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Sometimes Less is More

May 24, 2011

I recently attended a game theory conference where Gerd Gigerenzer presented his work on heuristics.  It was a bit strange to have him present since his work in this area seemed to run contrary to that of nearly all the other game theorists presenting.  The essence of his work on heuristics is that people can make good decisions by ignoring causally relevant information.  Sounds crazy right?  I mean, doesn’t more information always lead to better decisions?  This isn’t just a ‘common sense’ belief, entire disciplines, most notably economics, are founded on this principle. The problem is, in many situations, less information leads to better decisions.  For instance, in picking stock portfolios, research has found that choosing stocks on simple name recognition yields better results than market indices.  This isn’t to say that we should ignore information in all decision making.  In situations where the problem is well defined and variables are relatively few, more information is better.  There are a lot of situations, however, that do not fall in this category.  Heuristics provides a good way of analyzing decision making in such situations.

Here’s some more info on Gigerenzer’s work on heuristics:  http://www.edge.org/3rd_culture/gigerenzer03/gigerenzer_print.html

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