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The Future Of Economic Forecasting -How to model irrational behavior in the markets?

Ever wonder why you succumbed, yet again, to advertising hype or deceptive packaging and overpaid for a product? Or bought securities that you know were overvalued when the herd instinct was just too strong to resist?
Such irrationality is the focus of behavioral economists, who appear to be gaining greater credibility in macroeconomic circles since the housing bubble of 2008 and the ensuing global financial meltdown. They are also at the center of an age-old debate recently reignited by columnist and Nobel laureate Paul Krugman in a Sept. 6 New York Times Magazine article titled, "How Did Economists Get It So Wrong?," which fires a salvo at the assumption underlying neoclassical economics--namely, that free markets are inherently rational and efficient.
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Why Leaders Should Care About Cognitive Neuroscience

Why Leaders Should Care About Cognitive Neuroscience | Bounded Rationality and Beyond | Scoop.it

Everyone has an opinion on the issue of determinism and free will and most people accept the idea of determinism but nonetheless believe they are in charge of their actions. Busy people are willing to accept these disparate views and just live life. For those who stop a second and wonder, “hey how does that all work?” this is the book for them. It tells the story of my life in brain research and how after 50 years of it, I have come to think about the crucially important idea of personal responsibility in a determined brain.


Via Philippe Vallat
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PLoS Biology: Foundations of Neuroeconomics: From Philosophy to Practice

Evidence that neuroscience improves our understanding of economic phenomena comes from a broad array of novel experimental findings, including demonstrations of brain regions that guide responses to fair  and unfair social interactions, that resolve uncertainty dring decision making , that track loss aversion and subjective value, and that encode willingness to pay and reward error signals. Yet, neuroeconomics has been characterized as a faddish juxtaposition, not an integration, of disparate domains. More damningly, critics have charged that neuroscience and economics are fundamentally incompatible, an argument that resonates with many social scientists. Economics thrived for centuries in the absence of neuroscience and some economists argue that existing neuroeconomics research is not useful to mainstream economics.

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The role of cognitive biases in project failure. The same thing will happen with the European and Italian rehabilitation projects in particular?

The role of cognitive biases in project failure. The same thing will happen with the European and Italian rehabilitation projects in particular? | Bounded Rationality and Beyond | Scoop.it

There are two distinct views of project management practice: the rational view which focuses on management tools and techniques such as those espoused by frameworks and methodologies, and the social/behavioural view which looks at the social aspect of projects – i.e. how people behave and interact in the context of a project and the wider organisation. The difference between the two is significant: one looks at how projects should be managed, it prescribes tools, techniques and practices; the other at what actually happens on projects, how people interact and how managers make decisions. The gap between the two can sometimes spell the difference between project success and failure. In many failed projects, the failure can be traced back to poor decisions, and the decisions themselves to cognitive biases: i.e. errors in judgement based on perceptions. A paper entitled, Systematic Biases and Culture in Project Failure, by Barry Shore looks at the role played by selected cognitive biases in the failure of some high profile projects. The paper also draws some general conclusions on the relationship between organisational culture and cognitive bias. This post presents a summary and review of the paper. 

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MacArthur Foundation Research Network on Law and Neuroscience | Vanderbilt University

MacArthur Foundation Research Network on Law and Neuroscience | Vanderbilt University | Bounded Rationality and Beyond | Scoop.it
The Law and Neuroscience Project...

The Research Network on Law and Neuroscience, supported by the John D. and Catherine T. MacArthur Foundation, addresses a focused set of closely-related problems at the intersection of neuroscience and criminal justice: 1) determining the law-relevant mental states of defendants and witnesses; 2) assessing a defendant’s capacity for self-regulating his behavior; and 3) assessing whether, and if so how, neuroscientific evidence should be admitted and evaluated in individual cases.

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A cognitive neuroscience framework for understanding causal reasoning and the law.

Over the past couple of decades, there have been great developments in the fields of psychology and cognitive neuroscience that have allowed the advancement of our understanding of how people make judgements about causality in several domains. We provide a review of some of the contemporary psychological models of causal thinking that are directly relevant to legal reasoning. In addition, we cover some exciting new research using advanced neuroimaging techniques that have helped to uncover the underlying neural signatures of complex causal reasoning. Through the use of functional imaging, we provide a first-hand look at how the brain responds to evidence that is either consistent or inconsistent with one's beliefs and expectations. Based on the data covered in this review, we propose some ideas for how the effectiveness of causal reasoning, especially as it pertains to legal decision-making, may be facilitated.

