Behavioral economics
Part of a series on |
Economics |
---|
Part of a series on |
Nudge theory |
---|
Behavioral economics is the study of the
Behavioral economics is primarily concerned with the
Behavioral economics began as a distinct field of study in the 1970s and '80s, but can be traced back to 18th-century economists, such as Adam Smith, who deliberated how the economic behavior of individuals could be influenced by their desires.[5]
The status of behavioral economics as a subfield of economics is a fairly recent development; the breakthroughs that laid the foundation for it were published through the last three decades of the 20th century.[6][7] Behavioral economics is still growing as a field, being used increasingly in research and in teaching.[8]
History
Early classical economists included psychological reasoning in much of their writing, though psychology at the time was not a recognized field of study.
A rejection and elimination of psychology from economics in the early 1900s brought on a period defined by a reliance on empiricism.[9] There was a lack of confidence in hedonic theories, which saw pursuance of maximum benefit as an essential aspect in understanding human economic behavior.[6] Hedonic analysis had shown little success in predicting human behavior, leading many to question its viability as a reliable source for prediction.[6]
There was also a fear among economists that the involvement of psychology in shaping economic models was inordinate and a departure from accepted principles.[10] They feared that an increased emphasis on psychology would undermine the mathematic components of the field.[11][12]
To boost the ability of economics to predict accurately, economists started looking to tangible phenomena rather than theories based on human psychology.[6] Psychology was seen as unreliable to many of these economists as it was a new field, not regarded as sufficiently scientific.[9] Though a number of scholars expressed concern towards the positivism within economics, models of study dependent on psychological insights became rare.[9] Economists instead conceptualized humans as purely rational and self-interested decision makers, illustrated in the concept of homo economicus.[12]
The resurgence of psychology within economics, which facilitated the expansion of behavioral economics, has been linked to the cognitive revolution.[13][14]In the 1960s, cognitive psychology began to shed more light on the brain as an information processing device (in contrast to behaviorist models). Psychologists in this field, such as Ward Edwards,[15] Amos Tversky and Daniel Kahneman began to compare their cognitive models of decision-making under risk and uncertainty to economic models of rational behavior. These developments spurred economists to reconsider how psychology could be applied to economic models and theories.[9] Concurrently, the Expected utility hypothesis and discounted utility models began to gain acceptance. In challenging the accuracy of generic utility, these concepts established a practice foundational in behavioral economics: Building on standard models by applying psychological knowledge.[6]
Mathematical psychology reflects a longstanding interest in preference transitivity and the measurement of utility.[16]
Development of Behavioral Economics
In 2017, Niels Geiger, a lecturer in economics at the University of Hohenheim conducted an investigation into the proliferation of behavioral economics.[8] Geiger's research looked at studies that had quantified the frequency of references to terms specific to behavioral economics, and how often influential papers in behavioral economics were cited in journals on economics.[8] The quantitative study found that there was a significant spread in behavioral economics after Kahneman and Tversky's work in the 1990s and into the 2000s.[8]
1979 Paper | 1992 Paper | 1974 Paper | 1981 Paper | 1986 Paper | |
---|---|---|---|---|---|
1974-78 | 0 | 0 | 1 | 0 | 0 |
1979-83 | 1 | 0 | 4 | 3 | 0 |
1984-88 | 7 | 0 | 0 | 1 | 0 |
1989-93 | 19 | 1 | 2 | 6 | 3 |
1993-98 | 37 | 16 | 12 | 7 | 6 |
1999-2003 | 51 | 20 | 5 | 15 | 11 |
2004-08 | 80 | 48 | 18 | 15 | 16 |
2009-13 | 161 | 110 | 59 | 38 | 19 |
Total Citations | 356 | 195 | 101 | 85 | 55 |
Bounded rationality
Bounded rationality is the idea that when individuals make decisions, their rationality is limited by the tractability of the decision problem, their cognitive limitations and the time available.
Prospect theory
In 1979, Kahneman and Tversky published Prospect Theory: An Analysis of Decision Under Risk, that used cognitive psychology to explain various divergences of economic decision making from neo-classical theory.[24] Kahneman and Tversky utilising prospect theory determined three generalisations; gains are treated differently than losses, outcomes received with certainty are overweighed relative to uncertain outcomes and the structure of the problem may affect choices. These arguments were supported in part by altering a survey question so that it was no longer a case of achieving gains but averting losses and the majority of respondents altered their answers accordingly. In essence proving that emotions such as fear of loss, or greed can alter decisions, indicating the presence of an irrational decision-making process. Prospect theory has two stages: an editing stage and an evaluation stage. In the editing stage, risky situations are simplified using various heuristics. In the evaluation phase, risky alternatives are evaluated using various psychological principles that include:
- Reference dependence: When evaluating outcomes, the decision maker considers a "reference level". Outcomes are then compared to the reference point and classified as "gains" if greater than the reference point and "losses" if less than the reference point.
- Loss aversion: Losses are avoided more than equivalent gains are sought. In their 1992 paper, Kahneman and Tversky found the median coefficient of loss aversion to be about 2.25, i.e., losses hurt about 2.25 times more than equivalent gains reward.[25]
- Non-linear probability weighting: Decision makers overweigh small probabilities and underweigh large probabilities—this gives rise to the inverse-S shaped "probability weighting function".
- Diminishing sensitivity to gains and losses: As the size of the gains and losses relative to the reference point increase in absolute value, the marginal effect on the decision maker's utility or satisfaction falls.
