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The neurological basis of intuition : Neurophilosophy

The neurological basis of intuition : Neurophilosophy | Bounded Rationality and Beyond | Scoop.it

Most of us have experienced the vague feeling of knowing something without having any memory of learning it. Most of us have experienced the vague feeling of knowing something without having any memory of learning it. This phenomenon is commonly known as a "gut feeling" or "intuition"; more accurately though, it is described as implicit or unconscious recognition memory, to reflect the fact that it arises from information that was not attended to, but which is processed, and can subsequently be retrieved, without ever entering into conscious awareness.


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éToile Platform

éToile Platform | Bounded Rationality and Beyond | Scoop.it

The modern world is complex beyond human understanding and control. The science of complex systems aims to find new ways of thinking about the many interconnected networks of interaction that defy traditional approaches. Thus far, research into networks has largely been restricted to pairwise relationships represented by links between two nodes. This course marks a major extension of networks to multidimensional hypernetworks for modeling multi-element relationships, such as companies making up the stock market, the neighborhoods forming a city, people making up committees, divisions making up companies, computers making up the internet, men and machines making up armies, or robots working as teams. This course makes an important contribution to the science of complex systems by: (i) extending network theory to include dynamic relationships between many elements; (ii) providing a mathematical theory able to integrate multilevel dynamics in a coherent way; (iii) providing a new methodological approach to analyze complex systems; and (iv) illustrating the theory with practical examples in the design, management and control of complex systems taken from many areas of application.

 
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The Inefficient Market Hypothesis

The Inefficient Market Hypothesis | Bounded Rationality and Beyond | Scoop.it
Despite significant differences of opinion, two winners of the Nobel in economic science, Eugene Fama and Robert Shiller, express more confidence in financial markets than may be warranted, an economist writes. 

In its simplest form, the debate between traditional and behavioral finance comes down to the difference between two sets of investment recommendations: if you believe the efficient market hypothesis, don’t try to beat the market by picking individual stocks, just invest in index funds. If you don’t believe it, try to anticipate the kinds of mistakes other investors are likely to make and take advantage of them (a strategy closely associated with the behavioral economist Richard Thaler, who was considered a likely candidate for the Nobel this year).

Tragically, however, both investment strategies fail in the event of a major financial collapse, which drives many businesses into bankruptcy and many workers into unemployment. Minor departures from informational efficiency can’t explain the experience of the United States economy in the 21st century.

Theories based on the Keynes/Minsky view of the business cycle focus not on the imperfect rationality of individual investors, but on the institutional dynamics of financial profit maximization under conditions of uncertainty. Banks face temptations to overextend and overleverage themselves during booms and to develop inherently opaque securities like derivatives that offer them enormous profits.

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The computational beauty of flocking: boids revisited

Artificial-life research was founded in the mid-1980s. It promotes the idea of the bottom-up research approach, where only the basic units of a situation and their local interaction are modelled, and then the system is left to evolve. However, the notable progress of the processing power of personal computers, evident in the last two decades, has had little influence on the ways the basic units (artificial animals or animats) are constructed. This impacts largely on the applicability of the methods in other research fields. Our field of choice is the modelling of bird flocks. This area was at its peak in the late 1980s when Craig W. Reynolds presented the first and most influential model – the boids. In spite of his many following works no formal definition has ever been presented. This might be the reason why a second generation of flocking models is still awaited. In this article we make a step forward, all in view of allowing for the development of the second-generation models. We present an artificial animal construction framework that has been obtained as a generalization of the existing bird flocking models, but is not limited to them. The article thus presents a formal definition of the
framework and gives an example of its use. In the latter the framework is employed to present a formalization of Reynolds’s boids.

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The quest to understand consciousness - Antonio Damasio

The quest to understand consciousness - Antonio Damasio | Bounded Rationality and Beyond | Scoop.it

Every morning we wake up and regain consciousness -- that is a marvelous fact -- but what exactly is it that we regain? Neuroscientist Antonio Damasio uses this simple question to give us a glimpse into how our brains create our sense of self. Brain researcher Jill Bolte Taylor studied her own stroke as it happened -- and has become a powerful voice for brain recovery.

