|
on Cognitive and Behavioural Economics |
| By: | Nicolai J. Foss; Peter G. Klein |
| Abstract: | Ever since its emergence in the 1970s the modern economic or Coasian theory of the firm has been discussed and challenged by sociologists, heterodox economists, management scholars, and other critics. This paper reviews and assesses these critiques, focusing on behavioral issues (bounded rationality and motivation), process (including path dependence and the selection argument), entrepreneurship, and the challenge from knowledge-based theories of the firm. |
| Keywords: | Coasian theory of the firm; Bounded rationality; Motivation; Entrepreneurship |
| JEL: | B4 D23 L14 L22 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:aal:abbswp:05-03&r=cbe |
| By: | Robert J. Shiller (Cowles Foundation, Yale University) |
| Abstract: | Behavioral economics has played a fundamental role historically in innovation in economic institutions, even long before behavioral economics was recognized as a discipline. Examples from history, notably that of the invention of workers’ compensation, illustrate this point. Though scholarly discussion develops over decades, actual innovation tends to occur episodically, particularly at times of economic crisis. Fortunately, some of the major professional societies, the Verein für Sozialpolitik, the American Economic Association and their successors, have managed to keep a broad discourse going, involving a variety of research methods including some that may be described today as behavioral economics, thereby maintaining an environment friendly to institutional innovation. Further, the broad expansion of behavioral economics that is going on today can be expected to yield even more such important institutional innovations. |
| Keywords: | Economic innovation, Invention, Psychological economics, Institutional economics, Social insurance, Workers’ compensation, American Economic Association, Germany, Verein fur Sozialpolitik |
| JEL: | B41 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1499&r=cbe |
| By: | Prof John Foster (School of Economics, The University of Queensland) |
| Abstract: | Economics is viewed as a discipline that is mainly concerned with 'simplistic' theorizing, centered upon constrained optimization. As such, it is ahistorical and outcome focused, ie, it does not deal with economic processes. It is argued that all parts of the economy are inhabited by complex adaptive systems operating in complicated historical contexts and that this should be acknowledged at the core of economic analysis. It is explained how economics changes in fundamental ways when such a perspective is adopted, even if the presumption that people will try to optimize subject to constraints is retained. This is illustrated through discussion of how the production function construct has been used to provide an abstract representation of the network structures that exist in complex adaptive systems such as firms. It is argued that this has led to a serious understatement of the importance of rule systems that govern the connections in productive networks. The macroeconomics of John Maynard Keynes is then revisited to provide an example of how some economists in earlier times were able to provide powerful economic analysis that was based on intuitions that we can now classify as belonging to complex systems perspective on the economy. Throughout the paper, the reasons why a complex systems perspective did not develop in the mainstream of economics in the 20th Century, despite the massive popularity of an economist like Keynes, are discussed and this is returned to in the concluding section where the prospect of paradigmatic change occurring in the future is evaluated. |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:336&r=cbe |
| By: | Constantijn W.A. Panis (RAND) |
| Abstract: | This paper develops a method that improves researchers’ ability to account for behavioral responses to policy change in microsimulation models. Current microsimulation models are relatively simple, in part because of the technical difficulty of accounting for unobserved heterogeneity. This is all the more problematic because data constraints typically force researchers to limit their forecasting models to relatively few, mostly time-invariant explanatory covariates, so that much of the variation across individuals is unobserved. Furthermore, failure to account for unobservables often leads to biased estimates of structural parameters, which are critically important for measuring behavioral responses. This paper develops a theoretical approach to incorporate (univariate and multivariate) unobserved heterogeneity into microsimulation models; illustrates computer algorithms to efficiently implement heterogeneity in continuous and limited dependent models; and evaluates the importance of unobserved heterogeneity by conducting Monte Carlo simulations. |
| Date: | 2003–05 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp048&r=cbe |