In 1992, in the Journal of Risk and Uncertainty, Kahneman and Tversky gave a revised account of prospect theory that they called
A further argument of Behavioural Economics relates to the impact of the individual's cognitive limitations as a factor in limiting the rationality of people's decisions. Sloan first argued this in his paper 'Bounded Rationality' where he stated that our cognitive limitations are somewhat the consequence of our limited ability to foresee the future, hampering the rationality of decision.[28] Daniel Kahneman further expanded upon the effect cognitive ability and processes have on decision making in his book Thinking, Fast and Slow Kahneman delved into two forms of thought, fast thinking which he considered "operates automatically and quickly, with little or no effort and no sense of voluntary control".[29] Conversely, slow thinking is the allocation of cognitive ability, choice and concentration. Fast thinking utilises heuristics, which is a decision-making process that undertakes shortcuts, and rules of thumb to provide an immediate but often irrational and imperfect solution. Kahneman proposed that the result of the shortcuts is the occurrence of a number of biases such as hindsight bias, confirmation bias and outcome bias among others. A key example of fast thinking and the resultant irrational decisions is the 2008 financial crisis.
Nudge theory
Nudge is a concept in
The first formulation of the term and associated principles was developed in
In this variant, the nudge is a microtargeted design geared towards a specific group of people, irrespective of the scale of intended intervention.In 2008, Richard Thaler and Cass Sunstein's book Nudge: Improving Decisions About Health, Wealth, and Happiness brought nudge theory to prominence.[30] It also gained a following among US and UK politicians, in the private sector and in public health.[33] The authors refer to influencing behavior without coercion as libertarian paternalism and the influencers as choice architects.[34] Thaler and Sunstein defined their concept as:[35]
A nudge, as we will use the term, is any aspect of the choice architecture that alters people's behavior in a predictable way without forbidding any options or significantly changing their economic incentives. To count as a mere nudge, the intervention must be easy and cheap to avoid. Nudges are not mandates. Putting fruit at eye level counts as a nudge. Banning junk food does not.
Nudging techniques aim to capitalise on the judgemental heuristics of people. In other words, a nudge alters the environment so that when heuristic, or System 1, decision-making is used, the resulting choice will be the most positive or desired outcome.[36] An example of such a nudge is switching the placement of junk food in a store, so that fruit and other healthy options are located next to the cash register, while junk food is relocated to another part of the store.[37]
In 2008, the United States appointed Sunstein, who helped develop the theory, as administrator of the Office of Information and Regulatory Affairs.[34][38][39]
Notable applications of nudge theory include the formation of the British Behavioural Insights Team in 2010. It is often called the "Nudge Unit", at the British Cabinet Office, headed by David Halpern.[40] In addition, the Penn Medicine Nudge Unit is the world's first behavioral design team embedded within a health system.
Nudge theory has also been applied to
Criticisms
Cass Sunstein has responded to critiques at length in his The Ethics of Influence[42] making the case in favor of nudging against charges that nudges diminish autonomy,[43] threaten dignity, violate liberties, or reduce welfare. Ethicists have debated this rigorously.[44] These charges have been made by various participants in the debate from Bovens[45] to Goodwin.[46] Wilkinson for example charges nudges for being manipulative, while others such as Yeung question their scientific credibility.[47]
Some, such as Hausman & Welch[48] have inquired whether nudging should be permissible on grounds of (distributive[clarification needed]) justice; Lepenies & Malecka[49] have questioned whether nudges are compatible with the rule of law. Similarly, legal scholars have discussed the role of nudges and the law.[50][51]
Behavioral economists such as Bob Sugden have pointed out that the underlying normative benchmark of nudging is still
It has been remarked that nudging is also a
There exists an anticipation and, simultaneously, implicit criticism of the nudge theory in works of Hungarian social psychologists who emphasize the active participation in the nudge of its target (Ferenc Merei[55] and Laszlo Garai[56]).
Concepts
Behavioral economics aims to improve or overhaul traditional economic theory by studying failures in its assumptions that people are rational and selfish. Specifically, it studies the biases, tendencies and heuristics of people's economic decisions. It aids in determining whether people make good choices and whether they could be helped to make better choices. It can be applied both before and after a decision is made.
Search heuristics
Behavioral economics proposes search heuristics as an aid for evaluating options. It is motivated by the fact that it is costly to gain information about options and it aims to maximise the utility of searching for information. While each heuristic is not wholistic in its explanation of the search process alone, a combination of these heuristics may be used in the decision-making process. There are three primary search heuristics.
Satisficing
Satisficing is the idea that there is some minimum requirement from the search and once that has been met, stop searching. After satisficing, a person may not have the most optimal option (i.e. the one with the highest utility), but would have a "good enough" one. This heuristic may be problematic if the aspiration level is set at such a level that no products exist that could meet the requirements.
Directed cognition
Directed cognition is a search heuristic in which a person treats each opportunity to research information as their last. Rather than a contingent plan that indicates what will be done based on the results of each search, directed cognition considers only if one more search should be conducted and what alternative should be researched.
Elimination by aspects
Whereas satisficing and directed cognition compare choices, elimination by aspects compares certain qualities. A person using the elimination by aspects heuristic first chooses the quality that they value most in what they are searching for and sets an aspiration level. This may be repeated to refine the search. i.e. identify the second most valued quality and set an aspiration level. Using this heuristic, options will be eliminated as they fail to meet the minimum requirements of the chosen qualities.[57]
Heuristics and cognitive effects
Besides searching, behavioral economists and psychologists have identified other
Mental accounting
Mental accounting refers to the propensity to allocate resources for specific purposes. Mental accounting is a behavioral bias that causes one to separate money into different categories known as mental accounts either based on the source or the intention of the money.[58]
Anchoring
Herd behavior
This is a relatively simple bias that reflects the tendency of people to mimic what everyone else is doing and follow the general consensus.
