Real-World Decision Making

Coming soon:

The first and only encyclopedia to focus on the economic and financial behaviors of consumers, investors, and organizations, including an exploration of how people make good—and bad—economic decisions.

Features

• Contains an informative introductory essay that familiarizes students with the various aspects of behavioral economics

  • Provides a list of additional readings for those interested in learning more about the topic

• Includes cross-references in each entry to help readers make connections between related topics

• Defines key terms that are likely to be unfamiliar to those without advance knowledge of the subject

• Helps readers identify and study particular entry categories through accompanying Topic Finders

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Is Behavioral Economics Doomed?

Here is a skeptical take on the insights supposedly offered by the rise of behavioral economics as represented by Daniel Kahneman and others. Since I’m in the process of reviewing Kahneman it will be interesting to see if Levine’s take on behavioral economics jibes with my take on Kahneman in particular and behavioral economics in general – I have a strong sense that is unlikely to be the case.

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Hayek and Behavioral Economics: Mindscapes and Landscapes: Hayek and Simon on Cognitive Extension

I see that the publisher now has a fully detailed page up for a volume that I’ve been privileged to be a part of. The Foreword is by a very nice chappie going by the name of V.Smith and includes luminaries such as McCloskey, Boettke, Gintis, Steel and others. My abstract:

Mindscapes and Landscapes: Hayek and Simon on Cognitive Extension

Hayek’s and Simon’s social externalism runs on a shared presupposition: mind is constrained in its computational capacity to detect, harvest, and assimilate “data” generated by the infinitely fine-grained and perpetually dynamic characteristic of experience in complex social environments. For Hayek, mind and sociality are co-evolved spontaneous orders, allowing little or no prospect of comprehensive explanation, trapped in a hermeneutically sealed, i.e. inescapably context bound, eco-system. For Simon, it is the simplicity of mind that is the bottleneck, overwhelmed by the ambient complexity of the environmental. Since on Simon’s account complexity is unidirectional, Simon is far more ebullient about the prospects of explanation. Hayek’s social externalism functions as a kind of distributed “extra-neural” memory store manifest as dynamic spontaneous orders. Simon’s organizational rule-governed externalism negotiates the “inner” world (the mind) with the “outer” world through a homeostatic interface that offloads the cognitive burden into the environment. Their respective externalisms may differ in detail but not in spirit in that it ameliorates their shared presupposition of cognitive constraint. Even though any “optimization talk” for Hayek and Simon is objectionable, knowledge acquisition can be represented by a contextualized stigmergic swarm optimization algorithm that gives due emphasis to both the individual and the environment. The key insight is that “perfect” knowledge is unnecessary, impracticable and indeed irrelevant if one understands the mechanism at work in complex sociality, a stigmergic sociality that in effect augments or scaffolds cognition.

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The New Theories of Moral Sentiments

Here is an article in the WSJ on Deirdre McCloskey. I had the honour and pleasure to meet Deirdre some 18 months ago at a conference on behavioral economics in San Diego. She was absolutely delightful. Everything you wanted to know about Deirdre but were afraid to ask . . . can be found here.