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Cosa ci aspetta nel 2012: social media e tendenze per il prossimo anno

Cosa ci aspetta nel 2012: social media e tendenze per il prossimo anno | Bounded Rationality and Beyond | Scoop.it
Si avvicina la fine dell'anno e si comincia a ragionare su cosa ci aspetterà nel 2012: non fa eccezione il mondo dei social media, che il prossimo anno potrebbe consacrarsi come strumento decisivo per le aziende dopo un 2011 pieno di novità. Beverly Macy, nel suo post, parla apertamente di Global Social Brain: la social sfera è come una sorta di grande cervello globale i cui pensieri sono generati da tutti i contenuti prodotti dagli utenti all’interno dei social network.
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Art and the Limits of Neuroscience

Art and the Limits of Neuroscience | Bounded Rationality and Beyond | Scoop.it
Why does art move us? Why does it matter? The answers are not likely to be found by studying the brain.
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Legal Theory Blog: Law and Economics

Legal Theory Blog: Law and Economics | Bounded Rationality and Beyond | Scoop.it
As usual, the Lexicon is both too short and too long. Too short to even give you and elementary introduction to the issues, but too long for a one minute read. Nonetheless, I hope to have given you the tools that can help you to identify questions about the human good and to read intelligently about this topic.
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Visione.Una riflessione sull’epistemologia cognitiva — ComplexLab

Visione.Una riflessione sull’epistemologia cognitiva — ComplexLab | Bounded Rationality and Beyond | Scoop.it
L’atto del vedere costituisce il nostro rapporto primordiale con il mondo, non ci dobbiamo meravigliare perciò se un’attenta analisi dei processi visivi può mostrare una grande complessità teorica che conduce direttamente ai problemi spinosi che si intrecciano al confine tra neuroscienze, intelligenza artificiale ed epistemologia cognitiva. Esiste infatti una connessione profonda tra il meccanismo della percezione visiva, l’esperienza soggettiva del vedere ed i processi generali tramite i quali la nostra mente costruisce descrizioni del mondo, a riprova che il miglior modello del metodo di lavoro di una mente embodied parte proprio dallo studio di quei processi selezionati dall’evoluzione che ci permettono di “muoverci nel mondo”. Non dobbiamo dimenticare del resto che l’etimologia del termine “teoria” ha la stessa radice di “vedere” ed in entrambi i casi come spettatori del mondo siamo chiamati, sia nell’attività astratta di costruttori di modelli e rappresentazioni che nell’atto percettivo, ad operare una serie di scelte interpretative senza le quali non c’è conoscenza del mondo. Lungi dall’essere divisi da un taglio netto di cartesiana chiarezza, il rapporto tra la mente e il mondo rientra in una circolarità in cui osservatore ed osservato si riflettono e si definiscono l’un l’altro in un gioco di ricorsioni semiotiche infinite che è l’essenza stessa della conoscenza e nel quale, come vedremo, entra in gioco in modo irriducibile una dimensione che era stata espulsa dalla scienza cognitiva classica, l’irriducibile soggettività dell’osservatore.
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Our Behavioral Biases Play a Major Role in Our Investing Success

Our Behavioral Biases Play a Major Role in Our Investing Success | Bounded Rationality and Beyond | Scoop.it

The field of behavioral finance has provided us with fascinating insights into how our behaviors as human beings impacts investment results.

 

Using a database of tens of thousands of brokerage records of U.S. individual investors, the authors examined the effect of behavioral biases on the mutual fund choices of a large sample of U.S. discount brokerage investors.

 

Their basic conclusion was that behaviorally biased investors typically make poor decisions about fund style and expenses, trading frequency and timing — resulting in poor performance.

 

The following is a summary of their conclusions:


Via Alessandro De Angelis
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NBR | Behavioral Finance Basics | Your Mind and Your Money |

NBR's Dan Grech introduces viewers to the exciting and dynamic field of behavioral finance, examining how psychological factors affect financial decisions.


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Behavioral Finance with Victor Ricciardi | VoiceAmerica™

Behavioral Finance with Victor Ricciardi | VoiceAmerica™ | Bounded Rationality and Beyond | Scoop.it
Our guest today, Victor Ricciardi, BBA, MBA, APC is an Assistant Professor of Financial Management at Goucher College in Baltimore, Maryland. The questions we will be discussing today are: What is Standard (Traditional) Finance?What is Modern Portfolio Theory? What is Behavioral Finance? What type of decision maker are you? What is the Psychology of Risk (Risk Perception)? What is the inverse relationship between perceived risk and expected return? What are the main topics that influence an investor’s perception and decision-making process (Heuristics, Overconfidence, Loss Aversion, Control Bias, Representativeness, Anchoring, Familiarity Bias, Worry, Gut Feelings)? What role did the “2008 Financial Crisis” have on risk-taking behavior?
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Five Big Developments in Neuroscience to Watch - Forbes

Five Big Developments in Neuroscience to Watch - Forbes | Bounded Rationality and Beyond | Scoop.it
Neuroscience is in many ways a discipline still in its infancy, making it ripe for claims that veer closer to science fiction than science. In this post I’ve taken a cut at describing five real-deal developments in neuroscience that are going to heat up in the years to come, along with implications pro and con.
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Seeing Without Knowing: How the Conscious Mind Messes With Memory

Seeing Without Knowing: How the Conscious Mind Messes With Memory | Bounded Rationality and Beyond | Scoop.it
Our memories aren’t very reliable. The sobering truth is that we forget most of what we experience, our memories are usually distorted after they are formed and we have the tendency to accept misinformation about the past and faithfully adopt it as...

