This chapter examines alternative view of how people choose once they have construed what their options offer. It includes critical assessments of one-size-fits-all models from psychology (the Fishbein-Ajzen model of behavioral intentions, which takes account of social pressure, and Prospect Theory, which Thaler popularized in economics) that entail weighing up strong and weak points to arrive at an overall value for each option (“compensatory” choices). However, it suggests these are better seen within a pluralistic, context-based view of choice in which, in some situations, choices are made in intolerant ways based on a checklist or list hierarchically ranked requirements (“non-compensatory” choice) or are made via much simpler decision rules. These different ways of choosing are considered in relation to Chapter 7’s analysis of value systems and that framework is used to analyze how dilemmas are resolved. Differences between choice methods in the role they assign to prices are considered, along with the psychology of pricing and how the use of decision rules reduces challenge of predicting buyer behavior. Case studies are used to show how contexts affect how choices are made.

This chapter questions whether evolution would have resulted in people inheriting the kinds of preference systems that economists normally assume, whose generic form offers little to explain responsiveness to price changes or what people mean if they say they “don’t like” something or “wouldn’t change for the world.” The chapter fills these gaps by exploring the relationship between cognitive rules and operating systems, emotions and values, via a novel extension of Kelly’s personal construct psychology, means-end-chain analysis, Hayek’s theory of the mind and the notion of brain plasticity, with the resulting synthesis providing foundations of the core modern behavioral notion of loss aversion as well as showing how people can change their minds through time even though they may have trouble accepting some new situations. This analysis centers on the complex cognitive architecture of the systems of thinking and neural networks that people build to make sense of the world, where change in one area may require collateral change elsewhere and the mind favors options that limit the amount of cognitive restructuring necessary to prevent reductions in its ability to make sense of the world.

Problems and potential solutions do not speak to themselves: people recognize them and size them up in an active process of cognition. The open-ended nature of problem-solving activities requires that our minds can avoid being paralyzed by several infinite regress problems that conventional economics overlooks. This chapter explores how people allocate their attention between implementing solutions to problems and scanning for new problems and how they judge whether incoming information signifies a problem. It draws parallels with how scientists and object recognition technologies operate via systems of rules, and it presents an original synthesis of Hayek’s theory of the mind (a forerunner to modern theories of brain plasticity), Kelly’s personal construct psychology, Koestler’s work on creativity, Simon’s theory of satisficing and the dual-system view of thinking, and of the role of associative memory processes suggested by Kahneman. The analysis explains how “what comes to mind” is determined as we try to find matches between incoming stimuli and templates from our memories and how we resolve cognitive dissonance between what we expect and what initially seems to be going on.