Abstract
Merton’s analysis of the Law of Unintended Consequences (LUC) criticizes rational choice theory, a cornerstone of modern economics. Section 4.1 takes a brief excursion into rational choice theory and will illuminate what Merton (and his successors) were reacting to and why. Following that, we will review the prevailing cognitive explanation for psychological triggers of LUC, in four parts. Section 4.2 provides a brief history of the research collaboration by Amos Tversky and Daniel Kahneman, who pioneered the study of distortions in judgments and choices from a cognitive perspective. Section 4.3 surveys the current “catalog” of cognitive factors that provoke LUC. Section 4.4 provides an overview of parallel research on judgment errors that arise when people make predictive judgments about the dynamics of changing situations. These cognitive factors are underappreciated triggers of LUC. Section 4.5 sketches a dynamic model that explains how these cognitive factors act to distort critical decision-making. Section 4.6 closes by identifying the cognitive biases that most strongly influence the phases of the critical decision-making process presented in Chap. 2.
Published Version
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