Government 'nudge unit' to take on complex problems A special government unit that has saved the NSW budget millions of dollars using behavioural psychology to "nudge" citizens to act differently will now turn its attention to helping apprentices finish their training, improving the experience of hospital patients and promoting diversity in the public service. After…
Cognitive Economics is the economics of what is in people’s minds. It is a vibrant area of research (much of it within Behavioral Economics, Labor Economics and the Economics of Education) that brings into play novel types of data—especially novel types of survey data. Such data highlight the importance of heterogeneity across individuals and highlight thorny issues for Welfare Economics. A key theme of Cognitive Economics is finite cognition (often misleadingly called “bounded rationality”), which poses theoretical challenges that call for versatile approaches. Cognitive Economics brings a rich toolbox to the task of understanding a complex world.
The economics of "happiness" shares a feature with behavioral economics that raises questions about its usefulness in public policy analysis. What happiness economists call "habituation" refers to the fact that people's reported well-being reverts to a base level, even after major life events such as a disabling injury or winning the lottery. What behavioral economists call "projection bias" refers to the fact that people systematically mistake current circumstances for permanence, buying too much food if shopping while hungry for example. Habituation means happiness does not react to long-term changes, and projection bias means happiness over-reacts to temporary changes. I demonstrate this outcome by combining responses to happiness questions with information about air quality and weather on the day and in the place where those questions were asked. The current day's air quality affects happiness while the local annual average does not. Interpreted literally, either the value of air quality is not measurable using the happiness approach or air quality has no value. Interpreted more generously, projection bias saves happiness economics from habituation, enabling its use in public policy.
The tools we use to study the brain are tested on a system we actually understand.
In 2014, the US announced a new effort to understand the brain. Soon, we would map every single connection within the brain, track the activity of individual neurons, and start to piece together some of the fundamental units of biological cognition. The program was named BRAIN (for Brain Research through Advancing Innovative Neurotechnologies), and it posited that we were on the verge of these breakthroughs because both imaging and analysis hardware were finally powerful enough to produce the necessary data, and we had the software and processing power to make sense of it. But this week, PLoS Computational Biology published a cautionary note that suggests we may be getting ahead of ourselves. Part experiment, part polemic, a computer scientist got together with a biologist to apply the latest neurobiology approaches to a system we understand far more completely than the brain: a processor booting up the games Donkey Kong and Space Invaders. The results were about as awkward as you might expect, and they helped the researchers make their larger point: we may not understand the brain well enough to understand the brain.
The process of “self-organization” takes place in open and complex systems that acquire spatio-temporal or functional structures without specific ordering instructions from the outside. In domains such as physics, chemistry or biology, the phrase, “far from equilibrium”, refers to systems that are “far from thermal equilibrium”, while in other disciplines, the term refers to the property of being “away from the resting state”. Such systems are “complex” in the sense that they are composed of many interacting components, parts, elements, etc., and “open” in the sense that they exchange with their environment matter, energy, and information. Here, “information” may imply Shannon information , as a measure of the capacity of a channel through which a message passes, pragmatic information, as the impact of a message on recipients, or semantic information, as the meaning conveyed by a message. An attempt to bring these lines of thought together was made by Hermann Haken in his 1988 book Information and Self-Organization . In the meantime, a number of authors have studied the interplay between information and self-organization in a variety of fields. Though the selection of the relevant authors and topics is surely not complete, we believe that this special issue mirrors the state of these interdisciplinary approaches fairly well. In fact, the various papers of this Special Issue expose the different ways processes of self-organization are linked with the various forms of information. As will be seen below, a study of such links has consequences on a number of research domains, ranging from physics and chemistry, through the life sciences and cognitive science, including human behavior and action, to our understanding of society, economics, and the dynamics of cities and urbanization. As will be seen below, the contributions to this Special Issue shed light on the various facets of information and self-organization. And since these various facets do not lend themselves to a topic-oriented order, and since a reader may prefer one over another, we present the papers in an alphabetic order that follows the family name of the first author of each article.
