9th 
3.00-6.20 pm

Slow and fast thinking (chair L. Macchi) Conference Room
The Slow and the Social – Two Studies of Reaction Time and Public Good Provision 	J. Lohse, T. Goeschl	
Deciding, Fast and Slow	C. Kops	
The embodiment of slow and fast thinking	A. Mastrogiorgio, E. Petracca	
Thinking Faster and Better: Acquiring Expertise Eases Limitations of Bounded Rationality	J. J. Staszewski	
Slow and fast thinking, historical-cultural psychology and some major trends of modern epistemology: analysis of a 
fundamental convergence	N. Bulle	

Heuristics (chair O. Gunes) Library
>From Perception to Preference and on to Inference: Towards Theory Integration	S. Luan, L. J. Schooler, G. Gigerenzer	
The Cognitive Processes Underlying Risky Choice	E. Brandstätter, M. Gussmack	
The origins of the intuitive “Feeling of Rightness”	V. Thompson	
Economic Decision Making: How Our Brain Works	J. Tomer	
The choice-experience feedback loop: Choosing and judging with small and biased samples	P. Pipergias Analytis, K. Katsikopoulos	

Experiments (chair M. Johnson) Gallery
Cognitive load and strategic sophistication	S. Allred, S. Duffyz, J. Smith	
Looking for the best deal: How numeracy and reflexive thinking are associated with fast and slow processes	M. Graffeo, L. Polonio, N. Bonini	
On the short horizon of spontaneous iterative reasoning in logical puzzles and games 	K. Mazzocco, A. M. Cherubini, P. Cherubini	
Decision and dopaminergic system: iowa gambling task and parkinson disease	D. Mapelli, E. Di Rosa, M. Cavalletti, S. Schiff, S. Tamburin	
In Defense of Human Rationality (in Deviant “Bi-Auctions")	J. Johnson, S. Bringsjord	

Creativity and other stuffs
April 10th
Creativity 9.30-12.20 am (chair M. Novarese) Conference Room 5th fl.
Exchange of ideas and creative productivity: an experiment	I. Sikora	
Individual Creativity, Ex-ante Goals and Financial Incentives 	G. Charness, D. Grieco	
The non-logical logic of discovery and creativity	R. Mabsout	

Evolution and learning (chair J. Rouchier) Library 3rd fl.
		
Experimental evolutionary robotics for ecological rationality. The case of intertemporal choice	F. Paglieri, D. Parisi, M. Patacchiola, G. Petrosino	
Environmental complexity and cognitive functioning	C. Schooler	
An Evolutionary Analysis of the Framing Effect	B. Routman	
The Structure and Two Complexities of Economic Choice Semiautomata	M.R. Johnson	

Rationality (chair N. Bulle) Teatro 2nd fl.
Bounded Rationality and Beyond: What is Rational when Talking about Rationality, and what Drives Human Action?	D. Bögenhold 	
Violations of Expected Utility Theory: How to Model Them? Are they Rational? Are These the Right Questions?	K. Katsikopoulos	
A Model of Introspection with Time	O. Gorelkina, A. Llorente-Saguer	
An essay on conceptual investigation of bounded rationality: Smithian and Benthamian point of view on satisficing	O. Gunes