Framing effects
People tend to choose differently depending on how the options are presented to them. People tend to have little control over their susceptibility to the framing effect, as often their choice-making process is based on intuition.[60]
Biases and fallacies
While heuristics are tactics or mental shortcuts to aid in the decision-making process, people are also affected by a number of
Present bias
Present bias reflects the human tendency to want rewards sooner. It describes people who are more likely to forego a greater payoff in the future in favour of receiving a smaller benefit sooner. An example of this is a smoker who is trying to quit. Although they know that in the future they will suffer health consequences, the immediate gain from the nicotine hit is more favourable to a person affected by present bias. Present bias is commonly split into people who are aware of their present bias (sophisticated) and those who are not (naive).[61]
Gambler's fallacy
The
Hot hand fallacy
The hot hand fallacy is the opposite of the gambler's fallacy. It is the belief that an event that has occurred often in the past is more likely to occur again in the future such that the streak will continue. This fallacy is particularly common within sports. For example, if a football team has consistently won the last few games they have participated in, then it is often said that they are 'on form' and thus, it is expected that the football team will maintain their winning streak.[64]
Narrative fallacy
Narrative fallacy refers to when people use narratives to connect the dots between random events to make sense of arbitrary information. The term stems from Nassim Taleb's book The Black Swan: The Impact of the Highly Improbable. The narrative fallacy can be problematic as it can lead to individuals making false cause-effect relationships between events.[65] For example, a startup may get funding because investors are swayed by a narrative that sounds plausible, rather than by a more reasoned analysis of available evidence.[66]
Loss aversion
Loss aversion refers to the tendency to place greater weight on losses compared to equivalent gains. In other words, this means that when an individual receives a loss, this will cause their utility to decline more so than the same-sized gain.[67] This means that they are far more likely to try to assign a higher priority on avoiding losses than making investment gains. As a result, some investors might want a higher payout to compensate for losses. If the high payout is not likely, they might try to avoid losses altogether even if the investment's risk is acceptable from a rational standpoint.[68]
Recency bias
Recency bias is the belief that of a particular outcome is more probably simply because it had just occurred. For example, if the previous one or two flips were heads, a person affected by recency bias would continue to predict that heads would be flipped.[69]
Confirmation bias
Confirmation bias is the tendency to prefer information consistent with one's beliefs and discount evidence inconsistent with them.[70]
Familiarity bias
Familiarity bias simply describes the tendency of people to return to what they know and are comfortable with. Familiarity bias discourages affected people from exploring new options and may limit their ability to find an optimal solution.[71]
Status quo bias
Status quo bias describes the tendency of people to keep things as they are. It is a particular aversion to change in favor of remaining comfortable with what is known.[72]
Connected to this concept is the endowment effect, a theory that people value things more if they own them - they require more to give up an object than they would be willing to pay to acquire it.[73]
Behavioral finance
Behavioral finance
Traditional finance
The accepted theories of finance are referred to as traditional finance. The foundation of traditional finance is associated with the modern portfolio theory (MPT) and the efficient-market hypothesis (EMH). Modern portfolio theory is based on a stock or portfolio's expected return, standard deviation, and its correlation with the other assets held within the portfolio. With these three concepts, an efficient portfolio can be created for any group of assets. An efficient portfolio is a group of assets that has the maximum expected return given the amount of risk. The efficient-market hypothesis states that all public information is already reflected in a security's price. The proponents of the traditional theories believe that "investors should just own the entire market rather than attempting to outperform the market". Behavioral finance has emerged as an alternative to these theories of traditional finance and the behavioral aspects of psychology and sociology are integral catalysts within this field of study.[77]
Evolution
The foundations of behavioral finance can be traced back over 150 years. Several original books written in the 1800s and early 1900s marked the beginning of the behavioral finance school. Originally published in 1841, MacKay's Extraordinary Popular Delusions and the Madness of Crowds presents a chronological timeline of the various panics and schemes throughout history.[78] This work shows how group behavior applies to the financial markets of today. Le Bon's important work, The Crowd: A Study of the Popular Mind, discusses the role of "crowds" (also known as crowd psychology) and group behavior as they apply to the fields of behavioral finance, social psychology, sociology and history. Selden's 1912 book Psychology of The Stock Market was one of the first to apply the field of psychology directly to the stock market. This classic discusses the emotional and psychological forces at work on investors and traders in the financial markets. These three works along with several others form the foundation of applying psychology and sociology to the field of finance. The foundation of behavioral finance is an area based on an interdisciplinary approach including scholars from the social sciences and business schools. From the liberal arts perspective, this includes the fields of psychology, sociology, anthropology, economics and behavioral economics. On the business administration side, this covers areas such as management, marketing, finance, technology and accounting.
Critics contend that behavioral finance is more a collection of
Quantitative behavioral finance
- Thaler's model of price reactions to information, with three phases (underreaction, adjustment, and overreaction), creating a price trend. (One characteristic of overreaction is that average returns following announcements of good news is lower than following bad news. In other words, overreaction occurs if the market reacts too strongly or for too long to news, thus requiring an adjustment in the opposite direction. As a result, outperforming assets in one period is likely to underperform in the following period. This also applies to customers' irrational purchasing habits.[84])
- The stock image coefficient
- Artificial financial market
- Market microstructure
Applied issues
Behavioral game theory
Behavioral game theory, invented by
Artificial intelligence
Much of the decisions are more and more made either by human beings with the assistance of artificial intelligent machines or wholly made by these machines. Tshilidzi Marwala and Evan Hurwitz in their book,[101] studied the utility of behavioral economics in such situations and concluded that these intelligent machines reduce the impact of bounded rational decision making. In particular, they observed that these intelligent machines reduce the degree of information asymmetry in the market, improve decision making and thus making markets more rational.