Despite some ethical concerns, a concept of behavioural economics is gaining popularity. When Richard Thaler signs copies of the best-selling book Nudge, which he co-authored with legal scholar Cass Sunstein, he always writes “Nudge for good” next to his name. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our T&Cs and Copyright Policy for more detail. Email firstname.lastname@example.org to buy additional rights. https://www.ft.com/content/e98e2018-70ca-11e5-ad6d-f4ed76f0900a “That’s a plea, not an expectation,” explains the Chicago Booth professor, and one of the fathers of nudge theory, which describes how small interventions in the environment or incentives can encourage people to make better decisions. Is nudge good or bad? Yet in those three words Professor Thaler encapsulates some of the biggest concerns of critics of nudge theory: that this area of behavioural economics, of which “nudging” is one element, can be used to manipulate people to their detriment as well as their benefit. “People can nudge you for their own purposes,” concedes Prof Thaler. “Bernie Madoff [the Ponzi scheme fraudster] was a master in the art of winning people’s confidence and taking advantage of it. I don’t think he needed to read my book. I think he could have written a better version of it himself.”
These are the latest findings from the ipsos perils of perception survey. the results highlight how wrong people across 40 countries are about some key issues and features of the population in their country.
Abstract: We theoretically show that agents with loss-averse preferences facing a decision to receive a bad financial payoff if they report honestly or to receive a better financial payoff if they report dishonestly are more likely to lie to avoid receiving the low payoff the lower the ex-ante probability of the bad outcome. This occurs due to the ex-ante expected payoff increasing as the bad outcome becomes less likely, and hence the greater the loss that can be avoided by lying. We demonstrate robust support for this role of loss aversion on lying by reanalyzing the results from the extant literature covering 74 studies and 363 treatments, and from two new experiments that vary the outcome probabilities and examine lying for personal gain and for gains to causes one supports or opposes. To measure and compare lying behavior across treatments and studies, we develop an empirical method that estimates the full distribution of dishonesty when agents privately observe the outcome of a random process and can misreport what they observed.
In 2003, Eric J. Johnson and Daniel G. Goldstein discovered that the organ donation rate in two European countries — Hungary and Denmark — differed wildly. The first boasted 99.997% and the second, 4.25%. What explained this night and day difference? Turns out, a box. Or rather, the language surrounding one box in particular. In Hungary, organ donation was the DMV’s default option; its citizens had to “opt out” if they didn’t want to participate. In Denmark, it was the opposite. In other words, the easiest option is the automatic option and therefore whatever is framed as “default” usually wins.
During my holiday/Christmas/Hanukkah/Kwanzaa/Festivus break, I read two books, Michael Lewis’ The Undoing Project and Richard Thaler’s Misbehaving that explore (at least in part) how people make decisions, predictions and choices in life. Written about behavioral psychologists in the former and by a behavioral economist in the latter, what struck me is the significance of the biases we carry with us impacts how we predict “the outcome of uncertain events.” The books explore concepts such as: hindsight bias (believing you knew something was going to happen all along,) theory (or confirmation) bias (in which you have a seemingly good idea, ergo, it must be correct,) and the law of small numbers (in which the results of a relatively small sample size are given outsized weight to their actual validity.) The bottom line? Even with our perceived experience, our ability to predict anything, let alone Donald Trump’s victory, sucks.
Abstract: This paper presents the first empirical evidence in the history of banking on the question of whether banks can create money out of nothing. The banking crisis has revived interest in this issue, but it had remained unsettled. Three hypotheses are recognised in the literature. According to the financial intermediation theory of banking, banks are merely intermediaries like other non-bank financial institutions, collecting deposits that are then lent out. According to the fractional reserve theory of banking, individual banks are mere financial intermediaries that cannot create money, but collectively they end up creating money through systemic interaction. A third theory maintains that each individual bank has the power to create money ‘out of nothing’ and does so when it extends credit (the credit creation theory of banking). The question which of the theories is correct has far-reaching implications for research and policy. Surprisingly, despite the longstanding controversy, until now no empirical study has tested the theories. This is the contribution of the present paper. An empirical test is conducted, whereby money is borrowed from a cooperating bank, while its internal records are being monitored, to establish whether in the process of making the loan available to the borrower, the bank transfers these funds from other accounts within or outside the bank, or whether they are newly created. This study establishes for the first time empirically that banks individually create money out of nothing. The money supply is created as ‘fairy dust’ produced by the banks individually, "out of thin air".
