Bounded Rationality and Beyond
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Cognitive Biases in Times of Uncertainty

Cognitive Biases in Times of Uncertainty | Bounded Rationality and Beyond | Scoop.it
We live in a world of increasing pressure and uncertainty, driven in large part by digital technology infrastructures. These marvelous infrastructures bring us unprecedented connectivity and opportunities to better ourselves.

Via Philippe Vallat
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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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Psychology into economics: fast and frugal heuristics

Abstract The present essay focuses on the fast and frugal heuristics program set forth by Gerd Gigerenzer and his fellows. In particular it examines the contribution of Gigerenzer and Goldstein (1996) ‘Reasoning the Fast and Frugal Way: Models of Bounded Rationality’. This essay, following the theoretical propositions and the empirical evidence of Gigerenzer and Goldstein, points out that simple cognitive mechanisms such as fast and frugal heuristics can be capable of successful performance in real world, without the need of satisfying the classical norms of rational inference.
https://mpra.ub.uni-muenchen.de/78162/3/MPRA_paper_78162.pdf

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Miklos Szilagyi's curator insight, Today, 10:05 AM
Yeah... praise of intuition... in its place it's "the" thing... and then, lots of research and books speak about the foreseeable and/or accidental failures yielded by intuition... 
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Compliance in the Digital Age – Why turning back isn’t an option - Planet Compliance

Compliance in the Digital Age – Why turning back isn’t an option - Planet Compliance | Bounded Rationality and Beyond | Scoop.it

Banks are faced with the problem how to deal with communications in the digital age. Gone are the days they only had to monitor e-mails and tap their phones. Chats aren’t limited to Bloomberg anymore, instead many new channels can be used to communicate with peers and clients nor do their employees want to be constrained to use their company phones. However, these new channels present new challenges for banks to comply with their regulatory obligations. Some are trying to turn back time, but we will look at why this isn’t really an option and how financial institutions should respond in the 21st century.

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Neuropolitica: problemi e prospettive

Neuropolitica: problemi e prospettive | Bounded Rationality and Beyond | Scoop.it

Il termine neuropolitica indica un campo d’indagine che ha lo scopo di studiare le funzioni del cervello di un individuo impegnato in attività che prevedono la presenza di altri individui. Durante le elezioni presidenziali americane del 2007, sette neuro scienziati dell’Università della California pubblicarono i risultati di un test sull’orientamento di voto somministrato a un gruppo di persone incerte nella decisione di voto. Dalla ricerca risultò come la citazione delle parole “democratico” e “repubblicano” suscitò alti livelli di attività nell’amigdala. L’amigdala è una struttura anatomica a forma di mandorla che fa parte dell’area primitiva del cervello e che è coinvolta nell’attivazione delle emozioni, come la paura, della memoria e nella reazione “attacca o scappa”. Secondo gli studiosi, questo comportamento significa una “crescita” dell’ansia dal momento che i leader sono considerati portatori sia di promesse che di insidie. Un sintomo dell’interesse che questo genere di studi ha suscitato nelle sfide del XXI secolo è la decisione del primo ministro britannico di assumere tra i suoi consiglieri esperti di neuroscienze ed esperti del comportamento umano.

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Gamification & Nudging (G&N): quando scegliere e motivare si incontrano (e fanno faville)

Gamification & Nudging (G&N): quando scegliere e motivare si incontrano (e fanno faville) | Bounded Rationality and Beyond | Scoop.it

Gamification e nudging sono due facce della stessa medaglia. Il primo concetto definisce l’adozione, in ambiti non ludici, di strategie legate al gioco. Uno strumento potente e versatile per coinvolgere dipendenti, clienti e partner, cambiandone i comportamenti e sviluppando competenze che mirino all’innovazione. Il secondo invece (tradotto in italiano come “spintarella” o “spinta gentile”) è divenuto famoso grazie al best seller “Nudge” di Richard Thaler del 2009 e si rifà alla volontà, da parte di un’organizzazione, di un ente o di un qualsiasi soggetto, di modificare il contesto di una scelta, per renderlo più semplice e comprensibile, così da facilitare la decisione da parte degli altri. Si tratta di un processo, ad oggi, molto sviluppato nel campo dell’economia, delle scienze sociali ma anche nel vissuto quotidiano di piccole città e metropoli.