It is ironic that our conscious mind is not only unable to counteract most of the cognitive biases to which we are all subjected, but can also work to falsify memories. Peer pressure, cognitive dissonance, etc. - boy, not only can you not rely on what you think, you also can't really believe your memories.

 

The good news? This should make for more tolerance, but note, the emphasis is on should.


Via Susanne Ramharter
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The iDECIDE business forum opens, first newsletter! « BrainEthics

The iDECIDE business forum opens, first newsletter! « BrainEthics | Bounded Rationality and Beyond | Scoop.it

As you may have heard, we are currently opening a business network, entitled iDECIDE. The aim of this forum is to provide the latest news and views from the scene of neuroscience, applied to a business framework. We provide a network of selected likeminded companies from various disciplines (finance, marketing, communications).

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Crises of Capitalism "is time to look beyond capitalism"

In this RSA Animate, renowned academic David Harvey asks if it is time to look beyond capitalism towards a new social order that would allow us to live withi...

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Neuroscience and the Law

New discoveries in neuroscience intersect with law making, criminal punishment, and the development of new rehabilitative strategies. A new understanding of the neurobiology of behavior is emerging. Societies can increasingly leverage this base of scientific information to design modern, evidence-based policy. Questions at the interface of law and neuroscience include: (a) Is it a legitimate defense to claim that a tumor or a brain injury mitigates a crime?; (b) How do the brains of minors differ from adult brains in their capacity for decision-making and impulse control?; (c) Can neuroscience inform sentencing guidelines by offering better prediction of recidivism?; (d) Can new brain imaging technologies be leveraged for new methods of rehabilitation?; (e) Who should have access to information about our brains?; and (f) How should juries assess culpability when most behaviors are driven by unconscious systems of the brain?

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How are Neuromarketing Companies Marketing Themselves

How are Neuromarketing Companies Marketing Themselves… | Bounded Rationality and Beyond | Scoop.it
The Neuromarketing Frontier

The field of neuromarketing is actually still very young. Although cognitive neuroscience has been researched for decades, neuroscience as it pertains to perception a...
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The Neuroscience of Leadership

The Neuroscience of Leadership | Bounded Rationality and Beyond | Scoop.it
A few months ago I introduced you to the work of Dr. Jeffrey Schwartz, a research neuropsychiatrist at the University of California Los Angeles School of Medicine, in a column called The Neuroscien...
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Considerations on integrity and business (Eric Brown) - Academia.edu

Some considerations on integrity and business Eric Brown CEU Business School DRAFT – PLEASE DON’T QUOTE BIBLIOGRAPHIC INFO TO BE SUPPLIED IN COMPLETE When teaching business ethics, the second most frequent general question on gets is, “Well, what ...
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Chart.ly - Global_Macro

Chart.ly - Global_Macro | Bounded Rationality and Beyond | Scoop.it
Mr. Hoffman exploits the mathematics of nature to decipher financial market behavior. With 16+ years experience analyzing emergent trends & super-anomalies, he is host of financial blogs and an Internet radio talk-show.
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Biased thinking at work is a dangerous thing

Biased thinking at work is a dangerous thing | Bounded Rationality and Beyond | Scoop.it

The problem with the human brain is that it is built for a primitive era that does not exist anymore. In modern times we have to use brains that are geared toward survival and reproduction in a complex workplace environment.

 

It is no surprise that when we are faced with problems in a fast-paced modern workplace environment, we tend to go back to our default thinking and behavioural rules that got us out of trouble thousands of years ago, says Dr Lee Newman, a behavioural science expert at IE University in Spain.

 

This biased and ‘dangerous' thinking can, over time, harm one's business and career.


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NBR | Richard Thaler | Your Mind and Your Money

NBR's Susie Gharib interviews Richard Thaler of the University of Chicago about behavioral finance and its practical implications.


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Jim Bishopp will be talking with Deb Dupont of the ING Retirement Research Institute www.retirementresearch.com. | VoiceAmerica™

Jim Bishopp will be talking with Deb Dupont of the ING Retirement Research Institute www.retirementresearch.com. | VoiceAmerica™ | Bounded Rationality and Beyond | Scoop.it
Much of economic and financial theory is based on the notion that individuals act rationally and consider all available information in the decision-making process. However, researchers have uncovered a surprisingly large amount of evidence that this is frequently not the case. Dozens of examples of irrational behavior and repeated errors in judgment have been documented. “Behavioral finance" has evolved that attempts to better understand and explain how emotions and cognitive errors influence investors and the decision-making process. Ms. Dupont will help shed some light on the behavioral tendencies of public sector employees. She will also discuss some recent surveys that the Institute has conducted regarding the topic of Behavioral Finance in the public sector field.
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