On the 9th of January, T. A. Pai Management Institute was honoured to have Professor Gerd Gigerenzer, Director at the Max Planck Institute for Human Development and Director of the Harding Center for Risk Literacy in Berlin to give a lecture on Bounded Rationality. His work is renowned globally and participants and students got to hear about his work directly from Prof. Gerd.
He said that if one looks into a book on rational decision-making, good decisions follow logic and their goal is to maximize utility. Although he says it is a beautiful theory, it does not truly capture the essence of how we make decisions. Prof. Gerd’s main objective is to dispel the darkness in which much of our decision theory is based on. Simple heuristics that make us smart because it gives us the basics, and alternatives to think while making a decision.
There are times when we do not know what the consequences of a decision will be. These uncertainties according to Prof. Gerd are mainly when the situation is regarding whom to trust, where to invest and whom to marry. When the consequences of our decision is unknown, rationality cannot be counted as a factor for decision-making. This is when heuristics is used to evaluate our decision making. Optimisation may be a very good model but it gives us the illusion of certainty, thus heuristics is not a second choice.
Prof. Gerd spoke about ecological intuition and toolbox method of thinking as a part of heuristics. He even introduced a concept called Hiatus Heuristics. These concepts and theories were broken down for our convenience and delivered with high simplicity. It was an enriching experience to be sitting in the audience and watch such complex ideas delivered so simply