Simon Says...
The term for accepting a "good enough" option rather than searching for the best possible option.
What is satisficing?
The fast, automatic, unconscious thinking system that handles about 96% of our mental processing.
What is system 1?
The bias where the first number you encounter pulls your estimate toward it, even when that number is completely irrelevant.
What is anchoring?
The bias where we judge how common something is based on how easily examples come to mind — making vivid, dramatic events feel more frequent than they actually are.
What is the availability heuristic?
Kahneman's principle that the pain of losing $100 feels roughly twice as intense as the pleasure of gaining $100.
What is loss aversion?
Simon argued that rational decision making is limited by three constraints: incomplete information, limited cognitive processing power, and this third constraint.
What is limited time?
The slow, deliberate, effortful thinking system that could catch System 1's errors but usually doesn't because it's this.
What is lazy?
In Kahneman and Tversky's famous experiment, a rigged version of this game that landed on either 10 or 65 changed people's estimates of African UN membership by 20 points.
What is a wheel of fortune? (or roulette wheel)
This Swedish doctor and statistician showed that Nobel laureates and World Bank executives scored worse than random chance on basic facts about global health and poverty.
Who is Hans Rosling?
Whether a medical procedure is described as having a "90% survival rate" or a "10% mortality rate" changes people's decisions. This is an example of what effect?
What is the framing effect?
Simon contrasted satisficing with this ideal model where a decision maker evaluates every possible option and selects the one that maximizes value.
What is optimizing (or maximizing)?
Kahneman's term for the mental shortcuts that System 1 uses — fast and usually adequate, but they produce predictable errors.
What are heuristics?
When professional real estate agents were shown houses with different listing prices, this percentage of them denied that the listing price influenced their value estimates — even though it clearly did.
What is 81%?
In the Linda problem, about this percentage of people incorrectly say "feminist bank teller" is more probable than "bank teller."
What is 85%?
The person who designs how choices are presented — arranging food in a cafeteria, setting a retirement savings default, or structuring options on a form.
What is a choice architect?
The two-word term for Simon's central insight — that humans intend to be rational but are systematically constrained by information, cognition, and time.
What is bounded rationality?
A systematic, predictable, directional error in judgment — not a random mistake, but a pattern that affects everyone the same way under the same conditions.
What is a cognitive bias?
Judges who rolled loaded dice landing on 9 gave longer sentences than judges who rolled 3. This demonstrates that anchoring affects even trained professionals in this kind of setting.
What is a courtroom? (or sentencing / the justice system)
The logical error of judging that two things happening together (A AND B) is more probable than just one of them (A alone) — demonstrated by the Linda problem.
What is the conjunction fallacy?
Thaler and Sunstein's term for designing choice environments that steer people toward better outcomes while preserving their freedom to choose otherwise.
What is libertarian paternalism?
Simon won the Nobel Prize in Economics in this year — making him the first of six Nobel laureates studied in this course.
What is 1978?
The core mechanism underlying all of System 1's errors: when faced with a hard question, System 1 answers an easier question instead, without realizing the switch happened.
What is substitution?
The two mechanisms by which anchoring operates: insufficient adjustment from the starting number, and this second mechanism where the anchor activates related concepts in memory.
What is priming? (or anchoring as priming / selective accessibility)
When a person described as "meticulous, detail-oriented, and organized" is assumed to be a librarian rather than a farmer — even though farmers outnumber librarians 20 to 1 — this is an example of ignoring what statistical concept?
What are base rates? (or base rate neglect)
Hayek argued that no central planner can possess all the knowledge needed to make good decisions because the most important knowledge is local, temporary, tacit, and this fourth characteristic.
What is dispersed? (or scattered / distributed)