The use of AI machines in the market in applications such as online trading and decision making has changed major economic theories.
Other areas of research
Other branches of behavioral economics enrich the model of the utility function without implying inconsistency in preferences. Ernst Fehr, Armin Falk, and Rabin studied fairness, inequity aversion and reciprocal altruism, weakening the neoclassical assumption of perfect selfishness. This work is particularly applicable to wage setting. The work on "intrinsic motivation by Uri Gneezy and Aldo Rustichini and "identity" by George Akerlof and Rachel Kranton assumes that agents derive utility from adopting personal and social norms in addition to conditional expected utility. According to Aggarwal, in addition to behavioral deviations from rational equilibrium, markets are also likely to suffer from lagged responses, search costs, externalities of the commons, and other frictions making it difficult to disentangle behavioral effects in market behavior.[102]
"Conditional expected utility" is a form of reasoning where the individual has an illusion of control, and calculates the probabilities of external events and hence their utility as a function of their own action, even when they have no causal ability to affect those external events.[103][104]
Behavioral economics caught on among the general public with the success of books such as Dan Ariely's Predictably Irrational. Practitioners of the discipline have studied quasi-public policy topics such as broadband mapping.[105][106]
Applications for behavioral economics include the modeling of the consumer decision-making process for applications in
The University of Pennsylvania's Center for Health Incentives & Behavioral Economics (CHIBE) looks at how behavioral economics can improve health outcomes. CHIBE researchers have found evidence that many behavioral economics principles (incentives, patient and clinician nudges, gamification, loss aversion, and more) can be helpful to encourage vaccine uptake, smoking cessation, medication adherence, and physical activity, for example.[108]
Applications of behavioral economics also exist in other disciplines, for example in the area of supply chain management.[109]
Honors and awards
Nobel Prize
1978 - Herbert Simon
In 1978 Herbert Simon was awarded the Nobel Memorial Prize in Economic Sciences "for his pioneering research into the decision-making process within economic organizations".[110] Simon earned his Bachelor of Arts and his Ph.D. in Political Science from the University of Chicago before going on to teach at Carnegie Tech.[111] Herbert was praised for his work on bounded rationality, a challenge to the assumption that humans are rational actors.[112]
2002 - Daniel Kahneman and Vernon L. Smith
In 2002, psychologist Daniel Kahneman and economist Vernon L. Smith were awarded the Nobel Memorial Prize in Economic Sciences. Kahneman was awarded the prize "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty", while Smith was awarded the prize "for having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms."[113]
2017 - Richard Thaler
In 2017, economist Richard Thaler was awarded the Nobel Memorial Prize in Economic Sciences for "his contributions to behavioral economics and his pioneering work in establishing that people are predictably irrational in ways that defy economic theory."[114][115] Thaler was especially recognized for presenting inconsistencies in standard Economic theory and for his formulation of mental accounting and liberal paternalism.[116] [117]
Other Awards
1999 - Andrei Shleifer
The work of Andrei Shleifer focused on behavioral finance and made observations on the limits of the efficient market hypothesis.[7] Shleifer received the 1999 John Bates Clark Medal from the American Economic Association for his work.[118]
2001 - Matthew Rabin
Matthew Rabin received the "genius" award from the MarArthur Foundation in 2000.[7] The American Economic Association chose Rabin as the recipient of the 2001 John Bates Clark medal. Rabin's awards were given to him primarily on the basis of his work on fairness and reciprocity, and on present bias.[119]
2003 - Sendhil Mullainathan
Sendhil Mullainathan was the youngest of the chosen MacArthur Fellows in 2002, receiving a fellowship grant of $500,000 in 2003.[120][7] Mullainathan was praised by the MacArthur Foundation as working on economics and psychology as an aggregate.[7] Mullainathan's research focused on the salaries of executives on Wall Street; he also has looked at the implications of racial discrimination in markets in the United States.[121][7]
Criticism
Taken together, two landmark papers in economic theory which were published before the field of Behavioral Economics emerged, the first is the paper "Uncertainty, Evolution, and Economic Theory" by Armen Alchian from 1950 and the second is the paper "Irrational Behavior and Economic Theory" from 1962 by Gary Becker, both of which were published in the Journal of Political Economy,[122][123] provide a justification for standard neoclassical economic analysis. Alchian's 1950 paper uses the logic of natural selection, the Evolutionary Landscape model, stochastic processes, probability theory, and several other lines of reasoning to justify many of the results derived from standard supply analysis assuming firms which maximizing their profits, are certain about the future, and have accurate foresight without having to assume any of those things. Becker's 1962 paper shows that downward sloping market demand curves (the most important implication of the law of demand) do not actually require an assumption that the consumers in that market are rational, as is claimed by behavioral economists and they also follow from a wide variety of irrational behavior as well.
