Bounded Rationali...
Follow
Find
26.1K views | +17 today
 
Scooped by Alessandro Cerboni
onto Bounded Rationality and Beyond
Scoop.it!

Cambridge Journals Online - Abstract

Complex and widespread activation in many brain areas is seen while performing, listening or mentally imaging music, activity that varies with training, previous exposure, personal preference, emotional involvement and many other factors. Playing a musical instrument demands extensive motor and cognitive abilities, and early musical learning results in plastic reorganization of the developing brain – one example being the increased cortical representation area for the left little finger in (right-handed) string-players, which correlates with age at the start of training. Even though the developing brain has the most pronounced changes, the adult healthy brain has a considerable plasticity. Conductors have superior spatial tuning compared with non-musicians and pianists. Attentive listening to music for as little as three hours can temporarily alter the auditory cortex. Interactions between genetic predisposition, environment and training play a role in music as in other areas. It has been proposed that musical training may improve other cognitive functions. There is some evidence that this may be the case but it is an area that needs further exploration.
more...
No comment yet.
Bounded Rationality and Beyond
News on the effects of bounded rationality in economics and business, relationships and politics
Your new post is loading...
Your new post is loading...
Scooped by Alessandro Cerboni
Scoop.it!

Behavioral Science and Development Economics

Behavioral Science and Development Economics | Bounded Rationality and Beyond | Scoop.it
The World Bank recently launched its flagship ‘World Development Report,’ (WDR) and it’s surprising. As the guy who runs a Blog called “There are Free Lunches,” my immediate thought when seeing the report was: Aren’t the guys from the World Bank the ones who believe that people are rational self-interested agents, and that money is the solution to all the problems in the world? But soon I realized had been caught by the subtle but powerful forces of the availability heuristic, a mental shortcut people use when they have to make judgments under conditions of uncertainty. The heuristic entails basing judgments on scenarios that immediately come to mind, rather than on using all information appropriately. Thus, the ideas that immediately came to my mind when I thought about the World Bank were: money + loans + poor countries. Only when Varun Gauri, co-director of the report, told me they were “launching a new report that reviews exciting, early efforts to diagnose and solve psychological, cognitive, and social constraints to development economics and policy.”, I understood I had been fooled again by one of the many psychological and social shortcuts that, although evolutionary useful, nowadays bias our minds, govern our lives, and determine the faith of our societies and economies. In the following paragraphs we will be able to understand, through several examples picked from the WDR 2015, how small and low cost government interventions can tackle these biases and generate large development benefits.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Decide which frequent flyer program is best for your city - Decision Science News

Decide which frequent flyer program is best for your city - Decision Science News | Bounded Rationality and Beyond | Scoop.it
We’ve posted in the past about which airline you should be loyal to, but we always felt guilty because we only showed results for the New York metro area and there are Decision Science News readers all over the USA (and all over the World too, though in most countries it’s an easy decision: go with the national airline).

Since then, we’ve learned about data for every flight in the USA that makes it pretty straightforward to generate for every US metro area the number of departures for each airline.

Try out the new tool here: Decide which frequent flyer program to by loyal to.

Just type in the name of your metro area in the search box and you’ll see the number of departures by airline for your area only. The data comprise every flight taken in the USA in 2013.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Here’s The Curious Secret To Perfect Learning While You Are Distracted — PsyBlog

Here’s The Curious Secret To Perfect Learning While You Are Distracted — PsyBlog | Bounded Rationality and Beyond | Scoop.it

How to learn while distracted as if you were totally focused.
Learning with distractions can be just as efficient as total focus, as long as the distractions are still there during recall, a new study finds.
Although distractions have long been thought detrimental to learning, two new experiments have tested what happens when people are also distracted as they try to recall what they’ve learnt.

more...
acyon's curator insight, December 15, 8:40 AM

Comment bien apprendre même si on est dérangé lors de l'apprentissage ? 

Virginia-Victoria's curator insight, December 16, 12:07 PM

Experiments about how we learn (ofcourse, thous which are well-done) are always nice.
This experiment could give us another point of view about oruselves.
Really something curious.

 

Scooped by Alessandro Cerboni
Scoop.it!

How Embodied Is Cognition?