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Il male sociale della paura dei vaccini

Il male sociale della paura dei vaccini | Bounded Rationality and Beyond | Scoop.it
I cosiddetti bias cognitivi sono distorsioni del giudizio, errori di valutazione nel calcolo delle probabilità che agiscono a diversi livelli, non solo sul piano della salute ma anche nel mondo della finanza ad esempio. Diversi esperimenti dimostrano che noi siamo esseri con una razionalità limitata e questo si deve a ragioni evolutive. Per millenni l’uomo ha condotto una vita da cacciatore-raccoglitore e si è adattato a un contesto biologico che non prevedeva i problemi che la società della conoscenza oggi invece pone costantemente. Il nostro cervello non è stato selezionato per capire l’innovazione scientifica e per questo siamo disadatti a comprendere la modernità.
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Understanding brain-behavior relations

Understanding brain-behavior relations | Bounded Rationality and Beyond | Scoop.it
The Big Ideas in Cognitive Neuroscience, Explained Are emergent properties really for losers? Why are architectures important? What are “mirror neuron ensembles” anyway? My last post presented an idiosyncratic distillation of the Big Ideas in Cognitive Neuroscience symposium, presented by six speakers at the 2017 CNS meeting. Here I’ll briefly explain what I meant in…
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Ragioni e razionalità

Ragioni e razionalità | Bounded Rationality and Beyond | Scoop.it
This essay tries to highlight some heuristic potential of the theory of rationality developed by Boudon, comparing it with some of the most important contributions of the epistemology of the twentieth century. The theory of argumentation of Ch. Perelman, the critical rationalism of K. Popper and H. Albert, the theory of rationality of L. von Mises, and the philosophy of action of W. Dray. I try to analyse the similarities and the differences between the views of these authors and that of the French sociologist in order to highlight, through the use of a comparative approach, the peculiarity of the “rationality of good reasons” proposed by Boudon and its capacity to explain in terms individualistic positive and normative collective beliefs. In this way I intend to clarify some philosophical and methodology fundamental assumptions of Boudon’s interpretative sociology, focused on an analysis of social phenomena in terms of the intended and especially unintended effect of individual actions produced by “good reasons”.
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Harnessing legal complexity

Harnessing legal complexity | Bounded Rationality and Beyond | Scoop.it
Complexity science has spread from its origins in the physical sciences into biological and social sciences ( 1 ). Increasingly, the social sciences frame policy problems from the financial system to the food system as complex adaptive systems (CAS) and urge policy-makers to design legal solutions with CAS properties in mind. What is often poorly recognized in these initiatives is that legal systems are also complex adaptive systems ( 2 ). Just as it seems unwise to pursue regulatory measures while ignoring known CAS properties of the systems targeted for regulation, so too might failure to appreciate CAS qualities of legal systems yield policies founded upon unrealistic assumptions. Despite a long empirical studies tradition in law, there has been little use of complexity science. With few robust empirical studies of legal systems as CAS, researchers are left to gesture at seemingly evident assertions, with limited scientific support. We outline a research agenda to help fill this knowledge gap and advance practical applications.
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Keeping the code: How cultural beliefs affect police, court decisions

Keeping the code: How cultural beliefs affect police, court decisions | Bounded Rationality and Beyond | Scoop.it

LL Cool J's 1991 rap lyrics in his song "Mama Said Knock You Out" are about defending yourself and making sure you are not messed with. Florida State University researchers have found that when individuals adopt this outlook—referred to as a "code of the street"—it can increase their probability of arrest or conviction. The researchers found that individuals were more likely to be arrested and convicted when they adopted the code of the street or lived in areas where this belief system was more entrenched in the community. The FSU team included Daniel Mears, the Mark C. Stafford Professor of Criminology, Eric Stewart, the Ronald L. Simons Professor of Criminology, and Associate Professor Patricia Warren. Their findings are published in Justice Quarterly. "You can find a 'street code' culture, or something analogous to it, in other parts of the world," Mears said. "In part, it says that if your toughness is questioned or if you feel threatened, it's almost mandatory that you react with violence. The reaction doesn't have to be physical; it can also be verbal threats. Either way, the response signals that you are not to be messed with." The team also found that the two effects amplified one another. "In the study, individuals who adhered to the code more strongly and who lived in an area where the code of the street was more strongly embraced were disproportionately more likely to be arrested and convicted," Mears said. In explaining the results, the researchers discussed how "cognitive heuristics" may play a role in law enforcement and prosecutorial or judicial decision making. These individuals must make rapid-fire decisions and may rely on what amount to "mental shortcuts" to interpret behavior and how to respond to it. Prior criminal activity and evidence of residence in a disadvantaged, predominantly minority or high-crime area may lead officers or court actors to assume that an individual is criminal. Race, in particular, may play a role in contributing to such assumptions. Read more at: https://phys.org/news/2017-04-code-cultural-beliefs-affect-police.html#jCp