The lines of reasoning and argumentation used in these two papers is re-expressed and expanded upon in (at least) one other professional economic publication for each of them. As for Alchian's evolutionary economics via natural selection by way of environmental adoption thesis, it is summarized, followed by an explicit exploration of its theoretical implications for Behavioral Economic theory, then illustrated via examples in several different industries including banking, hospitality, and transportation, in the 2014 paper "Uncertainty, Evolution, and Behavioral Economic Theory," by Manne and Zywicki.[124] And the argument made in Becker's 1962 paper, that that a 'pure' increase in the (relative) price (or terms of trade) of good X must reduce the amount of X demanded in the market for good X, is explained in greater detail in chapters (or as he calls them, "Lectures" because this textbook is more or less a transcription of his lectures given in his Price Theory course taught to 1st year PhD students several years earlier) 4 (called The Opportunity Set) and 5 (called Substitution Effects) of Gary Becker's graduate level textbook Economic Theory, originally published in 1971.[125]
Besides the three critical aforementioned articles, critics of behavioral economics typically stress the rationality of economic agents.[126] A fundamental critique is provided by Maialeh (2019) who argues that no behavioral research can establish an economic theory. Examples provided on this account include pillars of behavioral economics such as satisficing behavior or prospect theory, which are confronted from the neoclassical perspective of utility maximization and expected utility theory respectively. The author shows that behavioral findings are hardly generalizable and that they do not disprove typical mainstream axioms related to rational behavior.[127]
Others, such as the essayist and former trader
Despite a great deal of rhetoric, no unified behavioral theory has yet been espoused: behavioral economists have proposed no alternative unified theory of their own to replace neoclassical economics with.
David Gal has argued that many of these issues stem from behavioral economics being too concerned with understanding how behavior deviates from standard economic models rather than with understanding why people behave the way they do. Understanding why behavior occurs is necessary for the creation of generalizable knowledge, the goal of science. He has referred to behavioral economics as a "triumph of marketing" and particularly cited the example of loss aversion.[132]
Traditional economists are skeptical of the experimental and survey-based techniques that behavioral economics uses extensively. Economists typically stress
Responses
Matthew Rabin[134] dismisses these criticisms, countering that consistent results typically are obtained in multiple situations and geographies and can produce good theoretical insight. Behavioral economists, however, responded to these criticisms by focusing on field studies rather than lab experiments. Some economists see a fundamental schism between experimental economics and behavioral economics, but prominent behavioral and experimental economists tend to share techniques and approaches in answering common questions. For example, behavioral economists are investigating neuroeconomics, which is entirely experimental and has not been verified in the field.[citation needed]
The epistemological, ontological, and methodological components of behavioral economics are increasingly debated, in particular by historians of economics and economic methodologists.[135]
According to some researchers,[136] when studying the mechanisms that form the basis of decision-making, especially financial decision-making, it is necessary to recognize that most decisions are made under stress[137] because, "Stress is the nonspecific body response to any demands presented to it."[138]
Related fields
Experimental economics
Experimental economics is the application of
A fundamental aspect of the subject is
Variants of the subject outside such formal confines include
Neuroeconomics
Neuroeconomics is an
Neuroeconomics studies decision making by using a combination of tools from these fields so as to avoid the shortcomings that arise from a single-perspective approach. In
Evolutionary psychology
An evolutionary psychology perspective states that many of the perceived limitations in rational choice can be explained as being rational in the context of maximizing biological fitness in the ancestral environment, but not necessarily in the current one. Thus, when living at subsistence level where a reduction of resources may result in death, it may have been rational to place a greater value on preventing losses than on obtaining gains. It may also explain behavioral differences between groups, such as males being less risk-averse than females since males have more variable reproductive success than females. While unsuccessful risk-seeking may limit reproductive success for both sexes, males may potentially increase their reproductive success from successful risk-seeking much more than females can.[146]
Notable people
Economics
- George Akerlof
- Werner De Bondt
- Paul De Grauwe[147]
- Linda C. Babcock
- Douglas Bernheim[148]
- Colin Camerer
- Armin Falk
- Urs Fischbacher
- Tshilidzi Marwala
- Susan E. Mayer
- Ernst Fehr
- Simon Gächter
- Uri Gneezy[149]
- David Laibson
- Louis Lévy-Garboua
- John A. List
- George Loewenstein
- Sendhil Mullainathan
- John Quiggin
- Matthew Rabin
- Reinhard Selten
- Herbert A. Simon
- Vernon L. Smith
- Robert Sugden[150]
- Larry Summers
- Richard Thaler
- Abhijit Banerjee
- Esther Duflo
- Kevin Volpp
- Katy Milkman
Finance
- Malcolm Baker
- Nicholas Barberis
- Gunduz Caginalp
- David Hirshleifer
- Andrew Lo
- Michael Mauboussin
- Terrance Odean
- Richard L. Peterson
- Charles Plott
- Robert Prechter
- Hersh Shefrin
- Robert Shiller
- Andrei Shleifer
- Robert Vishny
Psychology
See also
- Adaptive market hypothesis
- Animal Spirits (Keynes)
- Behavioralism
- Behavioral operations research
- Behavioral Strategy
- Big Five personality traits
- Confirmation bias
- Cultural economics
- Culture change
- Economic sociology
- Emotional bias
- Fuzzy-trace theory
- Hindsight bias
- Homo reciprocans
- Important publications in behavioral economics
- List of cognitive biases
- Methodological individualism
- Nudge theory
- Observational techniques
- Praxeology
- Priority heuristic
- Regret theory
- Repugnancy costs
- Socioeconomics
- Socionomics
References
Citations
- ^ SSRN 2040946.
- ^ a b Zeiler, Kathryn; Teitelbaum, Joshua (March 30, 2018). "Research Handbook on Behavioral Law and Economics". Books.
- ^ "Search of behavioural economics". in Palgrave
- ISBN 978-1-60649-704-3.
- .
- ^ ISBN 978-1-352-01080-0.
- ^ S2CID 143911190– via Project MUSE.
- ^ S2CID 56373713.
- ^ ISBN 9780691116822.
- S2CID 234860041.
