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Identification of Animal Spirits in a Bounded Rationality Model: An Application to the Euro Area - Jang, Tae-Seok and Sacht, Stephen (2012)

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.

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Nudge, la politica 'sexy' che punta a migliorare il mondo. Con gentilezza

Nudge, la politica 'sexy' che punta a migliorare il mondo. Con gentilezza | Bounded Rationality and Beyond | Scoop.it

Difficile pensare che la mosca disegnata al centro di un orinatoio rappresenti l’ultima frontiera del policy making, ma è così. Nei bagni pubblici di Schipholl, l’aeroporto di Amsterdam, serve a indirizzare il flusso di urina attirando l’attenzione degli utenti che, divertiti, istintivamente “mirano”: funziona meglio di ogni appello alla pulizia. Voilà un esempio classico – ed estremo – di nudge, ovvero “spinta gentile”: promuovere una buona pratica con un semplice stratagemma.

Dalle mosche agli elefanti: è la copertina di Nudge, la spinta gentile, in cui un pachiderma spinge dolcemente con la proboscide un suo simile. Questo best seller del 2008 (che si apre proprio con l’esempio degli orinatoi) ha inaugurato la teoria e introdotto alla Casa Bianca uno dei due autori, Cass R. Sunstein: nel 2009 è stato scelto da Obama per partecipare alle attività di governo del primo mandato.


Ti manipolo per il tuo bene

Ma di che si tratta esattamente? Che cosa sono questi nudge? Sono la conseguenza strategico-politica della diffusione in ambito accademico dei “behavioral studies”, gli studi comportamentali che fondono economia e psicologia, e che studiano i meccanismi delle scelte e gli automatismi mentali alla base di ogni azione, soprattutto quelle automatiche.


Questi studi dimostrano che tutti noi sopravvalutiamo la nostra razionalità: in realtà, ci muoviamo nel mondo spinti da istinti, abitudini, semplificazioni mentali e influenze sociali. Molti di questi meccanismi sono però prevedibili (come sanno benissimo gli esperti di marketing e pubblicità), e possono essere sfruttati per “spingere gentilmente” verso comportamenti intelligenti e pro-sociali. Ed ecco i nudge, stratagemmi psicologici usati per incoraggiare a donare il sangue, fare la raccolta differenziata, pagare le tasse, iscriversi a un fondo pensionistico, mangiare sano, risparmiare energia… Insomma il nudge è un marketing virtuoso.Cos'hanno in comune una mosca ad Amsterdam e Barack Obama? Hanno entrambi a che vedere con il nudge, il 'marketing virtuoso' che piace ai politici 

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» Stories from the States | The Behavioural Insights Team

» Stories from the States | The Behavioural Insights Team | Bounded Rationality and Beyond | Scoop.it
As part of BIT North America’s work with the Bloomberg Philanthropies What Works Cities initiative, we have launched ten randomized control trials in six cities from Kentucky to California in the last six months. While we wait for the results, we thought we’d share three stories that shed some light on BIT’s methodology and let you know what we’ve been up to in our first few months in the US.

The (randomized control) Trial

First up, a city that — like many — is already equipped to run randomized control trials but didn’t know it.

The marketing team at our wonderful partners, the City of Denver, uses MailChimp — an emailing software that includes built-in A/B test features. During a visit to the city, we were able to help them run a simple experiment to answer a simple question: which email would get more more people to click through to Denver’s online Department of Motor Vehicles (DMV) service? — email A or email B?
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The Rise of the Artificially Intelligent Hedge Fund

The Rise of the Artificially Intelligent Hedge Fund | Bounded Rationality and Beyond | Scoop.it

BEN Goertzel and his company, Aidyia, turned on a hedge fund that makes all stock trades using artificial intelligence—no human intervention required. “If we all die,” says Goertzel, a longtime AI guru and the company’s chief scientist, “it would keep trading.”