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Myopic Loss Aversion: A Behavioral Answer to the Equity Premium Puzzle?

Myopic Loss Aversion: A Behavioral Answer to the Equity Premium Puzzle? | Bounded Rationality and Beyond | Scoop.it

It’s well known to new and old investors alike that stocks yield much higher returns than bonds and other riskless securities. In fact, in the last 100 years US equities have seen an 8% average annual real return, compared to only a 1% return for more riskless securities. This gap is called the equity premium puzzle – why are equities valued so much higher than securities? The puzzle can’t seem to be explained by systemic economic factors alone, so that’s where a behavioral approach comes in handy. One behavioral theory by Shlomo Benartzi and Richard Thaler attributes the equity premium puzzle to what’s known as myopic loss aversion (MLA) – the idea that loss-averse investors (as all investors are) take too short-term a view of their investments, leading them to react overly negatively to short-term losses. Since investors are especially worried about losses, they need to know that equities have high return potential to justify investing in them – hence the equity premium. This is an intensely behavioral phenomenon, dealing with how individual investors react to the returns they’re seeing right before their eyes. But it’s also difficult to measure this idea, and all past efforts to do so have come from lab experiments. This is a problem: if you want to measure investment behavior, you have to see how investors act in real life, not in a lab.

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Darwin, the rule of three, and little use for higher mathematics - Decision Science News

Darwin, the rule of three, and little use for higher mathematics - Decision Science News | Bounded Rationality and Beyond | Scoop.it

Charles Darwin had little use for higher mathematics. He summed up his view in 1855 in a letter to his old friend (and second cousin) William Darwin Fox with a statement that Karl Pearson made famous: “I have no faith in anything short of actual measurement and the Rule of Three.” In 1901, Pearson adopted this as the motto for the new journal Biometrika … it was as close to an endorsement of mathematics as Pearson could find in Darwin’s writing. Darwin was surely right in valuing actual measurement, but his faith in the Rule of Three was msiplaced. The Rule of Three that Darwin cited would have been familiar to every English schoolboy who had studied Euclid’s book 5. It is simply the mathematical proposition that if a/b = c/d, then any three of a, b, c, and d suffice to determine the fourth. For Darwin, this would have served as a handy tool for extrapolation, just as it had for many other before him … In the 1600s, John Graunt and William Petty ahd used such rations to estimate population and economic activity; int he 1700s and early 1800s, so, too, did Pierre Simon Laplace and Adolphe Quetelet. Neither Darwin nor anyone before him realized what weak analytical support the Rule of Three provides. The rule works well in prorating commercial transactions and for the mathematical problems of Euclid; it fails to work in any interesting scientific question where variation and measurement error present …

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Neurobiological changes explain how mindfulness meditation improves health

Neurobiological changes explain how mindfulness meditation improves health | Bounded Rationality and Beyond | Scoop.it

Over the past decade, mindfulness meditation has been shown to improve a broad range of health and disease outcomes, such as slowing HIV progression and improving healthy aging. Yet, little is known about the brain changes that produce these beneficial health effects. New research from Carnegie Mellon University provides a window into the brain changes that link mindfulness meditation training with health in stressed adults. Published in Biological Psychiatry, the study shows that mindfulness meditation training, compared to relaxation training, reduces Interleukin-6, an inflammatory health biomarker, in high-stress, unemployed community adults. The biological health-related benefits occur because mindfulness meditation training fundamentally alters brain network functional connectivity patterns and the brain changes statistically explain the improvements in inflammation.

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Data Disrupts Corruption (SSIR)

Data Disrupts Corruption (SSIR) | Bounded Rationality and Beyond | Scoop.it

Data Disrupts Corruption Document leaks, big data, and open government are reviving the fight against global graft. By boosting public access to information and leveraging data analytics efforts, democracies can better keep public officials and corporations in check.

