Review of Behavioral Economics > Vol 8 > Issue 1

Counterfactual Thinking and Attribute Substitution in Economic Behavior

John Davis, Marquette University, USA and University of Amsterdam, The Netherlands, , Theodore Koutsobinas, University of Patras, Greece
Suggested Citation
John Davis and Theodore Koutsobinas (2021), "Counterfactual Thinking and Attribute Substitution in Economic Behavior", Review of Behavioral Economics: Vol. 8: No. 1, pp 1-23.

Publication Date: 14 Apr 2021
© 2021 J. Davis and T. Koutsobinas
Behavioral Economics,  Bounded rationality,  Biases,  Behavioral Decision Making,  Individual Decision Making
JEL Codes: A12A13B41D90
Counterfactual thinkingattribute substitutionKnightian uncertaintyrational imaginationeconomic behaviorHomo sapiens


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In this article:
1. Introduction: The Relationship Between Counterfactual Thinking and Attribute Substitution 
2. CFT as “Rational Imagination” 
3. Ways in Which People Engage in CFT 
4. AS and CFT: “Prefactuals” and Counterexamples 
5. The Relevance of CFT to Behavioral Economic Explanations of Economic Behavior 
6. A Socially Embedded Homo sapiens 
7. Concluding Remarks 


This paper discusses how counterfactual thinking can be incorporated into behavioral economics by relating it to a type of attribution substitution involved in choices people make in conditions of Knightian uncertainty. It draws on Byrne’s “rational imagination” account of counterfactual thinking, evidence from cognitive science regarding the forms it takes, and identifies types of attribution substitution specific to economic behavior. This approach, which elucidates the reflective stage of causal reasoning, is relevant for the explanation of hypothetical causal rules suitable for diverse tasks such as planning, expectations and mental simulations and for behavioural change interventions, which take into account people’s social and institutional embeddedness. The paper closes with a discussion of how this implies a specifically social Homo sapiens individual conception.