Ecological rationality and the maximum entropy heuristic

This article analyses the notion of Ecological Rationality in the context of decision making under uncertainty. It suggests that constructivist approaches, namely constructivist rationality, are not adapted to solve problems faced in the real ecological environments, which imply large world problems and intractability. The complexity of the decision problems imply search and information costs and thus heuristics, as exhibited by human decision makers might be optimal. It is suggested that inverse S-shaped probability weighting as exhibited by most decision makers might be optimal when facing real world environments. It is shown that the maximum entropy approach can be used to model such kind of behaviour as an approximation to the inverse S-shaped probability weighting. It is argued that this approach is ecologically rational and that such a heuristic can be used to treat financial and econometric decision problems and be a calibrated to decision-makers ambiguity aversion.