Two thirds of the population believes a myth that has been propagated for over a century: that we use only 10% of our brains. Hardly! Our neuron-dense brains have evolved to use the least amount of energy while carrying the most information possible -- a feat that requires the entire brain. Richard E. Cytowic debunks this neurological myth (and explains why we aren’t so good at multitasking).

The brain is what makes us function, yet we understand so little about how it works. We are learning more about the brain by using new technology to monitor epilepsy patients during surgery. Moran Cerf explains the process doctors use to explore the brain further.

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Collection of Delinquent Fines: An Adaptive Randomized Trial to Assess the Effectiveness of Alternative Text Messages - Haynes - 2013 - Journal of Policy Analysis and Management - Wiley Online Library

Collection of Delinquent Fines: An Adaptive Randomized Trial to Assess the Effectiveness of Alternative Text Messages - Haynes - 2013 - Journal of Policy Analysis and Management - Wiley Online Library | Bounded Rationality and Beyond | Scoop.it
Abstract

The collection of delinquent fines is a vast and ongoing public administration challenge. In the United Kingdom, unpaid fines amount to more than 500 million pounds. Managing noncompliant accounts and dispatching bailiffs to collect fines in person is costly. This paper reports the results of a large randomized controlled trial, led by the UK Cabinet Office's Behavioural Insights Team, which was designed to test the effectiveness of mobile phone text messaging as an alternative method of inducing people to pay their outstanding fines. An adaptive trial design was used, first to test the effectiveness of text messaging against no treatment and then to test the relative effectiveness of alternative messages. Text messages, which are relatively inexpensive, are found to significantly increase average payment of delinquent fines. We found text messages to be especially effective when they address the recipient by name.

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Neuroeconomics The Shadow of the Future_百度文库

Neuroeconomics The Shadow of the Future_百度文库 | Bounded Rationality and Beyond | Scoop.it

Humans and other animals tend to disregard future benefits and

costs when choosing between immediate and delayed gratification.

This tendency can lead to the choice of options that are not in

one’s own longterm interest. A new study looks at the neurophysiological basis of this self-defeating behavior.

 

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How Colors Smell

How Colors Smell | Bounded Rationality and Beyond | Scoop.it

When someone asks me what flavor slushie I want, I don’t say “cherry,” I say “red.” That flavor is called “red.” “Blue” is another flavor a slushie might have. Similarly, a cherry smell—especially the chemically cherry smell of a red slushie—is a red smell.

That one’s easy, since cherries are red. It doesn’t take a wild leap to make that association. But what color is the smell of, say, soap?

A new study published in PLOS One finds that some people say white, some say yellow, some say blue. A group of international researchers had people from different cultures smell 14 scents and choose from 36 colors the one that they associated most with the odor.

 

 

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Recognizing The Illusion Of 'Homo Economicus'

Recognizing The Illusion Of 'Homo Economicus' | Bounded Rationality and Beyond | Scoop.it
Market theory does not fully explain the economic choices we make. Commentator Wim Hordijk says we must also look to behavioral economics and evolutionary psychology to understand the economy.

Research into behavioral economics has shown, for example, that our assessment of what something is worth to us can be directly, and predictably, influenced. This is the illusion of the free lunch, something humans are known to fall for even when economic theory would clearly suggest we select a more valuable option at a small cost.

Ariely also beautifully elucidates how we sometimes operate on social norms, while other times we fall into market norms. The difference is in whether there is a price attached to something.

If a friend invites you over for dinner, she will probably appreciate it if you bring a nice bottle of wine along (social norms). However, if instead you slap $20 (the price of a nice bottle of wine) in cash on the table and say "thanks for a lovely dinner," she would most likely be offended (market norms). Mixing social norms and market norms inappropriately often leads to irrational behavior and, possibly, even to conflict or misunderstanding.