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Information Aversion

Abstract 
We propose a theory of inattention solely based on preferences, absent cognitive limitations or external costs of information. Under disappointment aversion, agents are intrinsically information averse. In a consumption-savings problem, we study how information averse agents cope with their fear of information, to make better decisions: they acquire information at infrequent intervals only, and inattention increases when volatility is high, consistent with the empirical evidence. Adding state-dependent alerts following sharp downturns improves welfare, despite the additional endogenous information costs. Our framework accommodates a broad range of applications, suggesting our approach can explain many observed features of decision under uncertainty
https://www.tse-fr.eu/sites/default/files/TSE/documents/doc/wp/2017/wp_tse_779.pdf  
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Miklos Szilagyi's curator insight, Today, 10:08 AM
The monkeys don"t hear, don't see, don't speak... where your attention is there you have your focus... and all the other aspects are in the Moon... yeah... sure...
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» Introducing Promptable: A BI Venture | The Behavioural Insights Team

» Introducing Promptable: A BI Venture | The Behavioural Insights Team | Bounded Rationality and Beyond | Scoop.it
Over the last three years, we’ve been working as part of the Adult Skills and Knowledge (ASK) research centre on a series of trials that use text messages to boost attendance and grades at further education colleges. We’ve learned a lot about how to get students to show up to class, and how to help them pass their final exams. In our first study, published here today, we found that a suite of text messages based on four principles increased the rate at which students passed by 8 percentage points.
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campidinformazionebiologici

campidinformazionebiologici | Bounded Rationality and Beyond | Scoop.it
Intervista al dottor Sergio Stagnaro L'idea che i campi elettromagnetici deboli trasportino energia-informazione che possa influenzare i processi quantistici, qualitativamente importanti i
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Three Ways the Internet of Things Is Shaping Consumer Behavior

Three Ways the Internet of Things Is Shaping Consumer Behavior | Bounded Rationality and Beyond | Scoop.it

The interconnection of devices within the “Internet of Things” (IoT) creates new data sources. Companies can now better observe people’s choices and test the effectiveness of different mechanisms to activate and retain more customers. It may also help policymakers overcome one of the most frequent problems of policy design: the lack of personalized content. We argue that the IoT not only disrupts the way we track our actions and monitor our goals, but also allows the identification of effective methods to alter our behavior. This is optimized by the combination of IoT, data analytics and behavioral science.

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Another rule of three, this one in statistics - Decision Science News

Another rule of three, this one in statistics - Decision Science News | Bounded Rationality and Beyond | Scoop.it

Here's another rule of three, this one in statistics..

We were surprised to learn this is called the rule of three, as we had only heard of the rule of three in comedy. We were even more surprised when a reader wrote in telling us about a rule of three in statistics. According to Wikipedia: the rule of three states that if a certain event did not occur in a sample with n subjects … the interval from 0 to 3/n is a 95% confidence interval for the rate of occurrences in the population. It’s a heuristic. We love heuristics! We decided to give it a test run in a little simulation. You can imagine that we’re testing for defects in products coming off of a production line. Here’s how the simulation works:

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Law and Behavioral Science: Removing the Rationality Assumption from Law and Economics

As law and economics turns forty years old, its continued vitality is threatened by its unrealistic core behavioral assumption: that people subject to the law act rationally. Professors Korobkin and Ulen argue that law and economics can reinvigorate itself by replacing the rationality assumption with a more nuanced understanding of human behavior that draws on cognitive psychology, sociology, and other behavioral sciences, thus creating a new scholarly paradigm called "law and behavioral science." This article provides an early blueprint for research in this paradigm. The authors first explain the various ways the rationality assumption is used in legal scholarship and why it leads to unsatisfying policy prescriptions. They then systematically examine the empirical evidence inconsistent with the rationality assumption and, drawing on a wide range of substantive areas of law, explain how normative policy conclusions of law and economics will change and improve under the law-and-behavioralscience approach
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Behavioural insights ‘have taken root’ in governments: OECD report

Behavioural insights ‘have taken root’ in governments: OECD report | Bounded Rationality and Beyond | Scoop.it

The use of ‘behavioural insight’ techniques in public policy is entering the mainstream, a new report from the OECD argues, and the next step is to use them to influence organisational behaviour inside public institutions. Governments are increasingly using behavioural insights – a practice combining psychology and economics – to design policies and regulations around a realistic understanding of human behaviour traits, rather than assuming that people will behave ‘rationally’ in ways that maximise their income or wellbeing. So far, the report says, the application of behavioural insights has mostly focused on end users and consumers – ‘nudging’ them into making better financial decisions, for example, or healthier food choices. But the OECD argues that these techniques could also be applied to regulated firms or governments themselves, nudging civil servants into working together on cross-cutting agendas such as diversity, open government or good regulatory practice.