E is the letter, if not the word, in today’s sciences of mind. E adjectives proliferate. Nowadays it is hard to avoid claims that cognition – perceiving, imagining, decision-making, planning – is best understood in E terms of some sort. The list of
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Five Economists Who Deserve Nobels

Five Economists Who Deserve Nobels | Bounded Rationality and Beyond | Scoop.it
Tomorrow,  Jean Tirole will officially receive his Nobel Prize in economics. He was a pretty obvious candidate for the prize, given the amazing breadth, influence and skill of his body of work. But who might win in the future? There are many perennial top candidates, but a few seem to stand out clearly in my mind.

Of course, this short list is heavily weighted toward the fields I know most about -- finance, behavioral economics and macroeconomics -- so I’m neglecting most of the top candidates in other fields such as labor, tax, trade and growth. For that bias I apologize. And with that apology out of the way, here is my mental list, in no particular order:
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Personality and Procedural Invariance: Effects on Bidding Behavior Across Induced Value Experimental Auction Mechanisms

Abstract: A growing literature exists on the design, implementation and evaluation of experimental auctions with a variety of non-market valuation applications. With behavioral economic models becoming more mainstreamed in the discipline, a natural question arises about how personality traits might affect bidding behavior in experimental auctions. To address this question, a series of induced-value experiments were carried out in the fall of 2012. Personality traits were measured in pre- and post-surveys aligning with the Midlife Development Inventory Analysis. Regression analysis determined the effects of personality traits on over- and under-bidding behaviors across four frequently used auction mechanism: the Becker-Degroot-Marschak, 2nd Price, Random Nth Price, and English auctions. Results indicate that only the BDM and Random Nth price auctions are significantly affected by personality profile. Specifically, openness, extraversion, and neuroticism are associated with overbidding behavior and agreeableness is associated with underbidding behaviors. 
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

» Nudging citizens to be risk savvy AlwaysResearching.com

I should start this review of Gerd Gigerenzer’s least satisfactory but still interesting book, Risk Savvy: How to Make Good Decisions, by saying that I am a huge Gigerenzer fan and that this book is still worth reading. But there was something about this book that grated at times, especially against the backdrop of his other fantastic work.

In part, I continue to be perplexed by Gigerenzer’s ongoing war against nudges (as I have posted about before), despite his recommendations falling into the nudge category themselves. Nudges are all about presenting information and choices in different ways – which is the staple of Gigerenzer’s proposal to make citizens “risk savvy”. Gigerenzer’s use of evidence and examples throughout the book also fall well short of his other work, and this is ultimately the element of the book that left me somewhat disappointed.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

‘Risk Savvy: How to Make Good Decisions’, by Gerd Gigerenzer - FT.com

‘Risk Savvy: How to Make Good Decisions’, by Gerd Gigerenzer - FT.com | Bounded Rationality and Beyond | Scoop.it

How many people did the 9/11 terrorists kill? According to Gerd Gigerenzer, more than 4,500 died as a direct result of the attacks. Besides the almost 3,000 slaughtered in the airliners and their targets on the ground, an additional 1,600 lost their lives in US road accidents during the year that followed because they chose to drive rather than risk flying. Gigerenzer’s statistical analysis of the increase in road traffic during 2001/02 – and its fatal consequences – is one of many powerful examples in Risk Savvy of the way people make bad decisions because they misunderstand risk.
His main target is the medical profession though many other fields, including finance and journalism, receive glancing blows from this German expert in risk communication. Gigerenzer, a psychologist based at the Max Planck Institute for Human Development in Berlin, is merciless in his attacks on those who mislead patients, clients and the public into exaggerated fears or hopes for their treatments and investments.

more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

UW Professor’s Book: How Religion Influences Consumption Behavior | News | University of Wyoming

UW Professor’s Book: How Religion Influences Consumption Behavior | News | University of Wyoming | Bounded Rationality and Beyond | Scoop.it

Religion is a topic that businesses often ignore, despite the fact that 70 percent of the world’s population is religious, says Elizabeth Minton, a UW Department of Management and Marketing assistant professor in the College of Business.

