7/4 happens to be approximately 30 cents away from 16/9. It's hard to tell what's "simple" when looking at fractions, but 16/9 is indeed simple: divide by 3 twice and adjust the octave. If we assume octave equivalence, that means one step in the "7" direction is perceived as more complex than 2 steps in the "3" direction, so the second interpretation wins, but is perceived as out-of-tune.

That said, we're trying to isolate things that are typically not isolated. If you get to 7/4 by following the harmonic series, it will sound in-tune. If you get to 16/9 by playing and applying 4/3 twice, then that will sound in tune. Unsurprisingly the second option is more common in music.