The premise of this chapter is that it is useful to know why problems arise in everyday life before trying to understand how people set about trying to solve problems and thereby gain control and make their lives more predictable. We examine first how finite information processing and imaginative capacities limit how well existing problems can be analyzed, leading to further surprises for decision-makers. Next, we explore problems of obtaining knowledge about the behavior of others (that results in coordination failures) and of limited time to search and the problems posed by experience goods and credence goods. We then take a complex systems view of why some kinds of environments and products are prone to generate problems. This analysis emphasizes the significance of the connective structural architecture of systems, how linkages can cause problems to compound, the advantages of modular systems and the problems caused by absent prerequisites or corequisite elements for system functioning (in contrast to the presumption of substitution in orthodox economics). In light of this, there is a consideration of what it means to “get one’s priorities wrong” and the cognitive and systems challenges of poverty.

Interactions in social roles typically involve the exchange of information. Those exchanges create coordination problems. A coordination problem is a situation in which each person wants to participate in a group action but only if others also participate. The relevant group action in social-role-mediated exchanges of information puts conditions on the flow and use of information. It is easy to solve such coordination problems when it is common knowledge that parties will all conform to the conditions. People’s presentation of themselves in social roles create such common knowledge that they will conform to standards of thought and behavior associated with those roles. We offer six examples of how common knowledge solves the coordination problems that typify social role interaction.