The correlation between religion and business is the focus of “Belief Systems, Religion and Behavioral Economics: Marketing in Multicultural Environments,” written by Minton and Lynn Kahle, the Ehrman Giustina Professor and head of the Department of Marketing at the University of Oregon.

According to the book, many people do not realize or simply resist the idea that religion is a key contributor to a consumer's core values, which then contribute to consumption decisions, voting practices, reaction to pro-social messages and public policy, as well as donating behavior.

The book provides one of the first comprehensive investigations into the relation between religion and marketing, and offers key “takeaways” for businesses on the influence of religion and behavioral economics.

more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Visualize Prospect Theory - Decision Science News

Visualize Prospect Theory - Decision Science News | Bounded Rationality and Beyond | Scoop.it
Cool Prospect Theory Visualizer draws the curves for you. Made with R/Shiny. 

INTERACTIVE R TOOL FOR GRAPHING PROSPECT THEORY AND MORE 

Dan Wall from Columbia University’s Center for the Decision Sciences (*) writes in that he’s developed a new Web app using Shiny and RStudio. It allows users to edit Prospect Theory and Quasi-Hyperbolic Time Discounting Parameters and see the resulting changes to the graphs.

Try it out!

https://decisionsciences.shinyapps.io/Shiny/pt_qtd_shiny.Rmd


more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Statement on Prediction Markets by Kenneth J. Arrow, Shyam Sunder, Robert Forsythe, Robert E. Litan, Eric Zitzewitz, Michael Gorham, Robert W. Hahn, Robin Hanson, Daniel Kahneman, John O. Ledyard, ...

Statement on Prediction Markets by Kenneth J. Arrow, Shyam Sunder, Robert Forsythe, Robert E. Litan, Eric Zitzewitz, Michael Gorham, Robert W. Hahn, Robin Hanson, Daniel Kahneman, John O. Ledyard, ... | Bounded Rationality and Beyond | Scoop.it
Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors. 

We argue that U.S. regulators should lower barriers to the creation and design of prediction markets by creating a safe harbor for certain types of small stakes markets. We believe our proposed change has the potential to stimulate innovation in the design and use of prediction markets throughout the economy, and in the process to provide information that will benefit the private sector and government alike. 

 

more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Social Neuroscience in Context: Narrative Practices, Niche Construction and Neural Patterns

A familiar, ‘standard approach’ to social neuroscience sees its job as determining “where in the brain mentalizing resides” (Mahy et al. 2014, p. 69, emphasis original). This quest is framed by three central assumptions, that: (1) Folk Psychology
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Conspiracy Theories by Cass R. Sunstein, Adrian Vermeule :: SSRN

Conspiracy Theories by Cass R. Sunstein, Adrian Vermeule :: SSRN | Bounded Rationality and Beyond | Scoop.it
Abstract:      
Many millions of people hold conspiracy theories; they believe that powerful people have worked together in order to withhold the truth about some important practice or some terrible event. A recent example is the belief, widespread in some parts of the world, that the attacks of 9/11 were carried out not by Al Qaeda, but by Israel or the United States. Those who subscribe to conspiracy theories may create serious risks, including risks of violence, and the existence of such theories raises significant challenges for policy and law. The first challenge is to understand the mechanisms by which conspiracy theories prosper; the second challenge is to understand how such theories might be undermined. Such theories typically spread as a result of identifiable cognitive blunders, operating in conjunction with informational and reputational influences. A distinctive feature of conspiracy theories is their self-sealing quality. Conspiracy theorists are not likely to be persuaded by an attempt to dispel their theories; they may even characterize that very attempt as further proof of the conspiracy. Because those who hold conspiracy theories typically suffer from a crippled epistemology, in accordance with which it is rational to hold such theories, the best response consists in cognitive infiltration of extremist groups. Various policy dilemmas, such as the question whether it is better for government to rebut conspiracy theories or to ignore them, are explored in this light.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Start-up dei servizi : l'arte di partire bene e .... prima possibile

Start-up dei servizi : l'arte di partire bene e .... prima possibile | Bounded Rationality and Beyond | Scoop.it
Parliamoci chiaro. Se esiste una azione difficile e coraggiosa è quella di aprire una propria attività o impresa, cercando  di vendere il proprio prodotto o servizio alle persone. Se poi aggiungiamo la burocrazia italica, da sempre contraria alla libertà di impresa per retaggio culturale, la difficoltà si moltiplica e il coraggio viene spesso a mancare.