- JSTOR 117403.
- ^ S2CID 230794629.
- ^ "What is behavioral economics? | University of Chicago News". news.uchicago.edu. Retrieved February 12, 2024.
- PMID 10485865.
- ^ "Ward Edward Papers". Archival Collections. Archived from the original on April 16, 2008. Retrieved April 25, 2008.
- ^ Luce 2000.
- ^ ISBN 978-0-262-57164-7.
- ^ Cyert, Richard; March, James G. (1963). A Behavioral Theory of the Firm. Prentice-Hall, Englewood Cliffs, N.J.
- S2CID 143911190.
- OCLC 791403664.
- SSRN 1583509.
- ^ Wright, Joshua; Ginsberg, Douglas (February 16, 2012). "Free to Err?: Behavioral Law and Economics and its Implications for Liberty". Library of Law & Liberty.
- ISBN 9780199793143.
- ^ Kahneman & Diener 2003.
- ^
- ^ Hogarth & Reder 1987.
- ^ "Nobel Laureates 2002". Nobel Foundation. Archived from the original on April 10, 2008. Retrieved April 25, 2008.
- ISBN 978-1-349-20568-4.
- ISBN 978-0374275631.
- ^ a b "What is behavioral economics? | University of Chicago News". news.uchicago.edu. Retrieved June 1, 2022.
- ISBN 978-90-481-5242-1
- ^ O'Hanlon, B.; Wilk, J. (1987), Shifting contexts : The generation of effective psychotherapy., New York, N.Y.: Guilford Press.
- ^ See: Dr. Jennifer Lunt and Malcolm Staves Archived 2012-04-30 at the Wayback Machine
- ^ a b Andrew Sparrow (August 22, 2008). "Speak 'Nudge': The 10 key phrases from David Cameron's favorite book". The Guardian. London. Retrieved September 9, 2009.
- ISBN 978-0-14-311526-7.
- S2CID 143673378.
- PMID 26186924.
- ^ Carol Lewis (July 22, 2009). "Why Barack Obama and David Cameron are keen to 'nudge' you". The Times. London. Retrieved September 9, 2009.
- ^ James Forsyth (July 16, 2009). "Nudge, nudge: meet the Cameroons' new guru". The Spectator. Archived from the original on January 24, 2009. Retrieved September 9, 2009.
- ^ "Who we are". The Behavioural Insights Team.
- ^ Marsh, Tim (January 2012). "Cast No Shadow" (PDF). Rydermarsh.co.uk. Archived from the original (PDF) on October 10, 2017.
- ISBN 978-1-107-14070-7.
- SSRN 2672970.
- ISSN 1878-5158.
- S2CID 141283500.
- S2CID 153597777.
- ISSN 1468-2230.
- ISSN 1467-9760.
- S2CID 144157454.
- ISSN 1474-2640.
- SSRN 2810229.
- ISSN 1865-1704.
- ^ Cass R. Sunstein. "NUDGING AND CHOICE ARCHITECTURE: ETHICAL CONSIDERATIONS" (PDF). Law.harvard.edu. Retrieved October 11, 2017.
- ^ "A nudge in the right direction? How we can harness behavioural economics". ABC News. December 1, 2015.
- ^ MÉREI, Ferenc (1987). "A perem-helyzet egyik változata: a szociálpszichológiai kontúr" [A variant of the edge-position: the contour social psychological]. Pszichológia (in Hungarian). 1: 1–5.
- ISBN 978-1-137-52561-1.
- ^ Tversky, A (May 16, 2023). "Elimination by aspects: A theory of choice".
- ^ behavioralecon. "Mental accounting". BehavioralEconomics.com | The BE Hub. Retrieved September 21, 2020.
- ^ "Anchoring Bias - Definition, Overview and Examples". Corporate Finance Institute. Retrieved September 21, 2020.
- ISBN 9781138097117.
- ^ O'Donoghue, Ted, and Matthew Rabin. 2015. "Present Bias: Lessons Learned and to Be Learned." American Economic Review, 105 (5): 273-79.
- ISBN 9781138097117.
- ^ Croson, R., Sundali, J. The Gambler's Fallacy and the Hot Hand: Empirical Data from Casinos. J Risk Uncertainty 30, 195–209 (2005). https://doi.org/10.1007/s11166-005-1153-2
- ISBN 9781138097117.
- S2CID 227191908.
- ^ "Narrative Fallacy - Definition, Overview and Examples in Finance". Corporate Finance Institute. Retrieved June 26, 2021.
- ISBN 9781138097117.
- ^ Kenton, Will. "Behavioral Finance Definition". Investopedia. Retrieved September 21, 2020.
- ^ "Use Cognitive Biases to Your Advantage, Institute for Management Consultants, #721, December 19, 2011". Archived from the original on October 24, 2020. Retrieved November 1, 2020.
- ISBN 9781138097117.
- ^ "10 cognitive biases that can lead to investment mistakes". Magellan Financial Group. Retrieved September 21, 2020.
- hdl:10419/145423.
- ^ "The Endowment Effect".
- ISBN 978-1-405-10746-4
- ^ "Behavioral Finance - Overview, Examples and Guide". Corporate Finance Institute. Retrieved September 21, 2020.
- ^ Van Loo, Rory (April 1, 2015). "Helping Buyers Beware: The Need for Supervision of Big Retail". University of Pennsylvania Law Review. 163 (5): 1311.
- ^ "Harry Markowitz's Modern Portfolio Theory [The Efficient Frontier]". Guided Choice. Retrieved September 21, 2020.
- ^ Ricciardi, Victor (January 2000). "What is Behavioral Finance?". Business, Education & Technology Journal: 181.