Our irrational behavior is not just random though. The scientific experiments are repeatable. Each time we are faced with a similar situation, we tend to behave in a similarly irrational way. So, next to the bad news that we are not nearly as rational as we might have thought (or hoped), there is also good news in that we can understand and predict our irrational behavior, at least to some extent. This, in turn, can help us improve our decision making and change our behavior for the better. In other words, we can try to be more rational about our irrationality.

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Power and Reduced Temporal Discounting

Abstract
Decision makers generally feel disconnected from their future selves, an experience that  leads them to prefer smaller immediate gains to larger future gains. This pervasive tendency is known as temporal discounting, and researchers across disciplines are interested in understanding how to overcome it. Drawing from recent advances in the power literature, we suggest that the experience of power enhances one’s connection with the future self, resulting in reduced temporal discounting. In Study 1, we show that participants assigned to high-power roles are less likely than others to display temporal discounting. In Studies 2 and 3, we find that
priming power reduces temporal discounting in monetary and non-monetary tasks and, further, that connection with the future self mediates the relationship between power and reduced discounting. In Study 4, we show that experiencing a general sense of power in the workplace predicts actual lifetime savings. Implications and future research directions are discussed.

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Is Time Travel Possible? Testing the ‘Grandfather Paradox’ - YouTube

Science for a Complex World

Time travel is a science fiction staple, inspiring the plots of countless books, movies and Star Trek episodes. But while basic physics allows for the possibility of moving through time, practical concerns like the “Grandfather Paradox,” in which a traveler jumps back in time, kills his grandfather and therefore prevents his own existence, seem to stand in the way. Self-described “quantum mechanic” Seth Lloyd looks at an alternate mode of time travel that eliminates any events that could later prove paradoxical, making this phenomenon both theoretically possible and creatively irresistible, whether you’re an astrophysicist or just a daydreamer.

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Chapter 18: Risk Perception and Risk Tolerance by Victor Ricciardi, Douglas Rice :: SSRN

Chapter 18: Risk Perception and Risk Tolerance by Victor Ricciardi, Douglas Rice :: SSRN | Bounded Rationality and Beyond | Scoop.it
Abstract:      
This chapter provides an overview of the research literature and the important issues regarding risk perception and risk tolerance. The academic literature reveals that various disciplines provide an assortment of perspectives in terms of how to define, describe, and analyze risk. The behavioral finance perspective encompasses the subjective and objective factors of risk within the domains of risk perception and risk tolerance. Risk perception is the subjective decision-making process that an investor uses when evaluating risk and the amount of uncertainty. Risk tolerance is the degree of risk that an investor is willing to endure in the pursuit of a financial objective. A major problem within the risk tolerance literature is the lack of general agreement about issues such as a standard definition, a uniform theory or model, measurement discrepancies, and the growing number of questionnaires. Academic researchers and practitioners are only now starting to study and understand the long-term effects of the financial crisis in 2007 and 2008 on investor risk-taking behavior. 

 

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What is Cognitive Science? An introduction to the mind from the view points of: neuroscience, anthropology, computer science, psychology, philosophy, and linguistics.

