View Paper (Pdf)
Total Page:16
File Type:pdf, Size:1020Kb
Load more
Recommended publications
-
When Does Behavioural Economics Really Matter?
When does behavioural economics really matter? Ian McAuley, University of Canberra and Centre for Policy Development (www.cpd.org.au) Paper to accompany presentation to Behavioural Economics stream at Australian Economic Forum, August 2010. Summary Behavioural economics integrates the formal study of psychology, including social psychology, into economics. Its empirical base helps policy makers in understanding how economic actors behave in response to incentives in market transactions and in response to policy interventions. This paper commences with a short description of how behavioural economics fits into the general discipline of economics. The next section outlines the development of behavioural economics, including its development from considerations of individual psychology into the fields of neurology, social psychology and anthropology. It covers developments in general terms; there are excellent and by now well-known detailed descriptions of the specific findings of behavioural economics. The final section examines seven contemporary public policy issues with suggestions on how behavioural economics may help develop sound policy. In some cases Australian policy advisers are already using the findings of behavioural economics to advantage. It matters most of the time In public policy there is nothing novel about behavioural economics, but for a long time it has tended to be ignored in formal texts. Like Molière’s Monsieur Jourdain who was surprised to find he had been speaking prose all his life, economists have long been guided by implicit knowledge of behavioural economics, particularly in macroeconomics. Keynes, for example, understood perfectly the “money illusion” – people’s tendency to think of money in nominal rather than real terms – in his solution to unemployment. -
Property in Housing Lee Anne Fennell
University of Chicago Law School Chicago Unbound Kreisman Working Paper Series in Housing Law and Working Papers Policy 2013 Property in Housing Lee Anne Fennell Follow this and additional works at: https://chicagounbound.uchicago.edu/ housing_law_and_policy Part of the Law Commons Chicago Unbound includes both works in progress and final versions of articles. Please be aware that a more recent version of this article may be available on Chicago Unbound, SSRN or elsewhere. Recommended Citation Lee Anne Fennell, "Property in Housing" (Kreisman Working Papers Series in Housing Law and Policy No. 13, 2013). This Working Paper is brought to you for free and open access by the Working Papers at Chicago Unbound. It has been accepted for inclusion in Kreisman Working Paper Series in Housing Law and Policy by an authorized administrator of Chicago Unbound. For more information, please contact [email protected]. CHICAGO PUBLIC LAW AND LEGAL THEORY WORKING PAPER NO. 426 KREISMAN WORKING PAPER ON HOUSING LAW AND POLICY NO. 13 PROPERTY IN HOUSING Lee Anne Fennell THE LAW SCHOOL THE UNIVERSITY OF CHICAGO April 2013 This paper can be downloaded without charge at the Public Law and Legal Theory Working Paper Series: http://www.law.uchicago.edu/academics/publiclaw/index.html and The Social Science Research Network Electronic Paper Collection. Academia Sinica Law Journal No. 12 March 2013 Property in Housing Lee Anne Fennell Suggested citation format: Footnote: Lee Anne Fennell, Property in Housing , 12 ACADEMIA SINICA L.J. 31, 31-78 (2013). Reference : Fennell, Lee Anne. 2013. Property in Housing. Academia Sinica Law Journal 12:31-78. -
Mindful Economics: the Production, Consumption, and Value of Beliefs
