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Daniel Kahneman - Two Systems of the Mind

November 9, 2011 Cambridge, MA Daniel Kahneman is Senior Scholar, Professor of Psychology and Public Affairs Emeritus, and Eugene Higgins Professor of Psycho...
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Bounded Rationality and Beyond

News on the effects of bounded rationality in economics and business, relationships and politics
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The change of music preferences following the onset of a mental disorder

A psychiatric population (n=123) was examined on how music preferences had changed after the onset of a mental disorder. Most patients did not change their previous music preference; this group of patients considered music helpful for their mental state, showed more attractivity and enforcement as personality traits and used music more for emotion modulation. Patients who experienced a preference shift reported that music had impaired them during the time of illness; these patients showed less ego-strength, less confidence and less enforcement and used music less for arousal modulation. A third subgroup stopped listening to music completely after the onset of the mental disorder; these patients attribute less importance to music and also reported that music had impaired their mental state. They showed more ego-strength and used music less for emotion modulation. The results suggest that the use of music in everyday life can be helpful as an emotion modulation strategy. However, some patients might need instructions on how to use music in a functional way and not a dysfunctional one. Psychiatrists and psychotherapists as well as music therapists should be aware of emotion modulation strategies, subjective valence of music and personality traits of their patients. Due to the ubiquity of music, psychoeducative instructions on how to use music in everyday life plays an increasing role in the treatment of mental illness.

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Continuous Euclidean Embeddings of Incomplete Preferences

Abstract: Debreu's classic theorem asserts that when an agent's weak preference ordering is reflexive, transitive, and closed in a suitable topology, it can be represented by a continuous utility function. Of interest in some economic settings is to weaken these conditions by replacing transitivity with negative transitivity. Such preferences have been successfully modeled using multi-utility representations, ie. an order embedding into $\mathbb{R}^n$ rather than simply $\mathbb{R}$. Here we show that the topological conditions for a continuous single utility representation are sufficient to guarantee a continuous multi-utility representation, closing a conjecture of Nishimura & Ok (2015). The impossibility of a multi-utility representation consistent with Pareto improvement is also demonstrated.

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Are Survey Risk Aversion Measurements Adequate in a Low Income Context?

Abstract: Using an original dataset collected among motorcyclists in New Delhi (2011), this paper compares three different survey measures of risk attitudes: self-assessment, hypothetical lotteries and income prospect choices. While previous research on risk aversion measurement methods in developing countries mainly looked at specific groups such as rural farmers or students, the dataset I use covers a large and heterogeneous urban population. I first show that all measurements are positively and highly correlated with one another, this being even more the case within methodologies and within domains. Subsequently, I investigate the predictive power of these different individual risk-aversion measurements on occupation choices and health decisions. Most of my elicited risk preferences appear to predict risky health behaviors well. Puzzling results are found with the lotteries and may be interpreted either as evidence of risk-compensation between domains or as an incapacity to capture the desired characteristic. Finally, thanks to information on religious beliefs and practices, I am able to verify that cultural background does not impact on the relationship between risk preferences and risky conducts. Overall, this analysis highlights that elicitation of risk-aversion measurements through surveys in a developing country like India thus appears possible.

#neuroeconomy

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Bio. Quantum Physics of Sound and Music

Sound perceived by humans is produced by the brain through the stimulus of external vibration transmitted and converted into information signals, by means of the hearing organs focused in the activities of the cochlea. The brain exercises pre-attentive research functions, interactively searching to be synchronous with all frequencies that are similar to the spectrum of the human voice and their differences in tones and frequency before producing the effective sounds that we hear. Sounds in fact, are not a direct expression of external acoustic vibration but sensory simulation produced by the brain. Hence, the brain do not recognises directly the external frequencies as physical sounds or noises, but as “Information Energy” derived by the “entangling activity” of transformation of vibration waves in information signals. In fact the last information signals are not an immediate consequence of the physical vibration of air. This is because vibration, if not transduced in quantum-signals, cannot interact with the information activities of the brain neurons.

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Informal low-cost methods for increasing enrollment of environmentally sensitive lands in farmland conservation programs: An experimental study

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I Liked Everything I Saw on Facebook for Two Days. Here’s What It Did to Me

THERE’S THIS GREAT Andy Warhol quote you’ve probably seen before: “I think everybody should like everybody.” You can buy posters and plates with pictures of Warhol, looking like the cover of a Belle & Sebastian album, with that phrase plastered across his face in Helvetica. But the full quote, taken from a 1963 interview in Art News, is a great description of how we interact on social media today.