He means this literally. Goertzel and other humans built the system, of course, and they’ll continue to modify it as needed. But their creation identifies and executes trades entirely on its own, drawing on multiple forms of AI, including one inspired by genetic evolution and another based on probabilistic logic. Each day, after analyzing everything from market prices and volumes to macroeconomic data and corporate accounting documents, these AI engines make their own market predictions and then “vote” on the best course of action.

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pinITALY - Intervista Alberto Alemanno su democrazia partecipativa e nudging

Intervista ad Alberto Alemanno - Esperto di diritto, avvocato e Professore di EU Law & Risk Regulation presso l’HEC di Parigi. Alemanno spiega a pinITALY che cos’è la democrazia partecipativa e come funziona il nudging. @Telosaes
Interview with Alberto Alemanno, public interest lawyer and Professor in EU Law & Risk Regulation at the HEC Paris. Alemanno explains what is participatory democracy and how nudging works.
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Think Different to Lead Different

Think Different to Lead Different | Bounded Rationality and Beyond | Scoop.it

The show put entrepreneurs and celebrities in with charities in amongst the work and on the frontline developing innovative and ground-breaking projects that could have profound, positive effects for those in need tackling some of Britains biggest issues, while secretly trying to help secure £2 million of Lottery money that could turn the big idea into reality.


With youth unemployment increasing and now nearly 1 million people under 25 not in work, job centres are failing in my opinion to engage young people with the idea of finding a job. But what if the job centre was reinvented by young people, for young people? (designed by the customer for the customer, in other words).


Dave Fishwick was tasked with tackling this issue.


Straight-talking, self-made millionaire Dave Fishwick is one of the biggest suppliers of minibuses in Britain and in 2011 he took on the banking industry and successfully fought to open his own bank, so he is used to radical thinking.

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Human Memory Capacity is TEN TIMES MORE Than Previously Thought - PsyBlog

Human Memory Capacity is TEN TIMES MORE Than Previously Thought - PsyBlog | Bounded Rationality and Beyond | Scoop.it

A human brain could hold as much information as the entire internet, a new study finds.

Human memory capacity is in the petabyte range, researchers at the Salk Institute have now found.

This is ten times larger than was previously thought.

Professor Terry Sejnowski, the study’s first author, said:

“This is a real bombshell in the field of neuroscience.

We discovered the key to unlocking the design principle for how hippocampal neurons function with low energy but high computation power.

Our new measurements of the brain’s memory capacity increase conservative estimates by a factor of 10 to at least a petabyte, in the same ballpark as the World Wide Web.”

The conclusions come from an analysis of the brain’s synapses.The picture above shows a synapse between an axon (green) and dendrite (yellow). 

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Miklos Szilagyi's curator insight, January 25, 4:12 AM

Good news...:-))) OK, I did know it... intuitively, of course...:-)))

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Pensare l'impensabile: Otto Neurath e l'economia senza moneta

Pensare l'impensabile: Otto Neurath e l'economia senza moneta | Bounded Rationality and Beyond | Scoop.it
By Mario Ricciardi in Economics and Otto Neurath.
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Mark Zuckerberg's AI butler and the death of irrational thought

Mark Zuckerberg's AI butler and the death of irrational thought | Bounded Rationality and Beyond | Scoop.it
In recent years, behavioural economists – I’m thinking specifically of Daniel Kahneman and his seminal 2011 book Thinking Fast and Slow – told us that we’ve been doing things all wrong. Brands were appealing to the wrong side of the brain.Its predecessor, Nudge by Richard Thaler cites many examples of research which raise "serious questions about the rationality of many judgments and decisions that people make". Instead, they make predictable mistakes because of their use of heuristics, fallacies, and because of the way they are influenced by their social interactions.It was a theory which never really got off the ground in marketing practice, but it had us hooked.It began to explain why I’d look down at my shopping basket and wonder how it got so full of brands I couldn’t remember choosing.It picked at a nagging thread that’s long bothered us marketers, but one we haven’t dared to tug at: most of the time, humans are irrational mammals blindly following a set of ill-evolved heuristics.Read more at http://www.marketingmagazine.co.uk/article/1378290/mark-zuckerbergs-ai-butler-death-irrational-thought#xVj3MHF5rwhW8jVU.99
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2015 Annual Report | Social and Behavioral Sciences Team