Journal of Economic Perspectives—Volume 30, Number 3—Summer 2016—Pages 141–164 Mindful Economics: The Production, Consumption, and Value of Beliefs Roland Bénabou and Jean Tirole n the economic models of old, agents had backward-looking expectations, arising from simple extrapolation or error-correction rules. Then came the I rational-expectations revolution in macroeconomics, and in microeconomics the spread and increasing refinements of modern game theory. Agents were now highly sophisticated information processors, who could not be systematically fooled. This approach reigned for several decades until the pendulum swung back with the rise of behavioral economics and its emphasis on “heuristics and biases” (as in Tversky and Kahneman 1974). Overconfidence, confirmation bias, distorted prob- ability weights, and a host of other “wired-in” cognitive mistakes are now common assumptions in many areas of economics. Over the last decade or so, the pendulum has started to swing again toward some form of adaptiveness, or at least implicit purposefulness, in human cognition. In this paper, we provide a perspective into the main ideas and findings emerging from the growing literature on motivated beliefs and reasoning. This perspec- tive emphasizes that beliefs often fulfill important psychological and functional needs of the individual. Economically relevant examples include confidence in ones’ abilities, moral self-esteem, hope and anxiety reduction, social identity, polit- ical ideology and religious faith. People thus hold certain beliefs in part because ■ Roland Bénabou is Theodore A. Wells ‘29 Professor of Economics and Public Affairs, Princ- eton University, Princeton, New Jersey and a Senior Fellow, Canadian Institute for Advanced Research, Toronto, Canada. -
Hyperbolic Discounting and Pension Design the Case of Germany
Stefan Zimmermann Hyperbolic Discounting and Pension Design The Case of Germany MSc Thesis 2010 Hyperbolic Discounting and Pension Design: The Case of Germany Master Thesis to achieve the degree Master of Science (M.Sc.) in Economics at the Faculty of Economics and Management at Tilburg University submitted by Stefan Zimmermann ANR: 661647 Words: 9509 Supervisor: Johannes Binswanger, PhD Second Reader: Nathanaël Vellekoop, Drs Berlin, August 17th, 2010 Abstract Both data and people’s self-reports reveal that there is a undersaving problem. Be- havioral economics seeks to explain this phenomenon with the concept of hyperbolic discounting. In essence, short-term actions are inconsistent with long-term goals. This is applied to the German pension system in this text. The results lean on a theoretical life-cycle model that is simulated in Matlab, whereby the parameters are calibrated to match the German economy. It is shown that myopic preferences lead to deviations from outcomes that would be desirable from a normative point of view. The savings rate is considerably lower for hyperbolic discounters, compared to standard discounters. Moreover, a fully funded pension scheme seems preferable to the current Pay-As-You-Go system. Contents List of Tables4 List of Figures4 1 Introduction5 2 Survey6 2.1 Facts about the German Pension System................7 2.2 Behavioral Aspects............................7 3 The Life-Cycle Model - LCM 10 3.1 The Life-Cycle Model without a Pension Scheme............ 11 3.1.1 Behavior of Private Agents.................... 11 3.2 The Life-Cycle Model with a Pension Scheme............. 16 3.2.1 Pay-As-You-Go Pension - PAYG............... -
Memory, Attention, and Choice
Memory, Attention, and Choice Pedro Bordalo, Nicola Gennaioli, Andrei Shleifer1 Revised May 7, 2019 (original version 2015) Abstract. Building on the textbook description of associative memory (Kahana 2012), we present a model of choice in which options cue recall of similar past experiences. Recall shapes valuation and choice in two ways. First, recalled experiences form a norm, which serves as an initial anchor for valuation. Second, salient quality and price surprises relative to the norm lead to large adjustments in valuation. The model provides a unified account of many well documented choice puzzles including experience effects, projection and attribution biases, background contrast effects, and context- dependent willingness to pay. The results suggest that well-established psychological processes – memory-based norms and attention to surprising features – are key to understanding decision-making. 1 The authors are from University of Oxford, Universita Bocconi, and Harvard University, respectively. We are grateful to Dan Benjamin, Paulo Costa, Ben Enke, Matt Gentzkow, Sam Gershman, Thomas Graeber, Michael Kahana, Spencer Kwon, George Loewenstein, Sendhil Mullainathan, Josh Schwartzstein, Jesse Shapiro, Jann Spiess, Linh To, and Pierre- Luc Vautrey for valuable comments. Shleifer thanks the Sloan Foundation and the Pershing Square Venture Fund for Research on the Foundations of Human Behavior for financial support. 1 1. Introduction Memory appears to play a central role in even the simplest choices. Consider a thirsty traveler thinking of whether to look for a shop to buy a bottle of water at the airport. He automatically retrieves from memory similar past experiences, including the pleasure of quenching his thirst and the prices he paid before, and decides based on these recollections. -
