Decision Making as Output and Bounded Rationality

  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra

Mathematics, Tharoorisms and Prisoner's Dilemma

 

A few days before, came across an interesting tweet. This tweet is available here. The tweet links to an article that talks about jargons and their usage in everyday life. The author in the article points out that research indicates, the use of jargons at every second instant reflects a case of insecurity and not academic learning or competence.  Therefore, one would wonder, why people resort to jargons and high sounding words at the drop of the hat. Of course, people like Shashi Tharoor or Manish Tiwari seemed to master that. Therefore, it would be pertinent to decode the logic behind using Tharoorisms so as to speak in the everyday life. If one goes further, there is a tendency among the social scientists to increasingly resort to mathematical formalism of late. Interestingly, the mathematical formalism only makes the concept more complex than demystifying it. Unless the goal is to make the concepts or language complex, there seems to be no reason why one should use it. Yet people seem to bank on those.

 

A few months back, there was a post discussing the increasing use of Urdu when one run short of arguments. The post had argued that this reflected rational behaviour and symbolised the only available dominant strategy to the user. Superiority in the field entails the use of language that is academic in nature or something that resembles the practice of the art. Lawyers would prefer to use the language that will help them win cases, doctors have their own jargons, so do the designers and engineers and so on and so forth. The objective is to achieve a distinction in their field of profession. Therefore, there is sufficient incentive to invest in development of language and mathematics.

 

Social sciences tend to ape sciences and they are perhaps consciously or subconsciously desirous of getting accepted in mainstream science. Mainstream science thrives on facts and thus focus on mathematical expressions. Therefore, a pursuit to get accepted as a mainstream science compels the social scientists to use mathematical formalism in the course of their practice. Similarly, those in the field of humanities tend to use jargons to make themselves appear superior or something different. Underlying in this strategy is a need to differentiate from the rest. Given the number of practitioners in the field, there exists a motive to appear different. People tend to get noticed when they are different. This is best amplified by use of a mechanism, in the case language or mathematics that stands them out from the crowd.

 

As with any other instance, the need to stand out is not just within the circle but to the crowd that keeps entering the field. In many ways, this serves as the barrier of entry. Students desirous of entering these domains must perfect themselves with these jargons of language, mathematical or otherwise. Those who do are consigned to the side-lines.

 

If the resort to formalism indicates a pursuit of a competitive advantage in an industry with low concentration ratio, the question naturally comes to the mind is whether such a strategy works in the first place. To this end, one needs to look towards the game theory and prisoner’s dilemma in specific. Towards understanding this, the first step would be to know whether the profession would be worse off minus the use of these jargons. The answer is clearly no. The demystification actually makes the subject more popular and attracts the laymen. It is the ability of the practitioner to explain the concepts in a language that is intelligible even to the kids that makes him or her proficient in the subject. Yet this is just one part of the dynamics. The critical part is to establish themselves within the practice of profession. In this context, they need to stand out and appear intelligent. In other words, they have to follow a strategy that makes them better off relative to the rest. Implicit in this tactic is the assumption that others would not follow suit. Yet as goes with other cases, everybody is pursuing a similar thought and thus end up using the same methodology to arrive at the top. Therefore, when everybody pursues the same strategy, the outcome will remain the same as it started off. Yet the costs of pursuing this line of thinking is high. Therefore, as a profession, they appear to worse off collectively. In an approach to make themselves better off, the net outcome is ending up collectively worse off, thus manifesting what is known as prisoner’s dilemma.

 

If this is the outcome, then yet there seems to be no end to this practice. The answer again lies in the dominant strategy. The question who will chicken out and move away from the field. Though it is an arms race, nobody wants to become the chicken in the game that has evolved. The costs of being a chicken is perhaps very high. Therefore, it seems a sound and dominant strategy to follow the collective thinking or going with the flow rather than fighting the currents.

 

The logic for the above is very simple. It is about trying to evaluate what would be the outcome if an individual does not follow the strategy of mathematical formalism in academic disciplines like economics or psychology. There is no doubt that he or she would master the subject and be proficient. Yet within the discipline, they need to manifest themselves as someone outstanding. When everybody uses the same language, the outcome might be prisoner’s dilemma but if they do not use the language, there would be question marks raised over their credentials. To build a standing, they need to make a presence within their domain. This in itself would become impossible if they do not choose to coat themselves with high sounding jargons and mathematical formulas thrown in at the drop of the hat. They can resort to a simple language once they establish themselves but towards that pursuit, they need to manifest their credentials. Thus to make a mark, this becomes the only logical strategy to be followed. Once they have a made a mark, perhaps they have little incentive to scale back as they pursue seeking greater heights. Thus the procession continues.

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