Efficiently irrational: deciphering the riddle of human choice
A central question for decision-making scholars is: why are humans and animals so predictably inconsistent in their choices? In the language of economics, why are they irrational?
Data suggest that this reflects an optimal trade-off between the precision with which the brain represents the values of choices and the biological costs of that precision. Increasing representational precision may improve choice consistency, but the metabolic cost of increased precision is significant.
Given the cost of precision, the brain might use efficient value-encoding mechanisms that maximize informational content. Mathematical analyses suggest that a mechanism called divisive normalization approximates maximal efficiency per action potential in decision systems.
Behavioral studies appear to validate this claim. Inconsistencies produced by decision-makers can be well modeled as the byproduct of efficient divisive normalization mechanisms that maximize information while minimizing metabolic costs.