Beyond Greed and Fear Financial Management Association Survey and Synthesis Series
Beyond Greed and Fear Financial Management Association Survey and Synthesis Series The Search for Value: Measuring the Company's Cost of Capital Michael C. Ehrhardt Managing Pension Plans: A Comprehensive Guide to Improving Plan Performance Dennis E. Logue and Jack S. Rader Efficient Asset Management: A Practical Guide to Stock Portfolio Optimization and Asset Allocation Richard O. Michaud Real Options: Managing Strategic Investment in an Uncertain World Martha Amram and Nalin Kulatilaka Beyond Greed and Fear: Understanding Behavioral Finance and the Psychology of Investing Hersh Shefrin Dividend Policy: Its Impact on Form Value Ronald C. Lease, Kose John, Avner Kalay, Uri Loewenstein, and Oded H. Sarig Value Based Management: The Corporate Response to Shareholder Revolution John D. Martin and J. William Petty Debt Management: A Practitioner's Guide John D. Finnerty and Douglas R. Emery Real Estate Investment Trusts: Structure, Performance, and Investment Opportunities Su Han Chan, John Erickson, and Ko Wang Trading and Exchanges: Market Microstructure for Practitioners Larry Harris Beyond Greed and Fear Understanding Behavioral Finance and the Psychology of Investing Hersh Shefrin 2002 198 Madison Avenue, New York, New York 10016 Oxford University Press is a department of the University of Oxford It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide in Oxford New York Auckland Bangkok Buenos Aires Cape Town Chennai Dar es Salaam Delhi Hong Kong Istanbul Karachi Kolkata Kuala Lumpur Madrid Melbourne Mexico City Mumbai Nairobi São Paulo Shanghai Taipei Tokyo Toronto Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries Copyright © 2002 by Oxford University Press, Inc. -
An Economic Sociological Look at Economics
An Economic Sociologial Look at Economics 5 An Economic Sociological Look at Economics By Patrik Aspers, Sebastian Kohl, Jesper an impact on essentially all strands of economics over the Roine, and Philipp Wichardt 1 past decades. The fact that game theory is not (only) a subfield but a basis for studying strategic interaction in Introduction general – where ‘strategic’ does not always imply full ra- tionality – has made it an integral part of most subfields in New economic sociology can be viewed as an answer to economics. This does not mean that all fields explicitly use economic imperialism (Beckert 2007:6). In the early phase game theory, but that there is a different appreciation of of new economic sociology, it was common to compare or the importance of the effects (strategically, socially or oth- debate the difference between economics and sociology. erwise) that actors have on one another in most fields of The first edition of the Handbook of Economic Sociology economics and this, together with other developments, (Smelser/Swedberg 1994:4) included a table which com- has brought economics closer to economic sociology. pared “economic sociology” and “main-stream econom- ics,” which is not to be found in the second edition (Smel- Another point, which is often missed, is the impact of the ser/Swedberg 2005). Though the deletion of this table was increase in computational power that the introduction of due to limited space, one can also see it as an indication of computers has had on everyday economic research. The a gradual shift within economic sociology over this pe- ease by which very large data materials can be analyzed riod.2 has definitely shifted mainstream economics away from “pure theory” toward testing of theories with more of a That economic sociology, as economic anthropology, was premium being placed on unique data sets, often collected defined in relation to economics is perhaps natural since by the analyst. -
Edited by Alain Samson with a Foreword by George Loewenstein