This report was developed by the Social and Behavioral Sciences Team (SBST), a cross-agency team organized under the National Science and Technology Council. Its publication marks an important milestone for the Administration’s policy of using behavioral science to strengthen the ways in which Federal programs and policies serve the nation — a policy that was codified in September 2015.In building an initial portfolio of work, SBST focused on projects in two areas where behavioral science had a strong role to play and impacts could be demonstrated relatively rapidly:Assisting Americans by Streamlining Access to Programs: projects to streamline access to programs in retirement security, education, healthcare, and economic opportunity.Improving Government Efficiency: projects to improve program integrity, promote efficiencies by government workers, and help officials make cost-effective decisions.In nearly all cases, SBST was able to generate evidence about the effectiveness of these behavioral insights applications using randomized evaluations — the gold standard of evidence among policymakers and social scientists.
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Psychology's reproducibility project listed by Science Magazine as a top breakthrough of 2015 - Decision Science News

Science Magazine’s list of scientific breakthroughs for 2015 included the Psychology’sreproducibility project. While it didn’t win breakthrough of the year, the reproducibility project has been praised in other year-end roundups, according to the APS.Low replication rates hurt psychology’s reputation, but the project that discovered these rates helped it. The positive effects of the project will be felt for a long time.
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Political Incorrectness Is Scientifically Bogus

Political Incorrectness Is Scientifically Bogus | Bounded Rationality and Beyond | Scoop.it
By Cass R. Sunstein
Among Republicans, it has become politically correct to be politically incorrect. Actually that’s the most politically correct thing that you can possibly be. As soon as you announce that you’re politically incorrect, you’re guaranteed smiles and laughter, and probably thunderous applause. Proudly proclaiming your bravery, you’re pandering to the crowd.A math-filled new paper, by economists Chia-Hui Chen at Kyoto University and Junichiro Ishida at Osaka University, helps to explain what’s going on. With a careful analysis of incentive structures, they show that if self-interested people want to show that they are independent, their best strategy is to be politically incorrect, and to proclaim loudly that’s what they are being. The trick is that this strategy has nothing at all to do with genuine independence; it’s just a matter of salesmanship, a way to get more popular. 
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Finally a Study Explains Why Rich and Successful People Are Often Dishonest 

Finally a Study Explains Why Rich and Successful People Are Often Dishonest  | Bounded Rationality and Beyond | Scoop.it

Let’s face it, we’ve all been wondering why so many rich, successful, powerful people are cheating, lying, disgraces. Is it that only unethical people make it to the top? At least one study indicates that this is not the case—it’s that winning itself makes people behave unethically.


The Proceedings of the National Academy of Sciences just published a study that does not bode well for humanity’s future. Scientists at Ben-Gurion University and The Hebrew University of Jerusalem had participants in a psychological study participate in a series of games, the first of which determined a “winner,” and the second of which let that winner decide how much money they could award themselves. They found that competition winners cheated, awarding themselves more money than they deserved.


The games all involved two players playing against each other. In the first experiments, the participants played simple memory or identification games. They were told whether they were the winner or the loser, and if they won, they were given a pair of ear buds for a prize.


Let’s face it, we’ve all been wondering why so many rich, successful, powerful people are cheating, lying, disgraces. Is it that only unethical people make it to the top? At least one study indicates that this is not the case—it’s that winning itself makes people behave unethically. 

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NeuroEconomia: Come il Cervello prende le Decisioni - Video Corso

Economia, Psicologia e Neuroscienze stanno oggi convergendo in una nuova disciplina chiamata Neuroeconomia, con l'obiettivo di fornire una unica teoria generale dei processi decisionali umani.

La Neuroeconomia offre a economisti, psicologi e scienziati sociali una più profonda comprensione di come l'uomo prendere le decisioni, partendo dal presupposto che, a differenza di quanto affermato dall’economia tradizionale, l’uomo non è un animale razionale, ma agisce sotto l’impulso di processi neuronali automatici e molto spesso inconsci, quindi indipendenti dalla propria volontà.  