Dedico questo mio post ad una simpatica signora che mi ha chiesto un aiuto su come poter intraprendere una splendida mission che ha in mente nel campo alberghiero-svago.

Una start-up ha un unico grande problema: FARE SOLDI. Inutile nasconderselo. Se non si incassa e si raggiunge quello che in gergo tecnico si chiama break-even point,  prima o poi i soldi finiscono insieme ai sogni imprenditoriali. Occorre pertanto le persone che vi diano fiducia e paghino per il vostro prodotto.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Taming Heuristics

Heuristics: 
Usually give reasonably good results quickly & easily 
Can fail unpredictably . Can also fail in predictable ways; these are the biases "hidden traps." Most of these heuristics can work well or can turn into harmful biases in any of the stages of problem solving, but the details differ depending on what stage of problem solving you are in. 
Similarly, most of the heuristics are used (and abused) by people of all cognitive styles, but again the details differ depending on what cognitive style you are using.

more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Why We Kill: Violence as Socialization - YouTube

Acts of serious violence – often committed by seemingly average people – leave us only to ask “Why?” Culture, genetics, and low self-esteem are often cited, but growing evidence points to brutalization experienced in childhood, often at the hands of parents or peers. Ginger Rhodes and Richard Rhodes explore the work of criminologist Lonnie Athens, whose "violentization" model identifies a four-stage process by which almost any human being can be socialized into someone who will assault, rape, or murder. Their talk looks at the history of violence, questions the association of violence with mental illness, tests Athens’ theory on real-life cases, and makes an argument for early intervention.

Richard Rhodes is the author of twenty-five books including The Making of the Atomic Bomb, which won a Pulitzer Prize in Nonfiction, a National Book Award and a National Book Critics Circle Award; Dark Sun: The Making of the Hydrogen Bomb, which was shortlisted for a Pulitzer Prize in History; an investigation of the roots of private violence, Why They Kill; and, most recently, a narrative of the Spanish Civil War, That Fine Place. He has received numerous fellowships for research and writing, including grants from the Ford Foundation, the Guggenheim Foundation, the MacArthur Foundation and the Alfred P. Sloan Foundation. He has been a visiting scholar at Harvard and MIT and a host and correspondent for documentaries on American public television.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Big Mac Hurting as Customers Get Pickier

Big Mac Hurting as Customers Get Pickier | Bounded Rationality and Beyond | Scoop.it
As sales continue to slide in the U.S., McDonald's plans to expand a test that lets people build their own burgers by tapping on a touchscreen to pick the bread, cheese and toppings they want. The company says it will bring the option to 2,000 of its more than 14,000 U.S. locations next year.

The "Create Your Taste" program is a departure for McDonald's, which was built to deliver food consistently, quickly and affordably. That model has come under pressure as people gravitate toward places like Chipotle, which lets people pick what goes on their bowls and burritos as they walk down a line.

According to industry executives and analysts, the ability to customize food orders is becoming more important, particularly among people in their 20s and 30s. McDonald's has already been trying to adjust by installing new kitchen prep tables that can hold more toppings and sauces.

The plans to offer greater customization come as McDonald's fights to boost declining sales and customer traffic. On Monday, it said U.S. sales fell 4.6 percent in November at established locations. The figure fell 4 percent in the unit that includes the Asia-Pacific region, where the company is fighting to recover from a food supplier scandal. Overall, global sales declined 2.2 percent for the month.