- ^ "Fama on Market Efficiency in a Volatile Market". Archived from the original on March 24, 2010.
- ^ Kenton, Will. "Equity Premium Puzzle (EPP)". Investopedia. Retrieved September 21, 2020.
- ^ See Freeman, 2004 for a review
- hdl:10419/257069.
- ^ "U.S. Equity Market Structure: Making Our Markets Work Better for Investors". www.sec.gov. Retrieved September 21, 2020.
- ^ Tang, David (May 6, 2013). "Why People Won't Buy Your Product Even Though It's Awesome". Flevy. Retrieved May 31, 2013.
- ^ Auman, Robert. "Game Theory". in Palgrave
- S2CID 121396120.
- ^ Andreoni, James; et al. "Altruism in experiments". in Palgrave
- Young, H. Peyton. "Social norms". in Palgrave
- doi:10.1257/jep.11.4.167. Archived from the original on December 23, 2017. Retrieved October 31, 2014. Pdf version. Archived May 31, 2012, at the Wayback Machine
- ^ Ho, Teck H. (2008). "Individual learning in games". in Palgrave
- S2CID 2508835.
- Gul, Faruk (2008). "Behavioural economics and game theory". in Palgrave
- Camerer, Colin F. (2008). "Behavioral game theory". in Palgrave
- ISBN 978-0-691-09039-9.
- ^ Loewenstein, George; Rabin, Matthew (2003). Advances in Behavioral Economics 1986–2003 papers. Princeton: Princeton University Press.
- S2CID 3490729.
- ISBN 9781139052009.
- ISBN 9780444894281.
- ISBN 978-0-444-82642-8.
- ^ Games and Economic Behavior (journal), Elsevier. Online
- ^ ISBN 978-3-319-66104-9.
- .
- JSTOR 3791450.
- S2CID 29570235.
- ^ "US National Broadband Plan: good in theory". Telco 2.0. March 17, 2010. Retrieved September 23, 2010.
... Sara Wedeman's awful experience with this is instructive....
- ^ Cook, Gordon; Wedeman, Sara (July 1, 2009). "Connectivity, the Five Freedoms, and Prosperity". Community Broadband Networks. Retrieved September 23, 2010.
- ^ "Singluarities Our Company". Singular Me, LLC. 2017. Archived from the original on November 12, 2017. Retrieved July 12, 2017.
... machine learning and deduction engine that uses the latest data science and big data algorithms in order to generate the content and conditional rules (counterfactuals) that capture customer's behaviors and beliefs....
- ^ "Impact". Center for Health Initiatives and Behavioral Economics. Retrieved November 23, 2020.
- S2CID 54685109.
- ^ "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1978". NobelPrize.org.
- S2CID 158617764.
- PMID 14584993.
- ^ "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2002". Nobel Foundation. Retrieved October 14, 2008.
- ^ Appelbaum, Binyamin (October 9, 2017). "Nobel in Economics is Awarded to Richard Thaler". The New York Times. Retrieved November 4, 2017.
- ^ Carrasco-Villanueva, Marco (October 18, 2017). "Richard Thaler y el auge de la Economía Conductual". Lucidez (in Spanish). Retrieved October 31, 2018.
- S2CID 158175954.
- ^ "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2013". Nobel Foundation. Retrieved July 1, 2016.
- JSTOR 2696547.
- ISSN 0362-4331.
- ISSN 0046-8932.
- ISSN 0362-4331.
- ^ Alchian, A. (1950). 'Uncertainty, Evolution, and Economic Theory', Journal of Political Economy, 58(1), 211-221. Available at: https://www.jstor.org/stable/1827159?seq=1 (Accessed: June 9, 2021).
- ^ Becker, G. (1962). 'Irrational Behavior and Economic Theory', Journal of Political Economy, 70(1), 1–13. Available at: https://www.jstor.org/stable/1827018?seq=1 (Accessed: June 9, 2021).
- ^ Manne, G.; Zywicki, T. (2014). "Uncertainty, Evolution, and Behavioral Economic Theory". Journal of Law, Economics & Policy. Retrieved November 11, 2023.
- ISBN 978-0-202-30980-4.
- ^ Myagkov, Mikhail; Plott, Charles R. (December 1997). "Exchange Economies and Loss Exposure: Experiments Exploring Prospect Theory and Competitive Equilibria in Market Environments" (PDF). The American Economic Review. 87 (5): 801–828. Archived from the original (PDF) on December 22, 2015. Retrieved October 21, 2015.
- S2CID 126703002.
- ^ Roberts, Russ; Taleb, Nassim (March 2018). "EconTalk: Nassim Nicholas Taleb on Rationality, Risk, and Skin in the Game".
- ^ Klass, Greg; Zeiler, Kathryn (January 1, 2013). "Against Endowment Theory: Experimental Economics and Legal Scholarship". UCLA Law Review. 61 (1): 2.
- .
- .
- ^ Gal, David (October 6, 2018). "Why Is Behavioral Economics So Popular?". The New York Times (Opinion). Retrieved November 16, 2018.
- S2CID 219338876.
- ^ Rabin 1998, pp. 11–46.
- ^ Kersting, Felix; Obst, Daniel (April 10, 2016). "Behavioral Economics". Exploring Economics.
- PMID 25379268.
- ^ Zhukov, D.A. (2007). Biologija Povedenija, Gumoral'nye Mehanizmy [Biology of Behavior. Humoral Mechanisms]. St. Petersburg, Russia: Rech.
- ISBN 978-1-4831-9221-5.
