We know this. We don’t always choose the option that’s best for us. We are not compensatory decision-makers, we are not consistent decision-makers and we surely are not optimal decision-makers. But how are we?

Information processing and energy consumption

We aren’t compensatory decision-makers, we aren’t consistent decision-makers and we surely aren’t optimal decision-makers. We don’t always choose the option that’s best for us. We are however surprisingly good at taking complex situations and simplifying them it is something manageable. Taking into account our limitations or bounds our decisions can sometimes look very rational.

So, let me begin by introducing the first major contributor to bounded rationality, our own limited computational abilities. To understand how we are limited will need to take a quick digression in the neurobiology. Let’s take a hypothetical average adult male in the United States. This man is about 5′ 10″ tall and weighs about 200 pounds. How much does his brain weigh?

This isn’t something that we often think about, how much of brain ways, so the answer might not be obvious or even intuitive. In an average adult male the brain weighs only about 3 to 4 pounds or a little less than 2% of the total body weight. 2%? That’s not much!  But that man’s brain uses up about 20% of his body’s energy supply from birth to death.

Day after day that 2% of his body requires 20% of all the calories he consumes and almost all of the human brain energy needs go to support information processing. Complex powerful brain is an extraordinarily expensive luxury metabolically speaking. What do I mean by expensive?

Our brains want to do as little computation as possible

Think about the primary challenges faced by your premodern ancestors: finding food, staying, warm avoiding predators. That 20% of the body’s energy represents 20% of all the food found over the course of the year. Keeping that percentage as small as possible meant fewer risky hunts, greater resilience to times of scarcity in fewer risks of daily life.

So in a very real sense, our brains want to do as little computation as possible while still making good decisions. I want to emphasize this point because there’s often misinformation. In popular books and news stories about the brain. Computational limitations are a feature, they are an advantage of our brains.

Even though the brain has extraordinary computational power with approximatively one hundred billion neurons and at least a thousand times that number of connections between her all that power isn’t enough to perceive everything, to remember everything and the way every cost and every benefit in an optimal fashion.

Simplification is always a good idea

Our brains aren’t designed the process everything, doing so would be much much too expensive so they simplify when the can. They preferentially focus on some information and throw away other information to keep energy costs as low as possible. Simplification is always a good idea.

If we take a complex problem and throw away the wrong information, say ignoring interest rates when deciding to refinance our home, then we will make very bad decisions. So the main challenge lies in knowing what information we should process and what we should ignore.

Our brains solve this challenge in an ingenious way they take advantage of the structure in the world around us. What do I mean by structure? Structure refers to the stable predictable properties of the world around us. Let me illustrate the two main ways in which our world is structured and how that structure encourages us to simplify complex situations.

Our brain take advantage of structure

Imagine that you’re walking alone down a well trodden path through a dense hardwood forest. You hear a noise of your left. You catch your breath and turn your head in the direction of the noise when you keep walking. Through the trees you see something large walking parallel to the path. It’s not more than 50 feet away, it’s a dear so you relax and watch as it disappears into the forest.

Now think for a moment. What information actually entered into your brain? That deer was 50 feet away and constantly passing behind tree after tree.

Even though you never had an uninterrupted view of the deer’s entire body your visual system automatically assumes that you see the same dear each time passes behind a tree. Now let’s continue walking down the force path.

As you walk you notice at the clouds above seem to be darkening, the wind picks up considerably in the air starts to feel slightly damp, then you see a flash of lightning in the distance and you brace yourself for what comes next: the sound of thunder.

Stability and predictability

In this example we can see the two main types of structure. First the world is stable you see one deer walking behind tree after tree because that’s the simplest explanation.
A deer doesn’t teleport from location to location like an animation on the computer screen.

You know it is still there even as it moves out a view behind a tree. This stability provides an important advantage, it helps us minimize the sort of processing we do. Close your eyes right now.

Now open them again every time you blink, which happens thousands of times each day, the world around you disappears and reappears but you don’t notice it. That’s because your brain assumes that the world is the same before and after the blink. It doesn’t need to remember everything.

Second changes in the world are predictable. When we get new information that information helps us predict what is likely to happen next. We see lightning, we predict thunder.

This prediction tends to be accurate because our natural physical laws by which lightning causes thunder we have enough experience to have learned that causal relationship. I am emphasizing this idea of structure because it will help when thinking about real-world decision-making.

Our processes of decision-making just like processes of perception or memory assume that we make decisions in a structured world.