Warhol: Someone said that Brecht wanted everybody to think alike. I want everybody to think alike. But Brecht wanted to do it through Communism, in a way. Russia is doing it under government. It’s happening here all by itself without being under a strict government; so if it’s working without trying, why can’t it work without being Communist? Everybody looks alike and acts alike, and we’re getting more and more that way.
I think everybody should be a machine. I think everybody should like everybody.

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environmentally sensitive lands in farmland conservation programs: An experimental study

http://purl.umn.edu/205126

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Cognitive Biases in the Assimilation of Scientific Information on Global Warming and Genetically Modified Food

Abstract: The ability of scientific knowledge to contribute to public debate about societal risks depends on how the public assimilates information resulting from the scientific community. Bayesian decision theory assumes that people update a belief by allocating weights to a prior belief and new information to form a posterior belief. The purpose of this study was to determine the effects of prior beliefs on assimilation of scientific information and test several hypotheses about the manner in which people process scientific information on genetically modified food and global warming. Results indicated that assimilation of information is dependent on prior beliefs and that the failure to update beliefs in a Bayesian fashion is a result of several factors including: misinterpreting information, illusionary correlations, selectively scrutinizing information, information-processing problems, knowledge, political affiliation, and cognitive function.

http://purl.umn.edu/162532

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The Neuroscience of Drumming: Researchers Discover the Secrets of Drumming & The Human Brain

An old musician’s joke goes “there are three kinds of drummers in the world—those who can count and those who can’t.” But perhaps there is an even more global divide. Perhaps there are three kinds of people in the world—those who can drum and those who can’t. Perhaps, as the promotional video above from GE suggests, drummers have fundamentally different brains than the rest of us. Today we highlight the scientific research into drummers’ brains, an expanding area of neuroscience and psychology that disproves a host of dumb drummer jokes.

“Drummers,” writes Jordan Taylor Sloan at Mic, “can actually be smarter than their less rhythmically-focused bandmates.” This according to the findings of a Swedish study (Karolinska Institutet in Stockholm) which shows “a link between intelligence, good timing and the part of the brain used for problem-solving.” As Gary Cleland puts it in The Telegraph, drummers “might actually be natural intellectuals.”

Neuroscientist David Eagleman, a renaissance researcher The New Yorker calls “a man obsessed with time,” found this out in an experiment he conducted with various professional drummers at Brian Eno’s studio. It was Eno who theorized that drummers have a unique mental makeup, and it turns out “Eno was right: drummers do have different brains from the rest.” Eagleman’s test showed “a huge statistical difference between the drummers’ timing and that of test subjects.” Says Eagleman, “Now we know that there is something anatomically different about them.” Their ability to keep time gives them an intuitive understanding of the rhythmic patterns they perceive all around them.

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Evolution and Complexity in Economics

The paper discusses recent trends in the sister sciences of evolutionary economics and complexity economics. It suggests that a unifying approach that marries the two strands is needed when reconstructing economics as a science capable of tackling the two key questions of the discipline: complex economic structure and evolutionary economic change. Physics, biology and the cultural sciences are investigated in terms of their usefulness as both paradigmatic orientation and as toolbox. The micro–meso–macro architecture delineated puts meso centre stage, highlighting its significance as structure component and as process component alike, thereby allowing us to handle the key issues of structure and change.
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Ernst Strüngmann Forum - Language, Music, and the Brain

This book explores the relationships between language, music, and the brain by pursuing four key themes and the crosstalk among them: song and dance as a bridge between music and language; multiple levels of structure from brain to behavior to culture; the semantics of internal and external worlds and the role of emotion; and the evolution and development of language. The book offers specially commissioned expositions of current research accessible both to experts across disciplines and to non-experts.

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After the crash, can biologists fix economics?

Orthodox economics is broken. Applying what we know about evolution, ecology and collective behaviour might help us avoid another catastrophe.

Moulding the future of economics (Image: Matt Murphy/Handsome Frank)

THE GLOBAL financial crisis of 2008 took the world by surprise. Few mainstream economists saw it coming. Most were blind even to the possibility of such a catastrophic collapse. Since then, they have failed to agree on the interventions required to fix it. But it’s not just the crash: there is a growing feeling that orthodox economics can’t provide the answers to our most pressing problems, such as why inequality is spiralling. No wonder there’s talk of revolution.