Edited by Alain Samson With a Foreword by George Loewenstein and Rory Sutherland The Behavioral Economics Guide 2014 1st Edition Author information: Alain Samson (Editor) George Loewenstein (Foreword) Rory Sutherland (Foreword) Phil Barden, Francesco Bogliacino, Leigh Caldwell, Cristiano Codagnone, Tom Ewing, Gerhard Fehr, George Gaskell,, Asit Gupta, Elina Halonen, Juliet Hodges, Moritz Jäger, Alain Kamm, John Kearon, Francisco Lupiáñez-Villanueva, Henry Stott, Giuseppe A. Veltri (Contributing authors) Design and layout by Elina Halonen. Cover design adapted from Tilly Patsalis. Proofing by Mark Jones and Leigh Caldwell. Copyright © by the authors All Rights Reserved Requests for permission to reproduce materials from this work should be sent to [email protected] or directly to contributing authors. Suggested citation: Samson, A. (Ed.)(2014). The Behavioral Economics Guide 2014 (with a foreword by George Loewenstein and Rory Sutherland) (1st ed.). Retrieved from http://www.behavioraleconomics.com. Suggested citation for individual sections/authors: [Author(s)] (2014). [Chapter/Section Title]. In A. Samson (Ed.), The Behavioral Economics Guide 2014 (with a foreword by George Loewenstein and Rory Sutherland) (1st ed.)(pp. nn-nn). Retrieved from http://www.behavioraleconomics.com. II Behavioral Economics Guide – 2014 With Contributions By: III Behavioral Economics Guide – 2014 Contents FOREWORD George Loewenstein and Rory Sutherland: An Exchange ............................................................................................................................... -
14.160: Behavioral Economics Syllabus – Fall 2017 Thurs 4:00 to 7:00 Pm E51-361
14.160: Behavioral Economics Syllabus – Fall 2017 Thurs 4:00 to 7:00 pm E51-361 Instructors: Frank Schilbach, E52-560 Email: [email protected] Office hours: Sign up at http://economics.mit.edu/faculty/fschilb/office Gautam Rao, E52-540 Email: [email protected] Office hours: By appointment Graduate Teaching Assistant: Chishio Furukawa Email: [email protected] Recitation: Fri 10:30-11:30am, E52-324 Office hours: TBA Course overview: This class covers recent topics in behavioral economics, with an emphasis on empirical applications and tests. Topics include deviations from the standard neoclassical model in terms of (i) preferences (time and risk preferences, reference dependence, and social preferences), (ii) beliefs and learning (overconfidence, projection bias, and attribution bias), and (iii) decision-making (cognition, attention, framing, and persuasion), as well as (iv) market reactions to such deviations. Applications will cover a wide range of fields, including labor and public economics, industrial organization, health economics, finance, and development economics. The main course objectives are as follows: 1) Obtain exposure to the frontier of empirical research in behavioral economics 2) Learn how to critically assess a rapidly evolving literature and how to develop novel ideas that contribute to it 3) Learn how to test (behavioral) economic theory using field experiments and non- experimental data 4) Develop and present a research proposal, as well as give feedback to others The course is designed for first- and second-year PhD students in economics. It is meant to help launch students into conducting empirical research in behavioral economics, or to incorporate behavioral economics into their research in other fields. -
Behavioral Economics in Context Applications for Development, Inequality & Discrimination, Finance, and Environment
Behavioral Economics In Context Applications for Development, Inequality & Discrimination, Finance, and Environment By Anastasia C. Wilson An ECI Teaching Module on Social and Environmental Issues in Economics Global Development Policy Center Boston University 53 Bay State Road Boston, MA 02155 bu.edu/gdp Economics in Context Initiative, Global Development Policy Center, Boston University, 2020. Permission is hereby granted for instructors to copy this module for instructional purposes. Suggested citation: Wilson, Anastasia C. (2020) “Behavioral Economics In Context: Applications for Development, Inequality & Discrimination, Finance, and Environment.” An ECI Teaching Module on Social and Economic Issues, Economics in Context Initiative, Global Development Policy Center, Boston University, 2020. Students may also download the module directly from: http://www.bu.edu/eci/education-materials/teaching-modules/ Comments and feedback from course use are welcomed: Economics in Context Initiative Global Development Policy Center Boston University 53 Bay State Road Boston, MA 02215 http://www.bu.edu/eci/ Email: [email protected] NOTE – terms denoted in bold face are defined in the KEY TERMS AND CONCEPTS section at the end of the module. BEHAVIORAL ECONOMICS IN CONTEXT TABLE OF CONTENTS 1. INTRODUCTION ........................................................................................................ 