Il cervello é programmato per prendere rischi o per evitarli ? Come è valutata dal cervello una "decisione giusta" ? E possibile prevedere le intenzioni di acquisto di un consumatore ? Possiamo modulare il comportamento del cervello riguardo gli aspetti economici ?

Per rispondere a queste domande e conoscere meglio le basi della Neuroeconomia a partire dal prossimo 23 Giugno la prestigiosa Higher School of Economics di Mosca, presenta un nuovo interessante video corso di 9 settimane totalmente gratuito, intitolato Introduction to Neuroeconomics: how the brain makes decisions che tratterà molti argomenti partendo dai fondamenti della neuroeconomia e neuroanatomia del cervello trattati in quattro moduli successivi, guarda la video-presentazione del corso :.
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The hidden tricks of powerful persuasion

The hidden tricks of powerful persuasion | Bounded Rationality and Beyond | Scoop.it

Are we all just puppets on a string? Most people would like to assume that they are free agents – their fate lies in their own hands. But they’d be wrong. Often, we are as helpless as a marionette, being jerked about by someone else’s subtle influence. Without even feeling the tug, we do their bidding – while believing that it was our idea all along.

“What we’re finding more and more in psychology is that lots of the decisions we make are influenced by things we are not aware of,” says Jay Olson at McGill University in Quebec, Canada – who recently created an ingenious experiment showing just how easily we are manipulated by the gentlest persuasion. The question is, can we learn to spot those tricks, and how can we use them to our own advantage?

Olson has spent a lifetime exploring the subtle ways of tricking people’s perception, and it all began with magic. “I started magic tricks when I was five and performing when I was seven,” he says.Are we always in control of our minds? As David Robson discovers, it’s surprisingly easy to plant ideas in peoples’ heads without them realising. 

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Cass Sunstein - Nudge: Improving Decisions About Health, Wealth, and Happiness

Cass Sunstein, Harvard law professor, discusses his book "Nudge: Improving Decisions About Health, Wealth, and Happiness," at Cambridge Forum. He applies social science research on human behavior to legal questions in the stock market, mortgage markets, environmental protection, and family law. http://forum-network.org


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Scienze Cognitive: L'illusione di Sapere. Bias & Euristiche

Scienze Cognitive: L'illusione di Sapere. Bias & Euristiche | Bounded Rationality and Beyond | Scoop.it

È opinione comune che decisioni importanti non debbano essere prese sull’onda dell’emotività, bensì ponderate ed effettuate razionalmente. Peccato che la nostra mente “razionale” ci giochi spesso brutti scherzi. Infatti senza accorgercene imbocchiamo quelli che Piattelli-Palmarini definisce tunnel della mente, cioè mettiamo in atto delle strategie mentali (euristiche) fallaci oppure commettiamo degli errori cognitivi (bias) con risultati a dir poco disastrosi!

L’ illusione di sapere è una sconcertante rassegna degli errori madornali che compiamo quando prendiamo delle decisioni. Questi tunnel sono universali, sistematici, indipendenti dallo stato emotivo del momento, del tutto inconsapevoli e influenzano le nostre scelte nei più svariati campi.
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...and empathy too!

...and empathy too! | Bounded Rationality and Beyond | Scoop.it

This is a response to a post by Julie Drybrough, so it might be useful to check out her post before reading on. What I liked about her post and most of her posts is that it enlivened me and gave me an insight into what goes on for HER, rather than just blether about the “ten best whatevers” which most often leaves me with a sense of altschmertz, so I heartily recommend subscribing to her blog. At the end of it, she invited people to respond in the spirit of critical thinking, but if I may have some license, I would like to respond in a spirit of loving collaboration and “building on”. As she implores herself to get out of her “bubble”, it’s so important for me, too, to expose myself to things which challenge me to think about myself and the perspectives I hold about the world, otherwise I am not entirely sure I would be of much good service to others.

