2 Cognitive Load Increases Risk Aversion 5 2.1 Introduction
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Neuroeconomics: the Neurobiology of Decision-Making
Neuroeconomics: The Neurobiology of Decision-Making Ifat Levy Section of Comparative Medicine Department of Neurobiology Interdepartmental Neuroscience Program Yale School of Medicine Harnessing eHealth and Behavioral Economics for HIV Prevention and Treatment April 2012 Overview • Introduction to neuroeconomics • Decision under uncertainty – Brain and behavior – Adolescent behavior – Medical decisions Overview • Introduction to neuroeconomics • Decision under uncertainty – Brain and behavior – Adolescent behavior – Medical decisions Neuroeconomics NeuroscienceNeuronal MentalPsychology states “asEconomics if” models architecture Abstraction Neuroeconomics Behavioral Economics Neuroscience Psychology Economics Abstraction Neuroscience functional MRI VISUAL STIMULUS functional MRI: Blood Oxygenation Level Dependent signals Neural Changes in oxygen Change in activity consumption, blood flow concentration of and blood volume deoxyhemoglobin Change in Signal from each measured point in space at signal each point in time t = 1 t = 2 t = 3 t = 4 t = 5 t = 6 dorsal anterior posterior lateral ventral dorsal anterior medial posterior ventral Anterior The cortex Cingulate Cortex (ACC) Medial Prefrontal Cortex (MPFC) Posterior Cingulate Cortex (PCC) Ventromedial Prefrontal Cortex (vMPFC) Orbitofrontal Cortex (OFC) Sub-cortical structures fMRI signal • Spatial resolution: ~3x3x3mm3 Low • Temporal resolution: ~1-2s Low • Number of voxels: ~150,000 High • Typical signal change: 0.2%-2% Low • Typical noise: more than the signal… High But… • Intact human -
Volatility As Link Between Risk and Memory in Economics, Econometrics and Neuroeconomics: an Application for the Bolivian Inflation Rate 1938 - 2012
Volatility as link between risk and memory in Economics, Econometrics and Neuroeconomics: an application for the Bolivian Inflation Rate 1938 - 2012 María Edith Chacón B. [email protected] Teacher and researcher CIDES – UMSA. La Paz, Bolivia. Ernesto Sheriff B. [email protected] Teacher and researcher CIDES – UMSA and UPB. La Paz, Bolivia. Experimental and Behavioral Economics: Other Neuroeconomics Econometrics: Time Series ABSTRACT This paper provides an indicator that measures memory as a stock. Memory affects economic decisions thus the memory indicator is useful to help in applied work, it was built according to the state of the art in Psychology and Neuroeconomics and it is presented as a time series; it is a recursive one and it is represented by an accumulated measure of the volatility. Many theories of risk have used volatility indicators to represent risk in the applied work. Risk valuation is associated to volatility and it is very sensitive to periods in which it is measured; it is very sensitive too to the type of data associated to volatility. In this paper we found that the memory affects risk valuations and the link between them is a special kind of volatility i.e. accumulated volatility with an endogenous initialization period and compatible with many Psychological hypotheses. The developed indicator is compatible with the econometrics of stationary series, integrated series and fractional integrated series. These contributions help to improve the study of hysteresis in applied economics, to develop more consistent links between memory and risk in Neuroeconomics and, to obtain more confident time series models in econometrics using the new indicator. -
Economists As Worldly Philosophers
