TO 11 Downing Street for the launch of a book by two Conservative MPs, Matthew Hancock, a former adviser to George Osborne, and Nadhim Zahawi, a former pollster for YouGov. Masters of Nothing taps into modish fields of research, namely behavioural economics, to argue that the financial crash was the result of human irrationality: our misperception of risk, our tendency to favour evidence that confirms our existing biases, our hard-wired desire to go with the crowd. The authors warn that the crash will happen again unless governments find ways of compensating for these foibles through policy. 
A historical example of the failure of mathematical models and strategies based on linear and reductionist as those taken from the world of international finance at the base of the economic disasters that affect us today. This experience obviously has not helped to understand and it insists on completely wrong assumptions persegure roads, which are valid and totally restricted to a self-referential universe. 
The ecoDarwinian Paradigm:
Abstract
We study a class of heterogeneous agent-based models which are based on a basic set of principles, and the most fundamental operations of an economic system: trade and product transformations. A basic guiding principle is scale invariance, which means that the dynamics of the economy should not depend on the units used to measure the different products. We develop the idea of a “near-equilibrium” expansion which allow us to study the dynamics of fluctuations around economic equilibrium. This is similar to the familiar “perturbation theory” studied in many areas of physics. We study some simple models of both centralized and decentralized markets. We show the relaxation to equilibrium when appropriate. More interestingly, we study a simple model of a decentralized market that shows a spontaneous transition into a monetary phase. We use mean field theory analysis to provide a statistical interpretation of the monetary phase. Furthermore, we show that such phase can be dynamically unstable. Finally, we study some simple centralized financial markets, one of which shows a speculative bubble and a crash. 
INTELLIGENCE IN THE WORLD Ecological Rationality: Intelligence in the World is a new book by Peter Todd, Gerd Gigerenzer and the ABC Research Group... 
Are you ready for the fight?
Recessions are created for people who want follow this trend... why wouldn't you make your own trend and start your own business? An excellent post with some interesting insights and examples. [note mg]
Recessions are the perfect time to start a business: FedEx, Microsoft, Burger King and even GE were started during the recessions the U.S. has experienced over the last century and a half. If you’ve been thinking about starting a new business, the fact that the economy is down should not stop you. In fact, there are many reasons why the national economic situation should encourage you to start a new business now.
You Have Motivation...
Read more: http://bit.ly/L9RTWH Via Martin Gysler Neurophilosophy is a rich interdischiplinary study of the prospects for a unified cognitive neurobiology. Contemporary research in the empirical neurosciences and recent research in the philosophy of mind and the philosophy of science are used to illuminate fundamental questions concerning the raltion between abstract cognitive theory and substantive neuroscience. Cognitive Science - An Introduction to the Mind and Brain 2006 - Free ebook download as PDF File (.pdf), text file (.txt) or read book online for free. L’influenzabilità reciproca ha come conseguenza un effetto di rafforzamento dell’opinione dominante, proprio come avviene nella formazione di un raggio laser: se predomina una certa onda alla fine essa vince la gara con tutte le altre e un numero sempre maggiore di atomi cade sotto il suo dominio. Una cosa analoga accade nella formazione dell’opinione pubblica dominante: un numero sempre maggiore di persone cade sotto il suo predominio e finisce per sostenerla.” (H. Haken). We are all prone to having psychological preconceptions or biases that make us behave in certain ways. These biases influence how we assimilate the information we come in contact with on a daily basis. They also have an impact on how we utilize that information to make decisions. Some of the decisions that are influenced by our psychological biases can have a large impact on our personal wealth—or the lack of it. I have written this book to try to show you how your own psychological biases can creep into your investment decisions and sabotage your attempts at building wealth. The book that applies behavioral finance to the real worldUnderstanding how to use behavioral finance theory in investing is a hot topic these days. Nobel laureate Daniel Kahneman has described fin... In this paper, we empirically examine a heterogenous bounded rationality version of a hybrid New-Keynesian model. The model is estimated via the simulated method of moments using Euro Area data from 1975Q1 to 2009Q4. It is generally assumed that agents' beliefs display waves of optimism and pessimism - so called animal spirits - on future movements in the output and inflation gap. Our main empirical findings show that a bounded rationality model with cognitive limitation provides fits for auto- and cross-covariances of the data which are slightly better than or equal to a model where rational expectations are assumed. This implies that the bounded rationality model provides some structural insights on the expectation formation process at the macro-level for the Euro Area. First, over the whole time interval the agents had expected moderate deviations of the future output gap from its steady state value with low uncertainty. Second, we find strong evidence for an autoregressive expectation formation process regarding the inflation gap. Both observations explain a high degree of persistence in the output gap and the inflation gap. We consider 2-player games played on a finite state space for an infinite number of rounds. The games are concurrent: in each round, the two players (player 1 and player 2) choose their moves independently and simultaneously; the current state and the two moves determine the successor state. We study concurrent games with ω-regular winning conditions specified asparity objectives. We consider the qualitative analysis problems: the computation of the almost-sure and limit-sure winning set of states, |
We review literatures on agreeing to disagree and on the rationality of differing priors, in order to evaluate the honesty of typical disagreements. A robust result is that honest truth-seeking agents with common priors should not knowingly disagree. Typical disagreement seems explainable by a combination of random belief influences and by priors that tell each person that he reasons better than others. When criticizing others, however, people seem to uphold rationality standards that disapprove of such self-favoring priors. This suggests that typical disagreements are dishonest. We conclude by briefly considering how one might try to become more honest when disagreeing.