Earlier this year, several dozen quiet radicals met in a boxy red building on the outskirts of Frankfurt, Germany, to plot just that. The stated aim of this Ernst Strüngmann Forum at the Frankfurt Institute for Advanced Studies was to create “a new synthesis for economics”.

#neuroeconomy

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The 'new economic synthesis' (revolution?) is under way: Will Homo economicus topple?

A "new economic synthesis" (some are calling it a revolution) is under way, and long-held notions -- Homo economicus and wisdom of the crowd among them -- might just topple along with many of the tenets of neoclassical economic theory, according to a feature article in New Scientist that quotes a number of SFI external professors and collaborators.

The synthesis, notes the article, is a coming together of macroeconomics with not only behavioral economics, but with other fields, too -- anthropology, ecology, and evolutionary biology, to name a few. Approaches from these fields could help economists account for more and subtler determinants of human behavior such as beliefs, cultural norms, and reactions to each other.

The article touches a number of complex systems ideas that have been explored at SFI, and by SFI researchers, for nearly three decades.

#neuroeconomy #behavioral_economy #bounded_rationality

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Hierarchical mutual information for the comparison of hierarchical community structures in complex networks

The quest for a quantitative characterization of community and modular structure of complex networks produced a variety of methods and algorithms to classify different networks. However, it is not clear if such methods provide consistent, robust and meaningful results when considering hierarchies as a whole. Part of the problem is the lack of a similarity measure for the comparison of hierarchical community structures. In this work we give a contribution by introducing the {\it hierarchical mutual information}, which is a generalization of the traditional mutual information, and allows to compare hierarchical partitions and hierarchical community structures. The {\it normalized} version of the hierarchical mutual information should behave analogously to the traditional normalized mutual information. Here, the correct behavior of the hierarchical mutual information is corroborated on an extensive battery of numerical experiments. The experiments are performed on artificial hierarchies, and on the hierarchical community structure of artificial and empirical networks. Furthermore, the experiments illustrate some of the practical applications of the hierarchical mutual information. Namely, the comparison of different community detection methods, and the study of the the consistency, robustness and temporal evolution of the hierarchical modular structure of networks.

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The effect of decentralized behavioral decision making on system-level ris

Abstract: Certain classes of system-level risk depend partly on decentralized lay decision making. For instance, an organization's network security risk depends partly on its employees' responses to phishing attacks. On a larger scale, the risk within a financial system depends partly on households' responses to mortgage sales pitches. Behavioral economics shows that lay decision makers typically depart in systematic ways from the normative rationality of Expected Utility (EU), and instead display heuristics and biases as captured in the more descriptively accurate Prospect Theory (PT). In turn psychological studies show that successful deception ploys eschew direct logical argumentation and instead employ peripheral-route persuasion, manipulation of visceral emotions, urgency, and familiar contextual cues. The detection of phishing emails and inappropriate mortgage contracts may be framed as a binary classification task. Signal Detection Theory (SDT) offers the standard normative solution, formulated as an optimal cutoff threshold, for distinguishing between good/bad emails or mortgages. In this paper we extend SDT behaviorally by re-deriving the optimal cutoff threshold under PT. Furthermore we incorporate the psychology of deception into determination of SDT's discriminability parameter. With the neo-additive probability weighting function, the optimal cutoff threshold under PT is rendered unique under well-behaved sampling distributions, tractable in computation, and transparent in interpretation. The PT-based cutoff threshold is (i) independent of loss aversion and (ii) more conservative than the classical SDT cutoff threshold. Independently of any possible misalignment between individual-level and system-level misclassification costs, decentralized behavioral decision makers are biased toward under-detection, and system-level risk is consequently greater than in analyses predicated upon normative rationality.

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Integral Options Cafe: Biophotonic Communications and Information Encoding in Complex Systems - Implications for Consciousness?

How does consciousness emerge from inert matter? This may be the hardest part of the "hard problem" that is consciousness. We have developed pretty solid models for explaining how the various modules and circuits in the brain work together (often in parallel processes) to create awareness and a sense of self.

But how does the brain itself, a three pound lump of fatty acids, produce consciousness? We don't really know, but the research presented below offers the beginning of a possible explanation, but only if the various models are combined (integrated) to generate a coherent theory.

