The Power of Heuristics

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Every heuristic that I studied can be used unconsciously, like most baseball players do. And it also shows that the simple heuristics can increase safety and also, of course, they save time. This is one of the big values of going away from as if model to studying the decision-making process. So they cause a process, but also it can help people to teach others to make better decisions.

Psychologist and author Gerd Gigerenzer of the Max Planck Institute for Human Development talks about his book Gut Feelings with EconTalk host Russ Roberts. Gigerenzer argues for the power of simple heuristics--rules of thumb--over more complex models when making real-world decisions. He argues that many results in behavioral economics that appear irrational can be understood as sensible ways of coping with complexity.