Official Full-Text Publication: Cognitive brain mapping of auditors and accountants in going concern judgments on ResearchGate, the professional network for scientists.Th is study aims to explain the extent to which brain mapping patterns follow behavioral patterns of auditors and accountants’ judgments when assessing evidence for decisions involving going concern. It is multidisciplinary research involved investigating the relation between the theory of belief revision, neuroscience, and neuroaccounting with a sample of auditors and accountants. We developed a randomized controlled trial study with 12 auditors and 13 accountants. Auditors and accountants presented similar judgments about going concern, specially demonstrating greater sensitivity to negative evidence. Despite similar judgments, results showed diverging brain processing patterns between groups, as distinct reasoning was used to reach going concern estimates. During the decision process, auditors presented homogeneous brain processing patterns, while accountants evidenced con_ icts and greater cognitive e_ ort. For both groups, the occurrence of maximization (minimization) of judgments is observed in brain areas associated with identification of needs and motivations linked to individuals’ relations with their social group. This was strengthened by the lack of significant differences between the regression maps of auditors and accountants, leading to interpretation of the groups’ findings as homogeneous brain behavior. Despite familiarity with the executed task and knowledge of auditing standards, as a result of the greater use of algorithmic reasoning the auditors’ judgments were similar to that of accountants. On the other hand, the accountants’ greater cognitive effort, due to the experiencing of greater con_ ict in the decision-making process, made them use more quantum brain processing abilities, which are responsible for conscious reasoning. _ is was observed in the maximizations (minimizations) of the estimates in brain areas related to concerns with the judgments’ social repercussions, which culminated in some degree of “conservatism” in their decisions. Furthermore, these findings reveal another opportunity to discuss the assumption of the brain as the original accounting institution.
The debate about behavioral economics – the incorporation of insights from psychology into economics – is often framed as a question about the foundational assumptions of economic models. This paper presents a more pragmatic perspective on behavioral economics that focuses on its value for improving empirical predictions and policy decisions. I discuss three ways in which behavioral economics can contribute to public policy: by offering new policy tools, improving predictions about the effects of existing policies, and generating new welfare implications. I illustrate these contributions using applications to retirement savings, labor supply, and neighborhood choice. Behavioral models provide new tools to change behaviors such as savings rates and new counterfactuals to estimate the effects of policies such as income taxation. Behavioral models also provide new prescriptions for optimal policy that can be characterized in a non-paternalistic manner using methods analogous to those in neoclassical models. Model uncertainty does not justify using the neoclassical model; instead, it can provide a new rationale for using behavioral nudges. I conclude that incorporating behavioral features to the extent they help answer core economic questions may be more productive than viewing behavioral economics as a separate subfield that challenges the assumptions of neoclassical models.
The integration of neuroscience, psychology, microeconomic theory, and social intelligence has bred a field that provides insights and underlying assumptions to our normal interactions.
Behavioral economics sheds light on most everyday activities and why we consume goods and services the way we do, why we make certain choices about ourselves or others, and how we decide courses of action. It is an incredible lens that exposes our inner biases and approaches to decision-making. It’s one where we can more fully understand the bounds, motivations, causes and limitations to our decisions and actions—anything from risk to resource allocation, strategic dependence or irrationality. The integration of neuroscience, psychology, microeconomic theory and social intelligence has bred a field that provides insights and underlying assumptions to our interactions, and one that continues to influence us in our day-to-day lives.
Abstract A multidimensional financial system could provide benefits for individuals, companies, and states. Instead of top-down control, which is destined to eventually fail in a hyperconnected world, a bottom-up creation of value can unleash creative potential and drive innovations. Multiple currency dimensions can represent different externalities and thus enable the design of incentives and feedback mechanisms that foster the ability of complex dynamical systems to self-organize and lead to a more resilient society and sustainable economy. Modern information and communication technologies play a crucial role in this process, as Web 2.0 and online social networks promote cooperation and collaboration on unprecedented scales. Within this contribution, we discuss how one dimension of a multidimensional currency system could represent socio-digital capital (Social Bitcoins) that can be generated in a bottom-up way by individuals who perform search and navigation tasks in a future version of the digital world. The incentive to mine Social Bitcoins could sustain digital diversity, which mitigates the risk of totalitarian control by powerful monopolies of information and can create new business opportunities needed in times where a large fraction of current jobs is estimated to disappear due to computerisation.
Deficit cognitivi ed efficacia confessoria nelle condizioni generali di contratto, Gioacchino La Rocca, Ordinario di Diritto Civile nell’Università di Milano-Bicocca, Rivista di Diritto Bancario, 2016.
Costituiscono esperienza ormai diffusa moduli riproducenti condizioni generali di contratto, nei quali il predisponente ha inserito affermazioni volte a far sì che la controparte, nel sottoscrivere il modulo, dichiari di «essere operatore qualificato», di «avere ricevuto [determinate] informazioni», di «avere ricevuto informazioni adeguate» sul bene o servizio oggetto del contratto, di «avere esaminato il prodotto acquistato e di averlo trovato di proprio gradimento», ovvero di «avere ricevuto copia del contratto sottoscritta [dal predisponente]»; o ancora la dichiarazione – precompilata nel modulo predisposto dal soggetto abilitato allo svolgimento dei servizi di investimento - con la quale il cliente dichiara di avere un’elevata propensione al rischio .
