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Trade-offs, fast and slow
Our biology determines how we make decisions, but we have a secret weapon
Economics and biology are not the most obvious bedfellows. Standard economics has a reputation of assuming agents who have access to all relevant information and sufficient computational power to work out the optimum choice. But real, biological people from flesh and blood generally don’t behave according to this idealized model. Are they separated by a chasm that is hard to bridge, or are the two domains closer than it seems?
The contrast between an idealized representation and the messy reality is not that unusual. A real wheel is not a perfect circle, yet in many situations, engineers happily use a circle as an entirely reasonable approximation for a wheel. But the difference between what we humans actually do, and what standard economics expects us to do, is often so large that the homo economicus model is not much use in predicting our behaviour.
Economics and biology, peas in a pod
This is quite remarkable. One of the core concepts of economics is the trade-off, and that same concept is also quite central in living organisms, from single cell creatures to much more sophisticated ones, all the way to mammals. Even uncomplicated unicellular organisms are sometimes faced with…