There is at least one case in which an apparent instance of the conjunction fallacy is not fallacious. It happens when we consider bounded rational agents rather than the more idealized unbounded rational agents typical of Bayesianism. Bounded rationality assumes that there may be some limits on the cognitive powers of the agent and looks at a concept of rationality within these constraints. In many ways it is more relevant to human decision making than unbounded rationality, though it is much less theoretically developed. In certain cases, it is (boundedly) rational to assign a higher probability to a stronger claim than one would assign to a weaker version, if the stronger claim helps to explain why the weaker one might be true (and some other conditions are met). .......
Abstract: Consider a game where Alice generates an integer and Bob wins if he can factor that integer. Traditional game theory tells us that Bob will always win this game even though in practice Alice will win given our usual assumptions about the hardness of factoring. We define a new notion of bounded rationality, where the payoffs of players are discounted by the computation time they take to produce their actions. We use this notion to give a direct correspondence between the existence of equilibria where Alice has a winning strategy and the hardness of factoring. Namely, under a natural assumption on the discount rates, there is an equilibrium where Alice has a winning strategy iff there is a linear-time samplable distribution with respect to which Factoring is hard on average.
We also give general results for discounted games over countable action spaces, including showing that any game with bounded and computable payoffs has an equilibrium in our model, even if each player is allowed a countable number of actions. It follows, for example, that the Largest Integer game has an equilibrium in our model though it has no Nash equilibria or ǫ-Nash equilibria.
We investigated the neural underpinnings of timbral, tonal, and rhythmic features of a naturalistic musical stimu-
lus. Participants were scanned with functional Magnetic Resonance Imaging (fMRI) while listening to a stimulus with a rich musical structure, a modern tango. We correlated temporal evolutions of timbral, tonal, and rhythmic features of the stimulus, extracted using acoustic feature extraction procedures, with the fMRI time series. Results corroborate those obtained with controlled stimuli in previous studies and highlight additional areas recruited during musical feature processing. While timbral feature processing was associated with activations in cognitive areas of the cerebellum, and sensory and default mode network cerebrocortical areas, musical pulse and tonality processing recruited cortical and subcortical cognitive, motor and emotion-related circuits. In sum, by combining neuroimaging, acoustic feature extraction and behavioral methods, we revealed the large-scale cognitive, motor and limbic brain circuitry dedicated to acoustic feature processing during listening to a naturalistic stimulus. In ad- dition to these novel findings, our study has practical relevance as it provides a powerful means to localize neural processing of individual acoustical features, be it those of music, speech, or soundscapes, in ecological settings. 
"John Locke, the philosopher, who also argued that personal identity was really dependent on the autobiographical or episodic memories, and you are the sum of your memories, which, of course, is something that fractionates and fragments in various forms of dementia. (...)
As we all know, memory is notoriously fallible. It’s not cast in stone. It’s not something that is stable. It’s constantly reshaping itself. So the fact that we have a multitude of unconscious processes which are generating this coherence of consciousness, which is the I experience, and the truth that our memories are very selective and ultimately corruptible, we tend to remember things which fit with our general characterization of what our self is. We tend to ignore all the information that is inconsistent. We have all these attribution biases. We have cognitive dissonance. The very thing psychology keeps telling us, that we have all these unconscious mechanisms that reframe information, to fit with a coherent story, then both the “I” and the “me”, to all intents and purposes, are generated narratives. The illusions I talk about often are this sense that there is an integrated individual, with a veridical notion of past. And there’s nothing at the center. We’re the product of the emergent property, I would argue, of the multitude of these processes that generate us. (...)