- doi:10.1111/1468-0262.00335. Archived from the original(PDF) on January 12, 2012. Retrieved May 11, 2018.
- S2CID 41945226.
- ^
- Vernon L. Smith, 2008a. "experimental methods in economics," The New Palgrave Dictionary of Economics, 2nd Edition, Abstract.
- _____, 2008b. "experimental economics," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
- Relevant subcategories are found at the Journal of Economic Literature classification codes at JEL: C9.
- ^ J. DiNardo, 2008. "natural experiments and quasi-natural experiments," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
- ^ a b "Research". Duke Institute for Brain Sciences. Archived from the original on May 25, 2019. Retrieved May 21, 2019.
- S2CID 436025.
- PMID 17883335.
- ISBN 9780199586073.
- ^ Grauwe, Paul De; Ji, Yuemei (November 1, 2017). "Behavioural economics is also useful in macroeconomics".
- ^ Bernheim, Douglas; Rangel, Antonio (2008). "Behavioural public economics". in Palgrave
- ^ "Uri Gneezy". ucsd.edu. Archived from the original on February 25, 2017. Retrieved April 18, 2014.
- ^ "Robert Sugden".
- ^ "Predictably Irrational". Dan Ariely. Archived from the original on March 13, 2008. Retrieved April 25, 2008.
- ISBN 978-1-351-58689-4.
Sources
- Ainslie, G. (1975). "Specious Reward: A Behavioral /Theory of Impulsiveness and Impulse Control". Psychological Bulletin. 82 (4): 463–96. S2CID 10279574.
- Baddeley, M. (2017). Behavioural economics: a very short introduction (Vol. 505). Oxford University Press.
- from the original on April 20, 2008. Retrieved April 25, 2008.
- doi:10.1086/259394.
- Benartzi, Shlomo; S2CID 55030273.
- Cunningham, Lawrence A. (2002). "Behavioral Finance and Investor Governance". Washington & Lee Law Review. 59: 767. S2CID 152538297.
- Daniel, K.; S2CID 32589687.
- ISBN 978-1-4008-2914-9.
- Eatwell, John; Milgate, Murray; Newman, Peter, eds. (1988). The New Palgrave: A Dictionary of Economics. Macmillan. ISBN 978-0-935859-10-2.
- ISBN 9781137525604.
- Genesove, David; Mayer, Christopher (March 2001). "Loss Aversion and Seller Behavior: Evidence from the Housing Market" (PDF). Quarterly Journal of Economics. 116 (4): 1233–1260. S2CID 154641267.
- Hens, Thorsten; Bachmann, Kremena (2008). Behavioural Finance for Private Banking. Wiley Finance Series. ISBN 978-0-470-77999-6.
- Hogarth, R. M.; Reder, M. W. (1987). Rational Choice: The Contrast between Economics and Psychology. Chicago, IL: University of Chicago Press. ISBN 978-0-226-34857-5.
- John, K. (2015). "Behavioral indifference curves". Australasian Journal of Economics Education. 12 (2): 1–11.
- JSTOR 1914185.
- Kahneman, Daniel; Diener, Ed (2003). Well-being: the foundations of hedonic psychology. Russell Sage Foundation.
- Kirkpatrick, Charles D.; Dahlquist, Julie R. (2007). Technical Analysis: The Complete Resource for Financial Market Technicians. Upper Saddle River, NJ: Financial Times Press. ISBN 978-0-13-153113-0.
- ISBN 978-0-674-70758-0.
- ISBN 978-0-8058-3460-4.
- McGaughey, E. (2014), "Behavioural Economics and Labour Law", LSE Legal Studies Working Paper, no. 20/2014, SSRN 2460685
- Metcalfe, R; Dolan, P (2012). "Behavioural economics and its implications for transport". Journal of Transport Geography. 24: 503–511. .
- ISBN 9780080430768.
- Plott, Charles R.; Smith, Vernon L. (2008). Handbook of Experimental Economics Results. Vol. 1. Elsevier.
- Rabin, Matthew (1998). "Psychology and Economics" (PDF). Journal of Economic Literature. 36 (1): 11–46. Archived from the original (PDF) on September 27, 2011.
- ISBN 978-0-393-06977-8.
- Sent, E.M. (2004). "Behavioral economics: How psychology made its (limited) way back into economics". History of Political Economy. 36 (4): 735–760. S2CID 143911190.
- Shefrin, Hersh (2002). "Behavioral decision making, forecasting, game theory, and role-play" (PDF). International Journal of Forecasting. 18 (3): 375–382. .
- ISBN 978-0-19-829228-9.
- The New Palgrave: A Dictionary of Economics. Vol. 1. pp. 221–24.
- Thaler, Richard H (2016). "Behavioral Economics: Past, Present, and Future". American Economic Review. 106 (7): 1577–1600. .
- OCLC 237794267.
- Edward Zalta (ed.). Stanford Encyclopedia of Philosophy. Stanford, CA: Stanford University.
External links
- "Behavioral economics in U.S. (antitrust) scholarly papers". Le Concurrentialiste.
- The Behavioral Economics Guide
- Overview of Behavioral Finance
- The Institute of Behavioral Finance
- Stirling Behavioural Science Blog, of the Stirling Behavioural Science Centre at University of Stirling
- Society for the Advancement of Behavioural Economics
- Behavioral Economics: Past, Present, Future – Colin F. Camerer and George Loewenstein
- A History of Behavioural Finance / Economics in Published Research: 1944–1988 Archived November 12, 2020, at the Wayback Machine
- MSc Behavioural Economics, MSc in Behavioural Economics at the University of Essex
- Behavioral Economics of Shipping Business