Economists as Worldly Philosophers Robert J. Shiller and Virginia M. Shiller Yale University Hitotsubashi University, March 11, 2014 Virginia M. Shiller • Married, 1976 • Ph.D. Clinical Psychology, University of Delaware 1984 • Intern, Cambridge Hospital, Harvard Medical School, 1980-1 • Clinical Instructor, Yale Child Study Center, since 2000 • Private practice with children, adults, and families Robert Heilbroner 1919-2005 • His book The Worldly Philosophers: Lives, Times and Ideas of the Great Economic Thinkers, 1953, sold four million copies • Adam Smith, Henry George, Karl Marx, John Stewart Mill, John Maynard Keynes, Thomas Malthus Example: Adam Smith • Theory of Moral Sentiments, 1759 • The Wealth of Nations, 1776 • Did not shrink from moral judgments, e. g., frugality Example: John Maynard Keynes • Economic Consequences of the Peace • The General Theory of Employment, Interest and Money, 1936 Economics as a Moral Science • The kinds of questions economists are asked to opine on are inherently moral • Moral calculus requires insights into the complexities of human behavior • A plea for behavioral economics and a broader focus for economic research Kenneth Boulding 1910-1993 • “We cannot escape the proposition that as science moves from pure knowledge toward control, that is, toward creating what it knows, what it creates becomes a problem of ethical choice, and will depend upon the common values of the societies in which the scientific culture is embedded, as well as of the scientific subculture.” Boulding on the Theory that People Maximize Utility of their Own Consumption • That there is neither malevolence nor benevolence anywhere in the system is demonstrably false. • “Anything less descriptive of the human condition could hardly be imagined.” (from American Economics Association Presidential Address, 1968). -
Heuristics and Biases the Psychology of Intuitive Judgment. In
P1: FYX/FYX P2: FYX/UKS QC: FCH/UKS T1: FCH CB419-Gilovich CB419-Gilovich-FM May 30, 2002 12:3 HEURISTICS AND BIASES The Psychology of Intuitive Judgment Edited by THOMAS GILOVICH Cornell University DALE GRIFFIN Stanford University DANIEL KAHNEMAN Princeton University iii P1: FYX/FYX P2: FYX/UKS QC: FCH/UKS T1: FCH CB419-Gilovich CB419-Gilovich-FM May 30, 2002 12:3 published by the press syndicate of the university of cambridge The Pitt Building, Trumpington Street, Cambridge, United Kingdom cambridge university press The Edinburgh Building, Cambridge CB2 2RU, UK 40 West 20th Street, New York, NY 10011-4211, USA 477 Williamstown, Port Melbourne, VIC 3207, Australia Ruiz de Alarcon´ 13, 28014, Madrid, Spain Dock House, The Waterfront, Cape Town 8001, South Africa http://www.cambridge.org C Cambridge University Press 2002 This book is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2002 Printed in the United States of America Typeface Palatino 9.75/12.5 pt. System LATEX2ε [TB] A catalog record for this book is available from the British Library. Library of Congress Cataloging in Publication data Heuristics and biases : the psychology of intuitive judgment / edited by Thomas Gilovich, Dale Griffin, Daniel Kahneman. p. cm. Includes bibliographical references and index. ISBN 0-521-79260-6 – ISBN 0-521-79679-2 (pbk.) 1. Judgment. 2. Reasoning (Psychology) 3. Critical thinking. I. Gilovich, Thomas. II. Griffin, Dale III. Kahneman, Daniel, 1934– BF447 .H48 2002 153.4 – dc21 2001037860 ISBN 0 521 79260 6 hardback ISBN 0 521 79679 2 paperback iv P1: FYX/FYX P2: FYX/UKS QC: FCH/UKS T1: FCH CB419-Gilovich CB419-Gilovich-FM May 30, 2002 12:3 Contents List of Contributors page xi Preface xv Introduction – Heuristics and Biases: Then and Now 1 Thomas Gilovich and Dale Griffin PART ONE. -
The Future of Economics in a Lakatos–Bourdieu Framework
Munich Personal RePEc Archive The Future of Economics in a Lakatos–Bourdieu Framework. Heise, Arne University of Hamburg 2014 Online at https://mpra.ub.uni-muenchen.de/80024/ MPRA Paper No. 80024, posted 05 Jul 2017 05:42 UTC The Future of Economics in a Lakatos-Bourdieu framework Prof. Arne Heise University of Hamburg Dep. of Socioeconomics VMP 9 D-20146 Hamburg [email protected] Abstract The global financial crisis has clearly been a matter of great consternation for the busi- ness-as-usual faction of mainstream economics. Will the World Financial Crisis turn out to be that ‘experimentum crucis’ which triggered a scientific revolution? In this paper, we seek to assess the likelihood of a paradigm shift towards heterodox approaches and a more pluralist setting in economics emerging from the academic establishment in the U.S. – that