Problem solving

How do humans solve complex problems?

What does intellectual discovery mean? For most economists, it concerns gathering pieces of information and aggregating them so a clear picture emerges. We disagree with this image of intellectual discovery. Instead, we are closer to Umberto Eco, who wrote (Foreword to Nanni Balestrini’s Tristano, English version 2014): “The creative genius is capable of combining – with greater rapidity, more critical sense of what should be discarded, greater intuition in the choice of what should be saved – the same material that had been made available to the failed genius.” As such, intellectual discovery is akin to solving knapsack problems. Previously, we studied to what extent prize (read: patent) systems provide the right incentives for humans to solve knapsack problems or whether a markets system would not do a better job. The idea was that prize systems require one to be confident to have a shot at being the best genius (the one winning the prize), while in a market system, one merely needs to know some of the items that need to be discarded, and some of the items to be included. In an article in Science, we showed how markets indeed do at least as well, and in some metrics (more people get closer to the correct solution) do better.

We are back to studying intellectual discovery. It sounds far removed from risk and uncertainty, but we conjecture that studying the strategies humans use for intellectual discovery may reveal more general properties of human cognition.

Tang S, Huang S, Bowman E, Yadav N, Murawski C, Bossaerts P. The Efficient Markets Hypothesis does not hold when securities valuation is computationally hard. SSRN, abstract ID 2925071 (posted on 28/02/2017). [PDF]
Murawski C, Bossaerts P (2016). How humans solve complex problems: The case of the knapsack problem. Scientific Reports, 6:34851. [PDF]
Meloso D, Copic J, Bossaerts P (2009). Promoting intellectual discovery: patents versus markets. Science 323(5919):1335-1339. [PDF]