Humans and animals make inferences about the world under limited time and knowledge. In contrast, many models of rational inference treat the mind as a Laplacean Demon, equipped with unlimited time, knowledge, and computational might. Following H. Simon’s notion of satisficing, the authors have proposed a family of algorithms based on a simple psychological mechanism: one reason decision making. These fast and frugal algorithms violate fundamental tenets of classical rationality: They neither look up nor integrate all information. By computer simulation, the authors held a competition between the satisficing “Take The Best ” algorithm and various “rational ” inference procedures (e.g., multiple regression). The Take The Best algorithm matched or outperformed all competitors in inferential speed and accuracy. This result is an existence proof that cognitive mechanisms capable of successful performance in the real world do not need to satisfy the classical norms of rational inference. Organisms make inductive inferences. Darwin (1872/1965) observed that people use facial cues, such as eyes that waver and lids that hang low, to infer a person’s guilt. Male toads, roaming through swamps at night, use the pitch of a rival’s croak to infer its size when deciding whether to fight (Krebs & Davies, 1987). Stock brokers must make fast decisions about which of several stocks to trade or invest when only limited information is available. The list goes on. Inductive

Rothschild, and three most helpful referees. Very special thanks for many years of helpful insights are due to Richard Day and Luigi Ermini. Hamlet: “What a piece of work is a man! how noble in reason! how infinite in faculties!”

The economic theory of rationality promises to equal mathematical logic in its importance for the mechanization of reasoning. We survey the growing literature on how the basic notions of probability, utility, and rational choice, coupled with practical limitations on information and resources, influence the design and analysis of reasoning and representation systems. 1 Introduction People make judgments of rationality all the time, usually in criticizing someone else's thoughts or deeds as irrational, or in defending their own as rational. Artificial intelligence researchers construct systems and theories to perform or describe rational thought and action, criticizing and defending these systems and theories in terms similar to but more formal than those of the man or woman on the street. Judgments of human rationality commonly involve several different conceptions of rationality, including a logical conception used to judge thoughts, and an economic one used to judge actions or...

Employees are motivated intrinsically as well as extrinsically. Intrinsic motivation is crucial when tacit knowledge in and between teams must be transferred. Organizational forms enable different kinds of motivation and have different capacities to generate and transfer tacit knowledge. Since knowledge generation and transfer are essential for a firm s sustainable competitive advantage, we ask specifically what kinds of motivation are needed to generate and transfer tacit knowledge, as opposed to explicit knowledge.

The motivation crowding effect suggests that an external intervention via monetary incentives or punishments may undermine (and under different indentifiable conditions strengthen) intrinsic motivation. As of today, the theoretical possibility of crowding effects is widely accepted among economists. Many of them, however, have been critical about its empirical relevance. This survey shows that such scepticism is unwarranted and that there exists indeed compelling empirical evidence for the existence of crowding out and crowding in. It is based on circumstantial insight, laboratory studies by both psychologists and economists as well as field research by econometric studies. The presented pieces of evidence refer to a wide variety of areas of the economy and society and have been collected for many different countries and periods. Crowding effects thus are an empirically relevant phenomenon, which can, in specific cases, even dominate the traditional relative price effect. Keywords: Crowding effect, intrinsic motivation, principal-agent theory, economic psychology, experiments JEL-Codes: A12, J33, L22 1 Prof. Bruno S. Frey, Institute for Empirical Economic Research, Bl mlisalpstrasse 10, CH-8006 Z rich, Switzerland, Tel. +41-1-634-37-30/31, eMail: bsfrey@iew.unizh.ch 1. Background The basic idea that rewards, and in particular monetary rewards, may crowd out intrinsic motivation emanates from two quite different branches of literature in the social sciences. Thirty years ago in his book The Gift Relationship Titmuss (1970) argued that paying for blood undermines cherished social values and would therefore reduce or totally destroy peoples willingness to donate blood. Though he was unable to come up with any serious empirical evidence his thesis attracted much att...

One can be independent, or subject to decisions made by others. This paper empirically tests whether individuals attach an intrinsic value to the institutional difference between independence and hierarchy. Taking self-employment as an important case of independence, it is shown that the self-employed derive more utility from their work than people employed by an organization, irrespective of income gained or hours worked. This is evidence for procedural utility: people do not only value outcomes, but also the conditions and processes leading to these outcomes.

The core of any document retrieval system is a mechanism that ranks the documents in a large collection in order of the likelihood with which they match the preferences of any person who interacts with the system. Given a broader interpretation of “recommending” than is commonly accepted, such a preference ordering may be viewed as a recommendation, made by the system to the information-seeker, that is itself typically derived through synthesis of multiple preference orderings expressed as recommendations by indexers, information-seekers, and document authors. The ERIn (Evaluation--Recommendation--Information) model, a decision-theoretic framework for understanding information-related activity, highlights the centrality of recommending in the document retrieval process, and may be used to clarify the respects in which indexing, rating, and citation may be considered analogous, as well as to make explicit the points at which content-based, collaboration-based, and context-based flavors of document retrieval systems vary.

. This paper describes trust in information security as a subjective human belief. On this background, four formal models for trust which have been proposed in the recent years are analysed with the purpose of determining their strong and weak sides. From this we try to define general criteria for the feasibility of modelling trust. 1 Introduction A wide range of methods are used to achieve security in IT systems. Whether it is cryptographic algorithms and protocols, or high level security models and policies, they all have in common the implicit purpose of creating trust. This observation has led some researchers to propose models where trust is explicitly expressed. Trust is a human cognitive phenomenon, and not for example a property of a system or of an agent. The purpose of modelling trust must therefore be to model how a human observer would asses the security of a system or the honesty of an agent. This would enable automatic appreciation of trust as a human would do it. The ad...

Shelly Lundberg for their helpful comments, to Joanne Spitz for editorial assistance, and to Lars Hansen and Jim Heckman for inviting me to participate in the symposium. Their invitation read in part, "We would like you to discuss his and other work on household and family economics, including its importance to social science and policy. We would like this to be a serious assessment of research, more than just superficial praise. " Robert A. Pollak Washington University in St. Louis "Gary Becker's Contributions to Family and Household Economics" Gary Becker's influence on the economics of the family has been pervasive. His ideas have dominated research in the economics of the family, shaping the tools we use, the questions we ask, and the answers we give. The foundational assumptions of Becker's economic approach to the family-- maximizing behavior and equilibrium-- as well as such primary auxiliary assumptions as household production and interdependent preferences, are now widely accepted not only by economists but also by family sociologists, demographers, and others who study the family. Yet the interesting and provocative implications of Becker's economic approach to the family do not follow

The authors investigate the origins of homophily in a large university community, using network data in which interactions, attributes, and affiliations are all recorded over time. The analysis indicates that highly similar pairs do show greater than average propensity to form new ties; however, it also finds that tie formation is heavily biased by triadic closure and focal closure, which effectively constrain the opportunities among which individuals may select. In the case of triadic closure, moreover, selection to “friend of a friend” status is determined by an analogous combination of individual preference and structural proximity. The authors conclude that the dynamic interplay of choice homophily and induced homophily, compounded over many “generations ” of biased selection of similar individuals to structurally proximate positions, can amplify even a modest preference for similar others, via a cumulative advantage– like process, to produce striking patterns of observed homophily.