is, from the dominant center of knowledge production in the economic disci- pline. This will be done by building the analysis on a combined Lakatosian framework of ‘battle of research programmes’ and a Bourdieuian framework of ‘power struggle’ within the academic field and highlighting the likelihood of two main proponents of the mainstream elite to become the promulgator of change? Keywords: Paradigm, heterodox economics, scientific revolution JEL codes: A 11, E 11, E 12 1 1. The Keynesian Revolution and Pragmatic Pluralism – A Fruitful Competition Between Theories or a Crisis in Economics? John Maynard Keynes concludes ‘The General Theory of Employment, Interest, and Money’ (1936: 383-84) with the following, now-famous words: „At the present moment people are unusually expectant of a more funda- mental diagnosis; more particularly ready to receive it; eager to try it out, if it should be even possible. -
John Von Neumann Oskar Morgenstern
Neuroeconomics: From The Failures of Expected Utility to the Neurobiology of Choice Paul Glimcher PhD Julius Silver Professor of Neural Science, Economics and Psychology Director, Institute of the Study of Decision Making New York University Blaise Pascal Genius: Expected Value Theory Expected Probability x Value = Value #1 0.5 100 50 #2 1.0 45 45 Pascal's Wager If God Exists If God Doesn't Exist (Prob 3 Value) + (Prob 3 Value) = Exp. Value Believe in God >0 3 `$++ 0 3 0 = ` Do not Believe >0 3 2` ++ $0 3 0 = 2` in God Problem: The Beggar’s Dilemma Daniel Bernoulli Genius: Expected Utility Theory Beggar’s Dilemma 4.3 3.8 Beggar’s Utility (utils) Beggar’s 0 7000 20,000 Rich Man’s Choice Beggar’s Wealth (florins) 6.0056 6.0 5.9969 Rich Man’s Utility (utils) Rich Man’s Problem: 0 losses wins Value ($) Bentham, Pareto, Samuelson 993,000 1,013,000 1,000,000 Jeremy Bentham Vilfredo Pareto Paul Samuelson The Calculus of Utility The Intrinsic Arbitrariness of Utility Ordinal Objective Utility John von Neumann Oskar Morgenstern Genius: Modern Expected Utility Theory 0 < a <1 a $ s = Expected 35til u Utility weight s.w. = prob Subjective 0 Utility (utils) 0 Probability Dollars ($) Critcal Advantages: • Precise • Compact • Normative (people Problem: make sense) Maurice Allais Maurice Allais People Do Not Obey EU all the time 0 < a <1 a $ s = Expected 35til u Utility weight s.w. = prob Subjective 0 Utility (utils) 0 XProbability Dollars ($) Critcal Questons: • How to Predict People? • Are People Dumb? • Why? Amos Tversky Danny Kahneman Prospect Theory Critcal Advantages: • Predictive Critcal Disadvantages: • Bulky • No Why Behavioral Traditional Social-Natural Science Boundary Economics vs. -
Physical Laws and Human Behavior: a Three-Tier Framework
Yale University EliScholar – A Digital Platform for Scholarly Publishing at Yale Cowles Foundation Discussion Papers Cowles Foundation 2-1-2019 Physical Laws and Human Behavior: A Three-Tier Framework Shabnam Mousavi Shyam Sunder Follow this and additional works at: https://elischolar.library.yale.edu/cowles-discussion-paper-series Part of the Economics Commons Recommended Citation Mousavi, Shabnam and Sunder, Shyam, "Physical Laws and Human Behavior: A Three-Tier Framework" (2019). Cowles Foundation Discussion Papers. 84. https://elischolar.library.yale.edu/cowles-discussion-paper-series/84 This Discussion Paper is brought to you for free and open access by the Cowles Foundation at EliScholar – A Digital Platform for Scholarly Publishing at Yale. It has been accepted for inclusion in Cowles Foundation Discussion Papers by an authorized administrator of EliScholar – A Digital Platform for Scholarly Publishing at Yale. For more information, please contact [email protected]. PHYSICAL LAWS AND HUMAN BEHAVIOR: A THREE-TIER FRAMEWORK By Shabnam Mousavi and Shyam Sunder February 2019 COWLES FOUNDATION DISCUSSION PAPER NO. 2173 COWLES FOUNDATION FOR RESEARCH IN ECONOMICS YALE UNIVERSITY Box 208281 New Haven, Connecticut 06520-8281 http://cowles.yale.edu/ Physical Laws and Human Behavior: A Three-Tier Framework Shabnam Mousavi1 and Shyam Sunder2 1 Max Planck Institute for Human Development ([email protected]) 2 Yale University ([email protected]) This version: 21 February, 2019 Abstract Social sciences start by looking at the social-psychological attributes of humans to model and explain their observed behavior. However, we suggest starting the study of observed human behavior with the universal laws of physics, e.g., the principle of minimum action. -