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How Markets Alleviate the Excessive Choice Effect: A Field Experiment on Craft Beer Choice

Abstract: Research in psychology suggests that, somewhat paradoxically, providing consumers more choice can reduce the likelihood of making a purchase, producing the so-called excessive choice effect (ECE). To the extent the ECE exists, firms have an incentive to alleviate the effect through a variety of consumer-focused institutions that lower search costs. This study determines the effectiveness of three consumer-focused institutions on the excessive choice effect in a field experiment focused on beer sales in a restaurant. We manipulate the number of options on the menu (6 vs. 12) in addition to the use of search cost lowering consumer-focused institutions (a control, a menu, a menu with a special prominently displayed, a menu with local options prominently highlighted, and a menu with beer advocate scores). Although we find that consumers tend to be more likely to order beer when presented 6 rather than 12 options, the differences are often not significant depending which data are used and how it is analyzed. Highlighting specials or listing beer rankings have an effect on consumer choices, and have the potential to decrease the excessive choice effect. The experiment also suggests including a special is the most effective way to increase sales of a product category, but not the specific product itself. #neuroeconomy, #nudge #behavioral_economics
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Inducing Hypothetical Bias Mitigation with Ten Commandments

Abstract: While a number of hypothetical bias mitigation methods have been proposed, the problem remains as the literature continues to debate the effectiveness and practicality of the mitigation methods (Loomis, 2011). We propose an easy to implement methods to mitigate hypothetical bias in choice experiments. The method involve asking respondents to recall the Ten Commandments prior to willingness to pay elicitation. Our result shows that the proposed method exhibit sign of hypothetical bias mitigation.

#neuroeconomy, #nudge #behavioral_economics

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Why Neuroscience Needs Hackers

Brain researchers are overwhelmed with data. Hackers can help.

There was a time when neuroscientists could only dream of having such a problem. Now the fantasy has come true, and they are struggling to solve it. Brilliant new exploratory devices are overwhelming the field with an avalanche of raw data about the nervous system's inner workings. The trouble is that even starting to make sense of this bonanza of information has become a superhuman challenge.

Just about every branch of science is facing a similar disruption. As laboratory-bench research migrates into the digital realm, programming is becoming an indispensable part of the process. At the same time, previously dependable sources of financial support are drying up. The result has been a painful scarcity of jobs and grants—which, in turn, is impelling far too many gifted researchers to focus on their narrow areas of specialization rather than investing time and energy into acquiring new, computer-age skills. In fields where data growth is especially out of control, such as neuroscience, the demand for computer expertise is growing as quickly as the information itself.

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Hiring and Escalation Bias in Subjective Performance Evaluations: A Laboratory Experiment

Abstract: In many organizations the measurement of job performance can not rely on easily quantifiable information. In such cases, supervising managers often use subjective performance evaluations. We use laboratory experiments to study whether the way employees are assigned to a manager affects managers’ and co-employees’ subjective evaluations of employees. Employees can either be hired by the manager, explicitly not hired by him and nevertheless assigned to him or exogenously assigned to him. We present data from four different treatments. For all four treatments we find escalation bias by managers. Managers exhibit a positive bias towards those employees they have hired or a negative one towards those they have explicitly not hired. For three treatments we find that managers’ and employees’ biases are connected. Exogenously assigned employees are biased in favor of employees hired by the manager and against those explicitly not hired.

http://research.barcelonagse.eu/tmp/working_papers/839.pdf

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Getting Stronger through Stress: Making Black Swans Work for You

Unanticipated events, especially extreme unanticipated events, can harm us or even destroy us. But they can also help us to grow and make us stronger. If they do the former, we tend to fear them and avoid them wherever possible. If they do the latter, our orientation shifts and we tend to welcome them. In the world of the Big Shift, as I suggested in my post last week on resilience, we all need to find ways to harness the power of randomness, volatility and extreme events to help us grow and develop more of our potential.

Focusing on Black Swans

Nassim Nicholas Taleb has been consumed by black swans over three books: Fooled by Randomness, The Black Swan and, now, Antifragile. Black Swans, in Taleb’s parlance, are “large-scale unpredictable and irregular events of massive consequence.’ The latest book focuses on approaches that enable us to thrive from high levels of volatility, and particularly those unexpected extreme events. It’s a profoundly rich and engaging book that will no doubt prove infuriating to most of our economic, educational and political elites, for he argues that these elites have played a major role in making us increasingly vulnerable to volatility and Black Swans

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The future of human swarming and collective intelligence | Impact Lab

Whether it’s the birds and the bees, the fish, or even slime molds, it goes back to all social creatures that use their collective intelligence to form real-time synchronous systems. We have many names for these natural assemblages, including flocks, schools, shoals, blooms, colonies, herds, and swarms. Whatever we call them, one thing is clear – millions of years of evolution produced these highly coordinated behaviors because of the survival benefits they provide to a great many species. (Video)

In this way, nature had demonstrated that social creatures, by functioning together in closed-loop systems, can outperform the vast majority of individual members when solving problems and making decisions, thereby boosting overall survival of their population.