In the U.S., CEO Don Thompson has conceded the company hasn't done enough to keep up with shifting habits and that changes are in store.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Limited Attention and Status Quo Bias

Abstract: We introduce and axiomatically characterize a model of status quo bias in which the status quo affects choices by both changing preferences and focusing attention. The resulting Limited Attention Status Quo Bias model can explain both the finding that status quo bias is more prevalent in larger choice sets and that the introduction of a status quo can change choices between non-status quo alternatives. Existing models of status quo bias are inconsistent with the former finding while models of decision avoidance are inconsistent with the latter. We report the results of laboratory experiments which show that both attention and preference channels are necessary to explain the impact of status quo on choice.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

A Quantum Probability Account of Order Effects in Inference

A Quantum Probability Account of Order Effects in Inference

 

Abstract

 Order of information plays a crucial role in the process of updating beliefs across time. In fact, the presence of order effects makes a classical or Bayesian approach to inference difficult. As a result,

the existing models of inference, such as the belief-adjustment model, merely provide an ad hoc explanation for these effects. We postulate a quantum inference model for order effects based on the

axiomatic principles of quantum probability theory. The quantum inference model explains order effects by transforming a state vector with different sequences of operators for different orderings of information. We demonstrate this process by fitting the quantum model to data collected in a medical diagnostic task and a jury decision-making task. To further test the quantum inference model, a new jury decision-making experiment is developed. Using the results of this experiment, we compare the quantum inference model with two versions of the belief-adjustment model, the adding model and the averaging model. We show that both the quantum model and the adding model provide good fits to the data. To distinguish the quantum model from the adding model, we develop a new experiment involving extreme evidence. The results from this new experiment suggest that the adding model faces limitations when accounting for tasks involving extreme evidence, whereas the quantum inference model does not. Ultimately, we argue that the quantum model provides a more coherent account for order effects that was not possible before.

more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Gerd Gigerenzer

Gerd Gigerenzer | Bounded Rationality and Beyond | Scoop.it
In this world, nothing is certain except death and taxes. We learn to read and write but not how to deal with uncertainty: we’re risk illiterates. Why do we fear what’s unlikely to kill us? Is it true that people are basically hopeless when it comes to managing health and wealth? Some experts have concluded that Homo sapiens (“man the wise”) is a misnomer, and that John and Jane Q. Public need continuous guidance, as a child needs a parent.Against this pessimistic view, I will argue that everyone can learn to deal with risk and uncertainty, and that experts can be part of the problem rather than the solution. A democracy needs risk-savvy citizens who cannot be easily frightened into surrendering their money, their welfare, and their liberty. We should begin to teach risk literacy to everyone.
Gerd Gigerenzer is director at the Max Planck Institute for Human Development and director of the Harding Center for Risk Literacy in Berlin. Previous positions he held include Professor of Psychology at the University of Chicago and John M. Olin Distinguished Visiting Professor, School of Law at the University of Virginia. He is also a member of the
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Gigerenzer-Kahneman Debate on Decision Making - Ergonomics in Design

Gigerenzer-Kahneman Debate on Decision Making - Ergonomics in Design | Bounded Rationality and Beyond | Scoop.it
Here is the dispute in a nutshell. Kahneman is the most famous (Nobel Prizes tend to do that) so I will start there. He models decision making using a hot and fast System 1 that takes shortcuts using heuristics, is biased by emotion, and therefore makes less optimal decisions and a cold and slow System 2 that is more logical and optimal. Therefore, to help people make better decisions, we should push them towards using System 2 or use smart defaults and paternalistic policies to nudge them in that direction.

Gigerenzer finds two main faults to this approach. First, System 1 is often correct when System 2 fails. This happens because System 2 is limited by working memory and many of the complex decisions we make in life go beyond what working memory can handle. So our gut System 1 decisions, although we can’t articulate how we came to them, are sometimes better anyway. Second, he finds that many of the people who use System 1 inappropriately simple lack statistical knowledge and if we taught them some basic techniques, they would be much better. He highlights the difference between risk and uncertainty – which is one of the causes of the financial market crash of 2006-8. He also points to some of the intentional tricks that companies use to sell products that intentionally mislead.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Neuroeconomic modeling of global systemic risk

Neuroeconomic modeling of global systemic risk | Bounded Rationality and Beyond | Scoop.it
Abstract Financial market crises are frequent events that trigger large financial losses that represent an important global systemic risk (GSR). GSR forecasting is, therefore, a necessity to avoid the collapse of the global financial system or market. Understanding GSR dynamics is imperative if it is to be forecasted and controlled. Traditional finance theories have developed many tools for risk management that proved to be unreliable in the case of the 2008 Crisis. Recent results on financial decision-making provided by Neurosciences have being used to model the stock market dynamics. This approach is used, here, to model stock price evolution in 20 bourses during the period between January, 3, 2007 and September, 9, 2011. The results of this study show that the market humor, calculated as a function of the conflict associated with the stock benefit and risk evaluations and with the stock volatility, provides an adequate measure of a systematic global systemic risk, and humor threshold variation reflect unsystematic global systemic risks.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Nudges.gov: Behavioral Economics and Regulation by Cass R. Sunstein :: SSRN