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Behavioural economics for the 1 in 4 - Money and Mental Health Policy Institute

Behavioural economics for the 1 in 4 - Money and Mental Health Policy Institute | Bounded Rationality and Beyond | Scoop.it
How behavioural economics has informed policy making so far Behavioural economics is the study of human behaviour and psychology to better understand the economic decisions we make every day. Why do so many of us never switch bank account even though we know we could get a cheaper deal elsewhere? Why do we not make use of the many different types of energy tariffs and pick one that suits our needs? It’s probably not surprising to anyone that most of us are not the perfect ‘rational’ consumers. We use rules of thumb to make decisions, we are inert and stick with the status quo, we place more emphasis on the present than the future and we get overloaded by too many choices – to name but a few of the drivers of our behaviour. Just because there is a cheaper deal or lots of choice on offer, doesn’t mean we will make use of it. Increasingly, smart policy interventions are designed to work with our behaviour, aiming to deliver good outcomes based on how people actually behave, not on how policy makers wish we would. A brilliant example is auto-enrolment, which makes it compulsory for employers to enrol their employees into a pension scheme. In the first first six months alone the number of employees saving into a private pension rose from 61% to 83%. Accepting that people will stick with the status quo and use a default option has massively increased the number of people with retirement savings.
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» Think Small to Reach Big: a new book by Owain Service & Rory Gallagher | The Behavioural Insights Team

» Think Small to Reach Big: a new book by Owain Service & Rory Gallagher | The Behavioural Insights Team | Bounded Rationality and Beyond | Scoop.it
The Behavioural Insights Team was created to help apply a more nuanced understanding of human behaviour to government policy, and to spread the understanding of behavioural science. Governments across the globe are now using behavioural insights to make better policy. But from the outset, we found that there has been interest not just in how behavioural insights can be applied to policy, but how it can be used to help all of us achieve important goals in our personal and work lives. And that’s what this book is about. Our aim is to open up the behavioural insights tool box so that everyone can use these techniques to make better decisions at work, rest and play. You will most likely be using some ‘self-nudges’ in your everyday life already – whether it’s setting your watch a few minutes early to help you keep to time, getting colleagues to commit to specific tasks at work, hiding away the cookie jar, or using treats to reward your kids for good behaviour. This book aims to help you do this more systematically, through evidence-based techniques that you can use to help yourself and those around you. The key message is that to reach big, we need to Think Small. So it is not about reining in your ambitions. It is about adopting a mindset that focuses on getting the small – and often simple – details right that will set you on the path to achieving your goals
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Do The Effects of Social Nudges Persist? Theory and Evidence from 38 Natural Field Experiments

This study examines the mechanisms underlying long-run reductions in energy consumption caused by a widely studied social nudge. Our investigation considers two channels: physical capital in the home and habit formation in the household. Using data from 38 natural field experiments, we isolate the role of physical capital by comparing treatment and control homes after the original household moves, which ends treatment. We find 35 to 55 percent of the reductions persist once treatment ends and show this is consonant with the physical capital channel. Methodologically, our findings have important implications for the design and assessment of behavioral interventions.
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» Inspirational students encourage university applications | The Behavioural Insights Team

» Inspirational students encourage university applications | The Behavioural Insights Team | Bounded Rationality and Beyond | Scoop.it
Young people from lower income families, or families without a history of university attendance, are much less likely to apply to university than their peers, even when they get the grades to do so (Anders, 2012). They’re also particularly less likely to apply to selective universities – despite these universities often offering more generous financial support. Previous research, including ours, has shown that providing students with a positive role model – someone like them who has been to university and has benefited – can significantly boost enthusiasm for attending. In our previous research, a role model intervention was delivered through an assembly talk for year 12 or 13 students. Although it worked, it was difficult to take it to scale. At about the same time, we started working wit
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