For convenience I use the word “swarm” to refer to cohesive groupings of individual members, all working together as a unified dynamic system, their collective behavior tightly coordinated by real-time feedback loops. Unlike discordant groups (i.e. crowds), swarms behave as unique entities, operating as a coherent unit that displays emergent intelligence, even emergent personality. With that definition in mind, the big question that has propelled my explorations over the last few years is simply this: “Can humans swarm?”

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Psychiatry is reinventing itself thanks to advances in biology

Seeking biological markers for mental disorders is starting to bear fruit, says Thomas Insel, director of the US National Institute of Mental Health

A REVOLUTION is under way in psychiatry. The science underpinning this discipline has in the past shifted from psychology to pharmacology, and now it is changing again. We are starting to build it on genomics and neuroscience, thanks to advances in DNA sequencing and functional imaging.

The next decade should see all of these strands intertwined into a more holistic approach. People are beginning to recognise that depression and schizophrenia, for example, are brain disorders related to physiological changes rather than simply behavioural ones.

What does it mean to think of mental illnesses in this way? Is psychiatry really just part of neurology? Many disorders of neurology, such as stroke, involve damage to a specific site in the brain. But psychiatric disorders may be more usefully thought of as brain circuit problems – what researchers have called “connectopathies”. You could make an analogy with heart conditions. The behaviour and ways of thinking seen in a mental illness are symptoms of an underlying disorder in a brain circuit – a brain “arrhythmia”, but a straight neurological disorder would be more like a heart attack.

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Ernst Strüngmann Forum Evolution And The Mechanisms Of Decision Making Publication

How do we make decisions? Conventional decision theory tells us only which behavioral choices we ought to make if we follow certain axioms. In real life, however, our choices are governed by cognitive mechanisms shaped over evolutionary time through the process of natural selection. Evolution has created strong biases in how and when we process information, and it is these evolved cognitive building blocks--from signal detection and memory to individual and social learning--that provide the foundation for our choices. An evolutionary perspective thus sheds necessary light on the nature of how we and other animals make decisions. This volume--with contributors from a broad range of disciplines, including evolutionary biology, psychology, economics, anthropology, neuroscience, and computer science--offers a multidisciplinary examination of what evolution can tell us about our and other animals’ mechanisms of decision making. Human children, for example, differ from chimpanzees in their tendency to over-imitate others and copy obviously useless actions; this divergence from our primate relatives sets up imitation as one of the important mechanisms underlying human decision making. The volume also considers why and when decision mechanisms are robust, why they vary across individuals and situations, and how social life affects our decisions.

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Swarm Intelligence in Animal Groups: When Can a Collective Out-Perform an Expert?

An important potential advantage of group-living that has been mostly neglected by life scientists is that individuals in animal groups may cope more effectively with unfamiliar situations. Social interaction can provide a solution to a cognitive problem that is not available to single individuals via two potential mechanisms: (i) individuals can aggregate information, thus augmenting their ‘collective cognition’, or (ii) interaction with conspecifics can allow individuals to follow specific ‘leaders’, those experts with information particularly relevant to the decision at hand. However, a-priori, theory-based expectations about which of these decision rules should be preferred are lacking. Using a set of simple models, we present theoretical conditions (involving group size, and diversity of individual information) under which groups should aggregate information, or follow an expert, when faced with a binary choice. We found that, in single-shot decisions, experts are almost always more accurate than the collective across a range of conditions. However, for repeated decisions – where individuals are able to consider the success of previous decision outcomes – the collective’s aggregated information is almost always superior. The results improve our understanding of how social animals may process information and make decisions when accuracy is a key component of individual fitness, and provide a solid theoretical framework for future experimental tests where group size, diversity of individual information, and the repeatability of decisions can be measured and manipulated.

#neuroeconomy #behavioral_economy #bounded_rationality

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