Christoph Engel Preprints of the Max Planck Institute for Research on Collective Goods Bonn 2004/4
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Engel, Christoph Working Paper Social dilemmas, revisited from a heuristics perspective Preprints of the Max Planck Institute for Research on Collective Goods, No. 2004/4 Provided in Cooperation with: Max Planck Institute for Research on Collective Goods Suggested Citation: Engel, Christoph (2004) : Social dilemmas, revisited from a heuristics perspective, Preprints of the Max Planck Institute for Research on Collective Goods, No. 2004/4, Max Planck Institute for Research on Collective Goods, Bonn This Version is available at: http://hdl.handle.net/10419/85119 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen -
THINKING with MENTAL MODELS 63 and Implementation
Thinking with CHAPTER 3 mental models When we think, we generally use concepts that we it would be impossible for people to make most deci- have not invented ourselves but that reflect the shared sions in daily life. And without shared mental models, understandings of our community. We tend not to it would be impossible in many cases for people to question views when they reflect an outlook on the develop institutions, solve collective action problems, world that is shared by everyone around us. An impor- feel a sense of belonging and solidarity, or even under- tant example for development pertains to how people stand one another. Although mental models are often view the need to provide cognitive stimulation to shared and arise, in part, from human sociality (chapter children. In many societies, parents take for granted 2), they differ from social norms, which were discussed that their role is to love their children and keep them in the preceding chapter. Mental models, which need safe and healthy, but they do not view young children not be enforced by direct social pressure, often capture as needing extensive cognitive and linguistic stimu- broad ideas about how the world works and one’s place lation. This view is an example of a “mental model.”1 in it. In contrast, social norms tend to focus on particu- In some societies, there are even norms against verbal lar behaviors and to be socially enforced. There is immense variation in mental models across societies, including different perceptions of Mental models help people make sense of the way the world “works.” Individuals can adapt their mental models, updating them when they learn that the world—to interpret their environment outcomes are inconsistent with expectations. -
Neuroeconomics
Handbook of Experimental Economics Editors: John Kagel and Alvin Roth Neuroeconomics Colin Camerer1 (California Institute of Technology), Jonathan Cohen2 (Princeton University), Ernst Fehr3 (University of Zurich), Paul Glimcher4 (New York University), David Laibson5 (Harvard University) 1Division HSS, Caltech, [email protected]; 2Princeton Neuroscience Institute, Princeton University, [email protected]; 3University of Zurich, Department of Economics, [email protected]; 4Center for Neural Science, New York University, [email protected]; 5Department of Economics, Harvard University, [email protected]. We gratefully acknowledge research assistance from Colin Gray and Gwen Reynolds and key guidance from John Kagel, Alvin Roth, and an anonymous referee. We also acknowledge financial support from the Moore Foundation (Camerer), the National Science Foundation (Camerer), and the National Institute of Aging (Cohen; Glimcher, R01AG033406; Laibson, P01AG005842), the Swiss National Science Foundation (Fehr, CRSII3_141965/1) and the European Research Council (Fehr, 295642). Hyperlink Page Introduction Chapter 1: Neurobiological Foundations Chapter 2: Functional MRI Chapter 3: Risky Choice Chapter 4: Intertemporal choice and self-regulation Chapter 5: The neural circuitry of social preferences Chapter 6: Strategic thinking References Introduction “One may wonder whether Adam Smith, were he working today, would not be a neuroeconomi[st]” Aldo Rustichini (2005). Neuroeconomics is the study of the biological microfoundations of economic -
