Modern mainstream economic theory and traditional definitions of rationality employed in psychology, cognitive science, biology and other fields are mostly based on a vision of human decision making that is psychologically implausible. Economic agents, for instance, are conceptualized as fully rational Bayesian maximizers of expected utility who are assumed to behave as if equipped with unlimited knowledge, time, and information-processing power. The influence of emotions on decision making is also often ignored. Although this idealized view of decision-making is pervasive and may have a useful benchmark function, human beings seldom conform to it (see Kagel & Roth, 1995; Selten, 1990).

How then do real people make decisions? The alternative to the traditional notion of rationality is by no means irrationality but the notion of bounded rationality as proposed by Herbert Simon. Despite – and sometimes even because of – their bounded resources in knowledge, time, and computational resources, humans are able to make good decisions. The key to understanding people's performance is understanding how human decision-making strategies are well-matched to particular task environments (see Gigerenzer, Todd, & the ABC research group, 1999; Payne, Bettmann, & Johnson, 1988, 1993).

Two related ideas, ecological and social rationality, help to expand on Simon's idea of bounded rationality. Ecological rationality focuses on the way that humans and their repertoire of simple decision strategies are adapted to the specific environments. Social rationality captures the important fact that our fellow humans form a special part of our environment, thus the human mind needs decision making strategies tailored to its social environment.

The perspectives of bounded, ecological, and social rationality converge on one overarching goal: to understand human rationality – encompassing its cognitive as well as its emotional foundations – as it is adapted to specific environments via the different heuristics that guide adaptive behavior.

The study of bounded rationality rests on multiple methods. Participants of the Winter Institute will be introduced to different research practices, including theoretical modeling of heuristics (i.e., computational models of heuristics that specify the precise steps of information gathering and processing), the instantiation of those heuristics in terms of computer simulations, mathematical analysis of the fit between heuristics and ecological structures, and experimental tests of how well the heuristics model real-world decision making.

The Winter Institute aims to provide a stimulating forum for an interdisciplinary investigation of contemporary debate surrounding the role of bounded rationality in human decision making.