Decision Making, Behavioral Economics Approach

Mainstream economics has made major advances in explaining human behaviour extending the analysis even to such matters as love and marriage. However it has been more and more noticeable that the assumptions of traditional economic models are not adequate to discuss many problems of real world. They appear as a normative ideal of how people should behave rather than as a truthful description of how they do behave. The turn of the new century has seen the rise of a new approach, labelled Behavioural Economics. Scholars developing this approach have von 6 Nobel Prizes in Economics, including Richard Thaler’s Prize in 2017.

The aim of the seminar is to show cognitive abilities and emotional responses of humans in their economic decision making taking into account the institutions –organisational arrangements, social norms and the specific circumstances.

1. Introduction. Shortcomings of the standard economic model. The examples of the decisions which are inconsistent with this model (2 hours).

2. History and evolution of behavioral economics (2 hours).

3.4. Rational behavior

r; cognitive abilities and cognitive effort. Attitudes; functions of attitudes, the relation between attitudes and preferences. (4 hours).

5. Heuristic-driven bias. Examples (2 hours)

6.7. Decision making under risk - Prospect Theory (4 hours).

8. Behavioral Macroeconomics (2 hours)

9. Behavioral theory of savings, time preference (2 hours)

10.Subjective measures of risk (2 hours)

11. Mental accounting, endowment effect (2 hours)

12. The difficulties in realizing losses, hedonic framing. "Get eventis" problem (2 hours).

13.14. Fairness and Social Preferences. Policy implications (4 hours).

15. Conclusion (2 hours)

Literatura ( max 65 tys. znaków)

Obligatory:

George A.Akerloff, Behavioral Macroeconomics and Macroeconomic Behavior, The American Economic Review, vol 92, June 2002, pages 411-433

Gerrit Antonides, Psychology in Economics and Business, Kluwer Academic Publishers, Introduction and Chapter 2,

Colin Cramer, Behavioral Economics, Current Biology, vol.4/2015 no 18

Daniel Kahneman's Nobel Prize lecture http://nobelprize.org/nobel_prizes/economics/laureates/economics/2002/kahneman-lecture.html

D.Kahneman and A.Tversky(eds) Choices, Values and Frames, Cambridge University Press, Cambridge UK 2003 (suggested papers).

Peter E. Earl (2018) Richard H. Thaler: A Nobel Prize for Behavioral Economics, Review of Political Economy,

30:2, 107-125

Fred van Raaij, Understanding Consumer Financial Behavior, Money Management in an Age of Financial Illiteracy, Palgrave Macmillan 2016, ch.13-16

Hersh Shefrin, Beyond Greed and Fear. Harvard Business School Press, Boston, Ma.2000, Ch. 1, 2, 3, 14, 15

Paul Slovic and all, Risk as Analysis and Risk as Feelings: Some Thoughts about Affect, Reason, Risk, and Rationality, Risk Analysis, Vol.24-2/2004, p. 311-322

Richard Thaler, Nobel Prize lecture, www.nobelprize.org/prizes/economic-sciences/2017

Richard H. Thaler, Advances in Behavioral Finance, Russel Sage Fundation 2005. (Selected papers)

Nick Wilkinson, An Introduction to Behavioral Economics. Palgrave Macmillan 2008,

Part 1, 2, 3 (5.1, 5.2, 5.5, 6.1-6.3), 4 (8.1-8, 8.7) 5 (9).

Sugessted:

Several articles published in the Journal of Economic Psychology and Behavioral Economics and other Journals according to the preferences of participants.

I assume that participants will acquire wider and deeper knowledge in compexity of factors affecting economic decision making. The understanding of social, biological and emotional factors affecting human reasoning may be useful not only in their research but in practice as well.

S_W01,S_W02,S_W03,S_W04,S_W05,S_U01,S_U01, S_U03,S_U04, S_U05, S_U06,S_U07,S_K01,S_K02,S_K03

The assessment will be made on the basis of attendance and activity -To receive a course credit, a participant should be present at most of the meetings. Active part in the discussion on basic readings is required to get credit . A Participant should write 2 short home-works. Writing an essay based on additional readings is required to receive higher grade (A or B). This essay should be presented in class. The presenter should be prepared to show the most interesting problems to initiate discussion. Students, who are interested in Economic Behavior are Students, who are interested in Economic Behavior are suggested to prepare joint research paper on attitudes and values affecting economic decisions and present this paper at The Students Research Conference.