What is Cognitive Science? An introduction to the mind from the view points of: neuroscience, anthropology, computer science, psychology, philosophy, and linguistics. | Bounded Rationality and Beyond | Scoop.it
Cognitive science is partly defined as the study of thought, learning, and mentalorganization, which are all investigable functions of the human brain. Therefore, byunderstanding the principles of the brain, we can take a step forward in holistically knowing whatthe mind is.Neuroscience and ConsciousnessThe brain is comprised of billions of neurons. Neurons are the fundamental cells in thebrain that communicate to perform most bodily functions and higher-level cognitions. The thingthat makes these cells unique is that they are plastic and able to adapt based on the experiencesthey encounter. Scientists' ability to study the connections and specific importances of groups ofneurons across the brain contributes to the understanding of how humans learn, think, andchange.Various behavioral methods like electroencephalography (EEG) and functional magneticresonance imaging (fMRI) allow us to record neural action in the brain during various tasksrelating to cognitive function. By using these techniques, and others, it has been proven that thefrontal lobe of the brain plays a large part in higher-level cognitive functions like analyzinginformation, solving future problems, developing strategies, and controlling purposeful behaviors.This is significant because lower-level primates do not have developed frontal lobes andtherefore are unable to complete these complex actions. This ability to perform higher-levelfunctions, that aren't simply primitive or instinctive responses, is what makes us distinctlyhuman, and ultimately what composes our unique conscious mind.While neuroscience can solve many questions about what it truly means to be aconscious being (like the ability to control instinctive behaviors), it cannot answer them all. Somehuman functions still remain mysterious because neuroscience can't pin down concepts likefree will or behavioral control. In conclusion, the mind is certainly an emergence from the brain,but it isn't necessarily a distinct subject that can be entirely comprehended by science in today’stime.3
 
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BEHAVIOURAL FINANCE AND BEYON PERCEPTIONS, BELIEFS AND ACTIONS

Olivier Oullier, a renowned expert in behaviour change and neuroeconomics, explains how research developments in brain sciences and behavioural finance help us comprehend the biases that distort financial and economic decisions and how investors and traders can better understand and cope with such problems.

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The Behavioral Economics Guide 2014 | FREE Download on BehavioralEconomics.com

The BE Guide includes something for everyone. First, there’s a fantastic foreword written by George Loewenstein (a founding father of BE) and Rory Sutherland (ad man and leading BE advocate). The core of the Guide is an introduction to BE and mini encyclopedia / glossary of concepts written by my humble self, Alain Samson. The second part of the Guide contains various BE resources (books, journals and postgraduate programs). Finally, there’s a substantial section on applied behavioral science that includes eight papers contributed by authors from various organizations. 

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Are Markets Efficient? Even the Supreme Court Is Weighing In

Are Markets Efficient? Even the Supreme Court Is Weighing In | Bounded Rationality and Beyond | Scoop.it

In a case that delved into a much-debated academic theory, a ruling erects a new hurdle for investors to clear in some class-action lawsuits.  Mr. Shiller emphasized “the enormous role of human error” that has been documented by behavioral finance and the need to rein in market excesses through regulation. Therefore, the company argued, the court should overturn a 1988 decision, Basic v. Levinson, that has allowed shareholders in publicly traded companies to form class-action groups based on the automatic assumption that significant misstatements caused share prices to fall.

“The economics have changed,” Aaron M. Streett, Halliburton's lawyer, declared before the court. He said that many investors “do not rely on the integrity of the market price whatsoever. ... Sometimes, for example, prices are much higher than can be justified by fundamental factors like corporate earnings and other public information.They are prone to bouts of irrational exuberance, outright panic and other apparent aberrations that give wise traders an edge, and make claims of total efficiency hard to defend.”

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The Upside of Dyslexia

The Upside of Dyslexia | Bounded Rationality and Beyond | Scoop.it
The condition makes it harder to learn to read. But it also seems to offer visual advantages.

People with dyslexia, who have a bias in favor of the visual periphery, can rapidly take in a scene as a whole — what researchers call absorbing the “visual gist.”

Intriguing evidence that those with dyslexia process information from the visual periphery more quickly also comes from the study of “impossible figures,” like those sketched by the artist M. C. Escher. A focus on just one element of his complicated drawings can lead the viewer to believe that the picture represents a plausible physical arrangement.

