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

Academic Research and Policy Interventions

 

At least in terms of perception, there seems to be disconnect between public policy and academic research. Research is something sound, yet it has little application more often than not in terms of policy prescriptions. What might work as good policy measure might actually turn out to be bad research from a methodological point of view. There are occasion when there is some interesting research findings have emerged, yet when implemented in policy have turned out to be very bad choices. There is an interesting discussion on the same on Freakonomics. The talk highlights the gap between the research objectives and the policy instruments and objectives.

 

Research, in academic parlance is all about methodology. The journals would go at length to enquire on the methodological approaches. Their interest in findings are an outcome of methodology adopted rather than the outcomes themselves. The absence of rigor in research is a disqualification. For instance, if a firm has experienced profits through adoption of certain measure, it might be said that the cause effect can be established. Yet in academics, it is not the outcome which is examined but the methodology through which it was examined that would become critical to the acceptance of the piece. Correlation might not be causality. Moreover, the academic language would be obtuse and has little relevance from the policy point of view. The objective of the academic researcher is to gain a tenure and hence the signals would be towards the audience that would enable the academic researcher achieve their objectives. They might love their findings to be adopted by the policy makers, yet to the policy makers, it is the outcomes that are derived from the application that matters rather than the methodology or the findings per se. Similarly, in business, it is the profits that finally matter rather than resort to means of research per se.

 

In this context, it might be instructive to decode the disconnect between the different streams. For instance, one might take business. Business seminars and symposia would focus on the latest innovations in processes and services. The study would be robust and company experiences would be presented. Yet there would be significant differences between the presenters at the business conference and the ones at the academic conference. To the businesspersons, what would finally matter is the sustenance and prosperity of the company. The ends matter not necessarily the means. In this context, their focus would be on the results. They would identify the problem. They would indicate the solution they adopted for redressing the problem. The solution being presented obviously would have enhanced the revenues for the firm or helped them in cutting down the costs. Given the firm objectives are intertwined with these two, their emphasis is on how adopting this solution helped them. Yet in an academic conference, the focus would be on the study mechanism. It would be on the literature survey, the gaps identified and how usage of qualitative or quantitative models enabled them to identify the cause-effect mechanism.

 

The gap between policy and research emerges from the lack of understanding of policy objectives. To a policymaker it is not about the cause effect in the lab that matters but how it received on the ground. There is an interesting anecdote presented in the episode on Freakonomics cited above. In the US, they created a Parent Academy wherein parents were being given instructions on how to increase the cognitive skills of their kids. In fact, the program became quite a success in the US. They sought to replicate the same in the UK. Yet it was complete failure because the parents did not sign up for it. It might have to do with the inability to understanding the locational differences. While in the US, it might have been a success, it was difficult to replicate in UK. It is possible that there were significant cultural differences or locational differences. What might be appealing to a parent in the US, might be very different to some in Britain. Hence, there was little interest in the latter country. If one had tried to apply in India for instance, it might have had very different and perhaps unintended effects.

 

The academic research even in real world context would have its limitations. To the policy makers it is the cost benefit analysis on the ground that matters. The project has to be scalable. It cannot have a limited context. For an academician, as long as the cause effect relationship is established, it is the vindication of his or her research. The academic side who are involved in public policy research adopt randomized control trials for examining the applicability of the intervention. The interventions are measured through a placebo controlled trials. They do yield useful insights and no doubt are done with the right intentions. Yet the population across the world is not uniform. It is heterogeneous with conflicting behavior across societies. The trials do indicate the applicability or lack of it in a particular geographic, demographic or cultural context. Yet it fails in answering the scalability of the same or the replicability in other contexts. The cost benefit analysis is usually prohibitive to undertake these trials in every possible context. Therefore, the research design and the execution itself becomes a barrier in generalizing the findings thus the foundations for macro level policy interventions. To researchers it becomes pertinent to dissect why experiments which report good progress in the lab setting fail in the real world. There seemingly exists a fissure between the laboratory and the ground realities. The expectations that peak in the experimental settings seemingly hit a trough of disillusionment in the real world.

 

There is a belief that the solution for the same lies in the fact of rewarding the replicablity of the programs. If interventions work in some context, there must be rewards for researchers who seek to replicate the same in other geographic or cultural contexts. Furthermore, there needs to be an increased robustness in research. There needs to be fidelity in research. Fidelity according to those studying implementations is all about integrity of the original research when scaled up. The context of bridging the divide between academic research and the policy or business social requirements is quite important. It needs to move away from a narrower context into a broader set of objectives.

 

 

 

 

Comments

Popular posts from this blog

Decision Making as Output and Bounded Rationality

The Economics Origins of BCG Matrix

People and the Third Wave of Chinese Virus