Abstract In this paper we suggest that in the framework of the Category Theory it is possible to demonstrate the mathematical and logical dual equivalence between the category of the q-deformed Hopf Coalgebras and the category of the q-deformed Hopf Algebras in QFT, interpreted as a thermal field theory. Each pair algebra-coalgebra characterizes, indeed, a QFT system and its mirroring thermal bath, respectively, so to model dissipative quantum systems persistently in far-from-equilibrium conditions, with an evident significance also for biological sciences. The q-deformed Hopf Coalgebras and the q-deformed Hopf Algebras constitute two dual categories because characterized by the same functor T , related with the Bogoliubov transform, and by its contravariant application T op , respectively. The q-deformation parameter, indeed, is related to the Bogoliubov angle, and it is effectively a thermal parameter. Therefore, the different values of q identify univocally, and then label, the vacua appearing in the foliation process of the quantum vacuum. This means that, in the framework of Universal Coalgebra, as general theory of dynamic and computing systems (“labelled state-transition systems”), the so labelled infinitely many quantum vacua can be interpreted as the Final Coalgebra of an “Infinite State Black-Box Machine”. All this opens the way to the possibility of designing a new class of universal quantum computing architectures based on this coalgebraic formulation of QFT, as its ability of naturally generating a Fibonacci progression demonstrates.
Social Contagion of Ethnic Hostility Michal Bauer, Jana Cahlikova, Julie Chytilova and Tomas Zelinsky (email@example.com) CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague Abstract: Ethnic hostilities often spread rapidly. This paper investigates the influence of peers on willingness to sacrifice one’s own resources in order to cause harm to others. We implement a novel experimental design, in which we manipulate the identity of a victim as well as the social context, by allowing subjects to observe randomly assigned peers. The results show that the susceptibility to follow destructive peer behavior is great when harm is caused to members of the Roma minority, but small when it impacts co-ethnics. If not exposed to destructive peers, subjects do not discriminate. We observe very similar patterns in a norms elicitation experiment: destructive behavior towards Roma is not generally rated as more socially appropriate than when directed at co-ethnics but norms are more sensitive to social contexts. The findings can help to explain why ethnic hostilities can spread quickly among masses, even in societies with few visible signs of systematic inter-ethnic hatred, and why many societies institute hate crime laws.
Abstract: We study three common types of budgeting that differ in employees' influence over their approved budgets. These include affirmative budgeting where employees have full influence, consultative budgeting where employees have moderate influence, and authoritative budgeting where employees have low influence on their approved budgets. We argue that when organizations explicitly or implicitly communicate that budgeting will be participative, it establishes psychological contracts of affirmative budgeting in employees. Psychological contract breach occurs if employees subsequently experience authoritative or consultative budgeting. Psychological contract breach leads to feelings of violation and distrust, even when the terms of the employees' economic contracts are fulfilled. We examine if employees who experience psychological contract breach seek redress by increased budgetary misreporting. Experimental results indicate that psychological contract breach partially mediates the relation between budgeting type and budgetary misreporting. Moreover, the effects of budgeting type on budgetary misreporting persist in the future, even when budgeting is affirmative.
Money Illusion and Household Finance Thomas Stephens and Jean-Robert Tyran Additional contact information No 16-14, Discussion Papers from University of Copenhagen. Department of Economics Abstract: We elicit money illusion and match it with financial and sociodemographic data from official registers on a quasi-representative sample of the Danish population. We find that people who are more prone to money illusion hold more of their gross wealth in nominal assets, including bank deposits and bonds, and less in real assets, including real estate and stocks. This bias is robust to controls for education, income, cognitive ability and other relevant characteristics. We further find that money illusion is a costly bias: 10-year portfolio returns are about 10 percentage points lower for individuals with high money illusion.
What True Leaders Know About Emotional Intelligence True leaders at any level of the totem pole show their leadership primarily through managing their own emotions. After all, the only things we can control in life are our thoughts, feelings, and behaviors, and if we can manage those, we can lead our organizations from anywhere in…
What is a prediction? A prediction is a statement about what will happen or might happen in the future. This is the standard definition that you will find in a dictionary. Other, softer definitions, run like this: a statement about what you think will happen in the future. According to these two definitions - both are…
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