A more capacious view that takes in the entire scene at once, however, reveals that Escher’s staircases really lead nowhere, that the water in his fountains is flowing up rather than down — that they are, in a word, impossible. Dr. Catya von Károlyi, an associate professor of psychology at the University of Wisconsin, Eau Claire, found that people with dyslexia identified simplified Escher-like pictures as impossible or possible in an average of 2.26 seconds; typical viewers tend to take a third longer. “The compelling implication of this finding,” wrote Dr. Von Károlyi and her co-authors in the journal Brain and Language, “is that dyslexia should not be characterized only by deficit, but also by talent.”

The discovery of such talents inevitably raises questions about whether these faculties translate into real-life skills. Although people with dyslexia are found in every profession, including law, medicine and science, observers have long noted that they populate fields like art and design in unusually high numbers. Five years ago, the Yale Center for Dyslexia and Creativity was founded to investigate and illuminate the strengths of those with dyslexia, while the seven-year-old Laboratory for Visual Learning, located within the Harvard-Smithsonian Center for Astrophysics, is exploring the advantages conferred by dyslexia in visually intensive branches of science. The director of the laboratory, the astrophysicist Matthew Schneps, notes that scientists in his line of work must make sense of enormous quantities of visual data and accurately detect patterns that signal the presence of entities like black holes.

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EAST: Four Simple Ways to Apply Behavioural Insights | The Behavioural Insights Team

EAST: Four Simple Ways to Apply Behavioural Insights | The Behavioural Insights Team | Bounded Rationality and Beyond | Scoop.it
EAST: Four Simple Ways to Apply Behavioural InsightsIf you want to encourage a behaviour, make it Easy, Attractive, Social and Timely (EAST). These four simple principles, based on the Behavioural Insights Team’s own work and the wider academic literature, form the heart of the team’s new framework for applying behavioural insights.

One of the key objectives of the Behavioural Insights Team at its creation in 2010 was to spread the understanding of behavioural approaches across the policy community. 

Alongside the policy work and trials conducted by the Team over the last three years, we have conducted many seminars, workshops and talks with policymakers, academics and practitioners. 

From these many sessions, together with our trials and policy work, has emerged a simple, pragmatic framework: the EAST framework. EAST stands for Easy, Attractive, Social and Timely.

Though we do not claim that EAST is a comprehensive summary of all there is to know about behavioural science, we do think that for busy policymakers, the EAST framework is an accessible, simple way to make more effective and efficient policy. 

Minister for Government Policy, Oliver Letwin, said: 

“The behavioural science literature can be complex, so having a simple framework which policymakers can easily access and apply is invaluable.

As the Minister responsible for Government Policy, I’ve seen how some of these insights can be applied in practice to help generate policy that’s smarter, simpler and is highly cost-effective.” 

Minister for the Cabinet Office Francis Maude said:

“The publication of this framework, only two months after we announced the spin out of the Behavioural Insights Team into a mutual joint-venture, is a clear sign that this new business model will deliver results both for policymakers and for citizens. 

Giving the team the freedom to meet demand from across the public and private sectors, not just in the UK but overseas, is enabling more people to benefit from their work – and our retained stake means that their success is also a win for hardworking taxpayers.”

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The Behavioralist As Tax Collector: Using Natural Field Experiments to Enhance Tax Compliance

Tax collection problems date back to the earliest recorded history of mankind. This paper begins with a simple theoretical construct of paying (rather than declaring) taxes, which we argue has been an overlooked aspect of tax compliance. This construct is then tested in two large natural field experiments. Using administrative data from more than 200,000 individuals in the UK, we show that including social norms and public goods messages in standard tax payment reminder letters considerably enhances tax compliance. The field experiments increased taxes collected by the Government in the sample period and were cost-free to implement, demonstrating the potential importance of such interventions in increasing tax compliance.

Michael Hallsworth, John List, Robert Metcalfe, Ivo Vlaev 
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The Relationship Between Creativity and Mental Illness

The Relationship Between Creativity and Mental Illness | Bounded Rationality and Beyond | Scoop.it

The science behind the “tortured genius” myth and what it reveals about how the creative mind actually works.

