This paper presents an example of how economists can take the behavioural models of the social sciences (namely cognitive dissonance) and incorporate them into their own assumptions of behaviour (that agents are rational actors).
There are three basic premises of economic cognitive dissonance: confirmation biases, personal belief distortion and the persistence of chosen beliefs (despite their veracity). To confirm these premises, the authors illustrate a number of examples in the workplace which highlight the inherent flaws which are present in day-to-day cognition. For example, workers will believe in the safety of their workplace despite present dangers, to ease anxiety and caution; running the risk of injury should their judgements fail. In this example, the authors still maintain that the workers are rational; but only to the extent that their belief structure is the result of a subconscious cost-benefit analysis.
Social psychology, which is based upon the theory of cognitive consistency, offers psychological evidence of cognitive dissonance. Agents self-identify themselves as ‘smart’ and ‘nice’, and any information that conflicts with this identification is ignored, rejected or supplemented for another belief that fits within this self-identity. Agents rarely recognise these errors, as recognition itself would again be in conflict with the agent’s ego. Bayesian decision theory is offered as a critique of this theory, however the authors look to the results of psychological experiments analysing cognitive dissonance to discount this critique; arguing that the evidence supports the notion that it is in fact personal beliefs that affect decisions, more than available information.
With these findings in mind, the authors have constructed a decision model which modifies the traditional model of rational decision making and demonstrates the resultant opportunities and consequences. This paper approached the economics of ‘irrational behaviour’ from a different perspective as that of Gary Becker, who holds that irrational behaviour is a random and spontaneous deviation from economic rationality.
This article, when positioned amongst broader literature, establishes a clear model and provides practical outcomes. The model is robust and well thought out, allowing for an easy understanding of the relevant concepts. However, where this article falls short, is the confidence with which they present this model. In my personal opinion, matters of economic rationality are far too com