Libertarian Paternalism in Policy Making: Empirical, Methodological and Philosophical Problems
Institute for Research in Economic and Fiscal issues IREF Working Paper Series Libertarian paternalism in policy making: empirical, methodological and philosophical problems Yulie Foka-Kavalieraki Niki Sotiriou ORKING APER O IREF W P N . 202006 CTOBER O 2020 N NGLISH EN IREFEUROPE ORG I E : . N RENCH FR IREFEUROPE ORG I F : . N ERMAN DE IREFEUROPE ORG I G : . Institute for Research in Economic and Fiscal issues Libertarian Paternalism in Policy Making Empirical, Methodological and Philosophical Problems Yulie Foka-Kavalieraki & Niki Sotiriou1 University of Athens Nudge theory, according to its founders Richard Thaler and Cass Sunstein, is a kind of libertarian paternalism that helps people towards making choices that can improve their health, wealth and lives. The theory relies on the insights of the Heuristics &Bi- ases research program, and the assumption that people are systematically irrational. Nudge theory has been used in several cases by both government and private admin- istrations, in an attempt to guide individuals towards making preferable decisions, always on the basis that these decisions would be better for them. The aim of this paper is to review the relative literature of the theory’s applications in both the private and the public sector, and also examine the effectiveness of its applications. Specifi- cally, we examine examples where nudge theory has been broadly used as a policy making tool, such as in the UK, as well as in other countries around the globe. In ad- dition to that, we present the implementations of the theory in the private sector and in particular, we discuss the concept of nudge management, that is now applied by many big organizations. -
1 Neuroeconomics of Asset-Price Bubbles
Neuroeconomics of Asset-Price Bubbles: Toward the Prediction and Prevention of Major Bubbles John L. Haracz* Goldman School of Public Policy, UC Berkeley and Department of Psychological and Brain Sciences, Indiana University [email protected] and Daniel J. Acland Goldman School of Public Policy, UC Berkeley [email protected] Goldman School of Public Policy Working Paper January 16, 2015 Abstract Asset-price bubbles challenge the explanatory and predictive power of standard economic theory, suggesting that neuroeconomic measures should be explored as potential tools for improving the predictive power of standard theory. We begin this exploration by reviewing results from functional magnetic resonance imaging (fMRI) studies of lab asset-price bubbles and herding behavior (i.e., following others' decisions). These results are consistent with a neuroeconomics-based hypothesis of asset-price bubbles. In this view, decision making during bubble or non-bubble periods of financial- market activity is driven by, respectively, evolutionarily ancient or new neurocircuitry. Neuroimaging studies that test this or other neuroeconomics-based hypotheses of asset-price bubbles may yield a bubble-related biomarker (e.g., low trade-related lateral neocortical activity associated with traders’ herding-based decisions). Wearable functional near-infrared spectroscopy (fNIRS) technology could determine the prevalence of such a biomarker among financial-market participants, thereby enabling the real-time detection of an emerging bubble. We describe mechanisms by which this early-warning signal could be exploited in self-regulatory or government-administered policies for financial-system stabilization. In summary, neuroimaging-based financial-system regulation may be useful for distinguishing bubbles from non-bubble periods and preventing major asset-price bubbles.