4 1.1 The History and Development of Behavioral Economics .......................................................... 5 1.2 Behavioral Economics Toolkit: -
Behavioral Economics: Past, Present, Future
Behavioral Economics: Past, Present, Future Colin F. Camerer Division of Humanities and Social Sciences 228-77 Caltech Pasadena, CA 91125 [email protected] George Loewenstein Department of Social and Decision Sciences Carnegie-Mellon University Pittsburgh PA 15213 [email protected] draft: 10/25/02 Behavioral economics increases the explanatory power of economics by providing it with more realistic psychological foundations. This book consists of representative recent articles in behavioral economics.1 This chapter is intended to provide an introduction to the approach and methods of behavioral economics, and to some of its major findings, applications, and promising new directions. It also seeks to fill some unavoidable gaps in the chapters’ coverage of topics. What Behavioral Economics Tries To Do At the core of behavioral economics is the conviction that increasing the realism of the psychological underpinnings of economic analysis will improve economics on its own terms -- generating theoretical insights, making better predictions of field phenomena, and suggesting better policy. This conviction does not imply a wholesale rejection of the neoclassical approach to economics based on utility maximization, equilibrium, and efficiency. The neoclassical approach is useful because it provides economists with a theoretical framework that can be applied to almost any form of economic (and even non-economic) behavior, and it makes 1Since it is a book of advances, many of the seminal articles which influenced those collected here are not included, but are noted below and are widely reprinted elsewhere. 1 refutable predictions. Many of these predictions are tested in the chapters of this book, and rejections of those predictions suggest new theories. -
Building on Kahneman's Insights in the Development of Behavioral
7_SHEFRIN.DOCX 5/15/2013 12:46 PM Building On Kahneman’s Insights in the Development of Behavioral Finance Hersh Shefrin* INTRODUCTION First, I want to thank Michael Kaufman for inviting me to be part of this esteemed panel. And second, I would like to thank Danny Kahneman for his wisdom, insights, generosity, kindness, and much more. On a personal dimension, I first met Danny in 1978 when he and Amos Tversky were visiting Stanford University’s Center for Advanced Study in the Behavioral Sciences. At the time I was working with Dick Thaler, who was also visiting Stanford, on developing a System 1/System 2 model of economic choice.1 It should come as no surprise that what I learned from Danny and Amos in those first interactions, and subsequently over the years, dramatically influenced my own research and indeed the entire field of economics.2 * Mario L. Belotti Professor of Finance, Santa Clara University. This Article stems from remarks that I gave in response to Daniel Kahneman’s keynote address at Loyola University Chicago School of Law’s Second Annual Investor Protection Conference, “Behavioral Economics and Investor Protection.” 1. See generally DANIEL KAHNEMAN, THINKING, FAST AND SLOW 19–109 (2011) (describing System 1 and System 2 decision making processes). Professor Adam Zimmerman briefly summarizes the two Systems as follows: Cognitive psychologists and neurologists have identified two types of decisionmaking processes: intuitive and deliberative. Intuitive decisionmaking processes, which are sometimes called System I processes, are intuitive, automatic, and quick, encompassing the types of instantaneous judgments that permit a person to size up a situation.