Nudges.gov: Behavioral Economics and Regulation by Cass R. Sunstein :: SSRN | Bounded Rationality and Beyond | Scoop.it
Abstract:      
#Behavioral-economics is influencing regulatory initiatives in many nations, including the United States and the United Kingdom. The role of behavioral economics is likely to increase in the next generation, especially in light of the growing interest in low-cost, choice-preserving regulatory tools. Choice architecture -- including default rules, simplification, norms, and disclosure -- can affect outcomes even if material incentives are not involved. For example, default rules can have an even larger effect than significant economic incentives. Behavioral economics has helped to inform recent and emerging reforms in areas that include savings, finance, distracted driving, energy, climate change, obesity, education, poverty, health, and the environment.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

Brain Study Uncovers New Clues on How Cues May Affect Memory - News Center - The University of Texas at Dallas

Brain Study Uncovers New Clues on How Cues May Affect Memory - News Center - The University of Texas at Dallas | Bounded Rationality and Beyond | Scoop.it
A new study from the UT Dallas Center for Vital Longevity shows that the brain activity prior to seeing an item is related to how well it is later remembered.

In the study published online in NeuroImage, the researchers showed that receiving information about a pair of items before seeing them may affect how well they are remembered. Moreover, the researchers also found that the activity in different areas of the brain was unexpectedly related to how the information was remembered.

“If you’re interested in memory, you want to know the factors that are associated with it being worse as well as what makes it better,” said Dr. Richard Addante, a senior lecturer in the School of Behavioral and Brain Sciences and lead author of the paper. “Knowledge of these factors can lead to developing ways to help improve memory.”

The researchers used functional magnetic resonance imaging to look for activity in different areas of the brain as a participant decided which of two words or pictures would fit inside the other — for example, a dog and a house. But moments before the task, participants were shown a cue — an “X” if the items would be presented as words or an “O” if they would be presented as pictures. About 20 minutes later, outside of the MRI scanner, the participants were tested on how well they remembered the pairs of items.
more...
No comment yet.
Scooped by Alessandro Cerboni
Scoop.it!

The Storrs Lectures: Behavioral Economics and Paternalism by Cass R. Sunstein :: SSRN

The Storrs Lectures: Behavioral Economics and Paternalism by Cass R. Sunstein :: SSRN | Bounded Rationality and Beyond | Scoop.it
Abstract:      
A growing body of evidence demonstrates that in some contexts and for identifiable reasons, people make choices that are not in their interest, even when the stakes are high. Policymakers in a number of nations, including the United States and the United Kingdom, have used the underlying evidence to inform regulatory initiatives and choice architecture in a number of domains. Both the resulting actions and the relevant findings have raised the question whether an understanding of human errors opens greater space for paternalism. Behavioral market failures, which occur as a result of such errors, are an important supplement to the standard account of market failures; if promoting welfare is the guide, then behavioral market failures should be taken into consideration, even if the resulting actions are paternalistic. A general principle of behaviorally informed regulation – its first law – is that the appropriate responses to behavioral market failures usually consist of nudges, generally in the form of disclosure, warnings, and default rules. While some people invoke autonomy as an objection to paternalism, the strongest objections are welfarist in character. Official action may fail to respect heterogeneity, may diminish learning and self-help, may be subject to pressures from self-interested private groups (the problem of “behavioral public choice”), and may reflect the same errors that ordinary people make. The welfarist arguments against paternalism have considerable force, but choice architecture, and sometimes a form of paternalism, are inevitable, and to that extent the welfarist objections cannot get off the ground. Where paternalism is optional, the objections, though reasonable, depend on empirical assumptions that may not hold in identifiable contexts. There are many opportunities for improving human welfare through improved choice architecture. 

 

more...
No comment yet.