A rational heuristic model of economic decision making

Abstract

A conspicuous ‘hole’ lies between the ‘rational-choice’ paradigm and the ‘behavioral decision-making’ paradigm. The ‘missing model’ is ‘heuristic’ (research-based) yet ‘rational’ (non-biasing): a set of methods for the logically sound discovery and design of economic actions, options and objectives. Such a model is developed in this paper, enriching the notion and repertory of heuristics that are typically considered in economic and cognitive sciences with the notion and set of heuristics typically considered in the philosophy of science and the logic of discovery. The model then provides a response to the hitherto unaddressed question of how knowledge, on which the rationality and wisdom of any decision largely depends, can be constructed in a valid and reliable way. The specification of the heuristics that can effectively and efficiently guide economic discovery and innovation seems to be overdue in an economy said to be knowledge intensive and innovation oriented.