The irrational superstitious behaviors: what I think religions do is they capitalize on a lot of inclinations that children have. Then I entered into a series of work, and my particular interest was this idea of essentialism and sacred objects and moral contamination. (...) If you put people through stressful situations or you overload it, you can see the reemergence of these kinds of ways of thinking. The empirical evidence seems to be supporting that. They’ve got wrinkles in their brains. They’re never going to go away. You can try and override them, but they’re always there and they will reappear under the right circumstances, which is why you see the reemergence under stress of a lot of irrational thinking. (...)
The hierarchy of representations in the brain: "Representations are literally re-presentations. That’s the language of the brain, that’s the mode of thinking in the brain, it’s representation. It’s more than likely, in fact, it’s most likely that there is already representation wired into the brain. If you think about the sensory systems, the array of the eye, for example, is already laid out in a topographical representation of the external world, to which it has not yet been exposed. What happens is that this is general layout, arrangements that become fine-tuned. We know of a lot of work to show that the arrangements of the sensory mechanisms do have a spatial arrangement, so that’s not learned in any sense. But these can become changed through experiences, and that’s why the early work of Hubel and Weisel, about the effects of abnormal environments showed that the general pattern could be distorted, but the pattern was already in place in the first place." Via Amira “Behavioral economics” improves the realism of the psychological assumptions underlying economic theory, promising to reunify psychology and economics in the process. Reunification should lead to better predictions about economic behavior and better policy prescriptions. Because economics is the science of how resources are allocated by individuals and by collective institutions like firms and markets, the psychology of individual behavior should underlie and inform economics, much as physics informs chemistry; archaeology informs anthropology; or neuroscience informs cognitive psychology. However, economists routinely—and proudly—use models that are grossly inconsistent with findings from psychology. A recent approach, “behavioral economics,” seeks to use psychology to inform economics, while maintaining the emphases on mathematical structure and explanation of field data that distinguish economics from other social sciences (1–3). This book treats of two subject areas within philosophy. They are EPISTEMOLOGY
In his masterpiece “Horcynus Orca” the Sicilian writer Stefano D’Arrigo distinguishes three kinds of knowledge: “the
hearsay, what you can see with your eyes and what you can see with your mind’s eye”. In order to keep complexity out of the vaguely, anti-reductionist doxa of the hearsay, we are going to use the computational and radical emergence and logical openness. These ones will make us possible to define the observer/observed model-mediated relationship as an oriented cognitive equilibrium. To develop the key-points of our constructivist epispemology, we will draw an analogy between the vison processes and the modes we build theories and models and finally we will introduce the semanticcomplexity of an observer. We revisit the claims about the biological underpinnings of economic behavior by specifically exploring if observed gender differences in risk/time preferences can be explained by natural fluctuations in progesterone/estradiol levels during the menstrual cycle and by prenatal exposure to testosterone levels. Results suggest that natural fluctuations in progesterone levels have a direct effect on discount rates and that estradiol/progesterone levels can indirectly affect time preferences by changing the curvature of the utility function. Using measured D2:D4 digit ratio, results imply that subjects with low digit ratio exhibit higher discount rates and risk loving preferences. It is intended to be a guide both to understandingirrational investor behavior and to creating individual investors’ portfoliosthat account for these irrational behaviors. In this book, an optimal port-folio lies on the efficient frontier, but it may move up or down that frontierdepending on the individual needs and preferences of each investor. Whenapplying behavior finance to real-world investment programs, an optimalportfolio is one with which an investor can comfortably live, so that he orshe has the ability to adhere to his or her investment program, while at thesame time reach long-term financial goals. Cognitive Biases - A Visual Study Guide - Free download as PDF File (.pdf), text file (.txt) or view presentation slides online. Hello Everyone, Dietrich, Franz and List, Christian (2012) Behaviourism is the view that preferences, beliefs, and other mental states in social-scienti…c theories are auxiliary constructs re-describing people's behav- ioural dispositions. Mentalism is the view that they capture real phenomena, no less existent than the unobservable entities and properties in the natural sciences, such as electrons and electromagnetic …elds. While behaviourism has long gone out of fashion in psychology and linguistics, it remains the dominant orthodoxy in economics, especially in the form of 'revealed preference'theory. We aim to (i) clear up some common conceptual confusions about the two views in economics, (ii) situate the debate in a broader historical and philosophical context, and (iii) defend a mentalist approach to economics. Setting aside normative concerns about behaviourism, we show that mentalism is in line with best scienti…c practice even if economics is treated as a purely positive science of human social behaviour. We distinguish mentalism from, and reject, the radical neuroeconomic view that social behaviour should be explained in terms of people's brain processes, as distinct from their mental states. |
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