A second requirement of rationality is an element of internal logic or consistency. The judgement or action is appropriate given the beliefs about the world which give rise to it. This proposition requires care in interpretation. It may be difficult to distinguish errors in reasoning from mistakes in belief.

Three main propositions run through this book. First, the world of economics, business and finance is ‘non-stationary’ – it is not governed by unchanging scientific laws. Most important challenges in these worlds are unique events, so intelligent responses are inevitably judgements which reflect an interpretation of a particular situation.

an injunction to maximise shareholder value, or social welfare, or household utility, is not a coherent guide to action. Business people, policy-makers and families could not even imagine having the information needed to determine the actions that would maximise shareholder value, social welfare or household utility. Or to know whether they had

The appeal of probability theory is understandable. But we suspect the reason that such mathematics was, as we shall see, not developed until the seventeenth century is that few real-world problems can properly be represented in this way.

We cannot act in anticipation of every unlikely possibility. So we select the unlikely events to monitor.

At Harvard in the early 1960s, Daniel Ellsberg observed what he called ‘ambiguity aversion’ – people might prefer certainty to maximising subjective expected utility.

Artificial intelligence offers the prospect of ever faster ways to solve complex puzzles, but it will not resolve mysteries.

uncertainty remains because every complex structure is necessarily idiosyncratic.

With experienced decision-makers, the focus is on the way they assess the situation and judge it familiar, not on comparing options. Courses of action can be quickly evaluated by mentioning how they will be carried out, not by formal analysis and comparison. Decision-makers usually look for the first workable option they can find, not the best