“I think I’ve only spent about ten percent of my energies on writing,” Pulitzer Prize-winning writer Katherine Anne Porter confessed in a1963 interview. “The other ninety percent went to keeping my head above water.” While art maybe a form of therapy for the rest of us, Porter’s is a sentiment far from uncommon among the creatively gifted who make that art. Why?

When Nancy Andreasen took a standard IQ test in kindergarten, she was declared a “genius.” But she was born in the late 1930s, an era when her own mother admonished that no one would marry a woman with a Ph.D. Still, became a psychiatrist and a neuroscientist, and made understanding the brain’s creative capacity her life’s work. Having grown up seeped in ambivalence about her “diagnosis” of extraordinary intellectual and creative ability, Andreasen wondered about the social forces at work in the nature-nurture osmosis of genius, about how many people of natural genius were born throughout history whose genius was never manifested, suppressed by lack of nurture. “Half of the human beings in history are women,” she noted, “but we have had so few women recognized for their genius. How many were held back by societal influences, similar to the ones I encountered and dared to ignore?” (One need only look at the case of Benjamin Franklin and his sister to see Andreasen’s point.)


"I think I’ve only spent
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"It Can't Be A Bubble!" | Zero Hedge

"It Can't Be A Bubble!" | Zero Hedge | Bounded Rationality and Beyond | Scoop.it
If one wants to identify bubbles, one must perforce study monetary conditions. The comparison of historical data on valuations and other ancillary factors can only take one so far. The problem is that in times of strongly inflationary policy, the economy's price structure becomes thoroughly distorted, and that therefore a great many “data” can no longer be regarded as reliable... Most of the time, it's the eventual slowdown of money supply growth that brings a bubble to its knees.
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Neuroeconomists Retrospectively Confirm Warren Buffett's Wisdom

In their experimental markets, Colin Camerer, the Robert Kirby Professor of Behavioral Economics at Caltech, and colleagues found two distinct types of activity in the brains of participants—one that made a small fraction of participants nervous and prompted them to sell their experimental shares even as prices were on the rise, and another that was much more common and made traders behave in a greedy way, buying aggressively during the bubble and even after the peak.   The lucky few who received the early warning signal got out of the market early, ultimately causing the bubble to burst, and earned the most money. The others displayed what former Federal Reserve chairman Alan Greenspan called "irrational exuberance" and lost their proverbial shirts. The researchers set up a simple experimental market in which they were able to control the fundamental, or actual, value of a traded risky asset. In each of 16 sessions, about 20 participants were told how an on-screen trading market worked and were given 100 units of experimental currency and six shares of the risky asset.

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Is One of the Most Popular Psychology Experiments Worthless?

Is One of the Most Popular Psychology Experiments Worthless? | Bounded Rationality and Beyond | Scoop.it
A trolley is careening toward an unsuspecting group of workers. You have the power to derail the trolley onto a track with just one worker. Do you do it? It might not matter. 

"Suppose you're the driver of a trolley car, and your trolley car is hurtling down the track at 60 miles an hour. You notice five workers working on the track. You try to stop, but you can't, because your brakes don't work. You know that if you crash into these five workers, they will all die. You feel helpless until you notice that off to the side, there's a side track. And there's one worker on the side track."

The question: Do you send the trolley onto the side track, thus killing the one worker but sparing the five, or do you let events unfold as they will and allow the deaths of all five? (Most people, for what it's worth, say they would turn.)

Then Sandel asked about a popular variation on the same problem. The same trolley is careening toward unsuspecting innocents, but this time, you're an onlooker on a footbridge, and, "you notice that standing next to you, leaning over the bridge, is a very fat man."

A ripple of laughter rises from the packed auditorium.

"You could give him a shove," he continues. "He would fall over onto the track, right in the way of the trolley car. He would die, but he would spare the five. How many would push the fat man over the bridge?"

A few hands go up, but most of the students just erupt in giggles.

And that's exactly why, some scientists argue, this well-known "trolley dilemma," shouldn't be used for psychology experiments as much as it is.