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Resting brain chatter predicts ability to learn second language

Resting brain chatter predicts ability to learn second language | Bounded Rationality and Beyond | Scoop.it

Learning your native language as a child is tricky enough, but learning a second is a labor of love.


Once we have left the golden years of youth, learning new linguistic skills can be a hard-won battle.


Researchers at McGill University in Montreal, Canada, used functional magnetic resonance imaging (fMRI) to measure the normal resting activity of students' brains before embarking on a French language course.


The team, led by Xiaoqian Chai and Denise Klein, measured whether differences in connectivity predicted the success of the language students.


The results, published in The Journal of Neuroscience this week, are a tantalizing peek into why some people seem to learn second languages with more ease than others.


If you are planning on learning a second language, the connectivity of your brain at rest might predict how easy, or how difficult, you find it. 

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Mental depletion complicates financial decisions for the poor | PBS NewsHour

Mental depletion complicates financial decisions for the poor | PBS NewsHour | Bounded Rationality and Beyond | Scoop.it

Why does it become more difficult to make good financial decisions when you’re poor?

Last month, behavioral economist Dan Ariely and his team at the Center for Advanced Hindsight opened up the Common Cents Lab. Its goal is twofold: to examine how those living in poverty misspend their money and to help the poor make better financial decisions. I spoke with Ariely about the center, our not-so-rational spending and why making good financial decisions becomes even more difficult when you’re poor. For more on the topic, read the second half of Making Sen$e’s interview with Ariely here. The following conversation has been edited and condensed for clarity and length.



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Long-term effects of marijuana use on the brain

Abstract
Questions surrounding the effects of chronic marijuana use on brain structure continue to increase. To date, however, findings remain inconclusive. In this comprehensive study that aimed to characterize brain alterations associated with chronic marijuana use, we measured gray matter (GM) volume via structural MRI across the whole brain by using voxel-based morphology, synchrony among abnormal GM regions during resting state via functional connectivity MRI, and white matter integrity (i.e., structural connectivity) between the abnormal GM regions via diffusion tensor imaging in 48 marijuana users and 62 age- and sex-matched nonusing controls. The results showed that compared with controls, marijuana users had significantly less bilateral orbitofrontal gyri volume, higher functional connectivity in the orbitofrontal cortex (OFC) network, and higher structural connectivity in tracts that innervate the OFC (forceps minor) as measured by fractional anisotropy (FA). Increased OFC functional connectivity in marijuana users was associated with earlier age of onset. Lastly, a quadratic trend was observed suggesting that the FA of the forceps minor tract initially increased following regular marijuana use but decreased with protracted regular use. This pattern may indicate differential effects of initial and chronic marijuana use that may reflect complex neuroadaptive processes in response to marijuana use. Despite the observed age of onset effects, longitudinal studies are needed to determine causality of these effects.
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The Workbooks — Irrational Labs

The Workbooks — Irrational Labs | Bounded Rationality and Beyond | Scoop.it
These workbooks condense years of deep academic learnings in behavioral economics, with the goal to help product people understand human behavior and design powerful experiences.
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The Best Human-Blunder Books of 2015

The Best Human-Blunder Books of 2015 | Bounded Rationality and Beyond | Scoop.it
By Cass R. Sunstein
Behavioral science has become the usual term for psychological and economic research on human behavior, often designed to explore people’s biases and blunders. For that research, 2015 has been a banner year, with an unusually large number of important books. Five of them stand out -- and two of these weren’t even written by social scientists.“Phishing for Phools,” by George Akerlof and Robert Shiller, is an instant classic. Akerlof and Shiller contend that free markets lead companies to “phish” -- to exploit both the ignorance and the behavioral biases of “phools” (also known as human beings). One of their major contributions is to show that if we care about people’s well-being, the invisible hand is often the problem, not the solution.That hand sometimes punishes companies that fail to take advantage of biases, such as the tendency to ignore fine print or to show unrealistic optimism. Akerlof and Shiller are well aware that the free market does a lot of good, but they demonstrate that it can reward businesses (such as mortgage providers, cigarette companies and sellers of high-calorie foods) when those companies really don’t help their customers, but actually harm them.
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