 
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The Psychology of Risk: The Behavioral Finance Perspective by Victor Ricciardi :: SSRN

The Psychology of Risk: The Behavioral Finance Perspective by Victor Ricciardi :: SSRN | Bounded Rationality and Beyond | Scoop.it
HANDBOOK OF FINANCE: VOLUME 2: INVESTMENT MANAGEMENT AND FINANCIAL MANAGEMENT, Frank J. Fabozzi, ed., John Wiley & Sons, pp. 85-111, 2008 

Abstract:      
Since the mid-1970s, hundreds of academic studies have been conducted in risk perception-oriented research within the social sciences (e.g., nonfinancial areas) across various branches of learning. The academic foundation pertaining to the "psychological aspects" of risk perception studies in behavioral finance, accounting, and economics developed from the earlier works on risky behaviors and hazardous activities. This research on risky and hazardous situations was based on studies performed at Decision Research (an organization founded in 1976 by Paul Slovic) on risk perception documenting specific behavioral risk characteristics from psychology that can be applied within a financial and investment decision-making context. A notable theme within the risk perception literature is how an investor processes information and the various behavioral finance theories and issues that might influence a person's perception of risk within the judgment process. The different behavioral finance theories and concepts that influence an individual's perception of risk for different types of financial services and investment products are heuristics, overconfidence, prospect theory, loss aversion, representativeness, framing, anchoring, familiarity bias, perceived control, expert knowledge, affect (feelings), and worry.
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How Biases Affect Investor Behaviour by H. Kent Baker, Victor Ricciardi :: SSRN

How Biases Affect Investor Behaviour by H. Kent Baker, Victor Ricciardi :: SSRN | Bounded Rationality and Beyond | Scoop.it

Investor behaviour often deviates from logic and reason,

and investors display many behaviour biases that influence

their investment decision-making processes. Below, H.

Kent Baker and Victor Ricciardi describe some common

behavioural biases and suggest how to mitigate them.

"The investor's chief problem – even his worst enemy – is likely

to be himself."

Benjamin Graham

 

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The Precautionary Principle: Fragility and Black Swans from Policy Actions

The Precautionary Principle: Fragility and Black Swans from Policy Actions | Bounded Rationality and Beyond | Scoop.it

Abstract—The precautionary principle (PP) states that if

an action or policy has a suspected risk of causing severe

harm to the public domain (affecting general health or the

environment globally), the action should not be taken in the

absence of scientific near-certainty about its safety. Under

these conditions, the burden of proof about absence of harm

falls on those proposing an action, not those opposing it. PP

is intended to deal with uncertainty and risk in cases where

the absence of evidence and the incompleteness of scientific

knowledge carries profound implications and in the presence of

risks of "black swans", unforeseen and unforeseable events of

extreme consequence. Here we formalize PP, placing it within

the statistical and probabilistic structure of “ruin” problems, in

which a system is at risk of total failure, and in place of risk we

use a formal"fragility" based approach. In these problems, what

appear to be small and reasonable risks accumulate inevitably

to certain irreversible harm. Traditional cost-benefit analyses,

which seek to quantitatively weigh outcomes to determine

the best policy option, do not apply, as outcomes may have

infinite costs. Even high-benefit, high-probability outcomes

do not outweigh the existence of low probability, infinite cost

options—i.e. ruin. Uncertainties result in sensitivity analyses

that are not mathematically well behaved. The PP is increasingly

relevant due to man-made dependencies that propagate impacts

of policies across the globe. In contrast, absent humanity

the biosphere engages in natural experiments due to random

variations with only local impacts. Our analysis makes clear that

the PP is essential for a limited set of contexts and can be used

to justify a limited set of actions. We discuss the implications

for nuclear energy and GMOs. GMOs represent a public risk of

global harm, while harm from nuclear energy is comparatively

limited and better characterized. PP should be used to prescribe

severe limits on GMOs.

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