nep-cbe New Economics Papers
on Cognitive and Behavioural Economics
Issue of 2005‒04‒30
eleven papers chosen by
Marco Novarese
Universita del Piemonte Orientale

  1. Rationality, Irrationality and Economic Cognition By John Whalley
  2. The Weak Rationality Principle in Economics By Gebhard Kirchgässner
  3. Psychological Barriers in Gold Prices By Brian Lucey; Raj Aggarwal
  4. Personality, Education and Earnings By Mary A. Silles
  5. The Translocation of Culture: Migration, Community, and the Force of Multiculturalism in History By Pnina Werbner;
  6. Judgmental Overconfidence, Self-Monitoring and Trading Performance in an Experimental Financial Market By BIAIS, Bruno; HILTON, Denis; MAZURIER, Karine; POUGET, Sébastien
  7. Knowledge-based Entrepreneurship: The Organizational Side of Technology Commercialization By U. Witt; C. Zellner
  8. Hayek Reads the Literature on the Emergence of Norms By L. Andreozzi
  9. Agent-Based Models of Industrial Clusters and Districts By Guido Fioretti
  10. Individual Contacts, Collective Patterns. Prato 1975-97, a story of interactions. By Guido Fioretti
  11. Collective Memory, Identity and Cultural Investments By DESSI, Roberta

  1. By: John Whalley
    Abstract: This paper contrasts the modern use of the assumption that rationality guides individual economic behaviour, as reflected in simple models of utility and profit maximization, to literature between 1890 and 1930 which sharply challenged the use of such an assumption, as well as to later literature in economic psychology from Herbert Simon onwards which sees economic (and other) cognitive processes in different ways. Some of the earlier literature proposed objective and operational notions of rationality based on the availability of information, ability to reason (cognitive skills), and even morality. Learning played a major role in individuals achieving what was referred to as complete rationality. I draw on these ideas, and suggest that developing models in which economic agents have degrees (or levels) of economic cognition which are endogenously determined could both change the perceptions economists have on policy matters and incorporate findings from recent economic psychology literature. This would remove the issue of whether economic agents are dichotomously rational or irrational, and instead introduce continuous metrics of cognition into economic thinking. Such an approach also poses the two policy issues of whether raising levels of economic cognition should be an objective of policy and whether policy interventions motivated by departures from full economic cognition should be analyzed.
    Keywords: learning, complete rationality
    JEL: B00 B10 B50 D00
    Date: 2005
  2. By: Gebhard Kirchgässner
    Abstract: The weak rationality principle is not an empirical statement but a heuristic rule of how to proceed in social sciences. It is a necessary ingredient of any ‘understanding’ social science in the Weberian sense. In this paper, first this principle and its role in economic theorizing is discussed. It is also explained why it makes sense to use a micro-foundation and, therefore, employ the rationality assumption in economic models. Then, with reference to the ‘bounded rationality’ approach, the informational assumptions are discussed. Third, we address the assumption of self-interest which is often seen as a part of the rationality assumption. We conclude with some remarks on handling the problems of ‘free will’ as well as ‘weakness of the will’ within the economic approach.
    Keywords: rationality, self interest, micro-foundation, bounded rationality
    JEL: B41
    Date: 2005
  3. By: Brian Lucey; Raj Aggarwal
    Abstract: This paper examines for the first time the existence of psychological barriers in a variety of daily and intra-day gold price series. This paper uses a number of statistical procedures and presents evidence of psychological barriers in gold prices. We document that prices in round numbers act as barriers with important effects on the conditional mean and variance of the gold price series around psychological barriers. Classification-
    Date: 2005–04–20
  4. By: Mary A. Silles (Institute of Economics, University of Copenhagen)
    Abstract: This paper examines the effects of social maladjustment in childhood on schooling and earnings using the NCDS. Net of differences in family background and cognitive ability, estimates suggest that early social maladjustment scores are associated with lower labor market earnings and schooling. These results suggest that there are substantial returns to fostering positive social development in childhood.
    Keywords: educational economics; social maladjustment
    JEL: I21 J31
    Date: 2005–04
  5. By: Pnina Werbner;
    Abstract: In his work on a Welsh border village, Ronald Frankenberg showed how cultural performances, from football to carnival, conferred agency on local actors and framed local conflicts. The present article extends these themes. It responds to invocations by politicians and policy makers of ‘community cohesion’ and the failure of communal leadership, following riots by young South Asians in northern British towns. Against the critique of self-segregating isolationism, the article traces the historical process of Pakistani migration and settlement in Britain, to argue that the dislocations and relocations of transnational migration generate two paradoxes of culture. The first is that in order to sink roots in a new country, transnational migrants in the modern world begin by setting themselves culturally and socially apart. They form encapsulated ‘communities’. Second, that within such communities culture can be conceived of as conflictual, open, hybridising and fluid, while nevertheless having a sentimental and morally compelling force. This stems from the fact, I propose, that culture is embodied in ritual and social exchange and performance, conferring agency and empowering different social actors: religious and secular, men, women and youth. Hence, against both defenders and critics of multiculturalism as a political and philosophical theory of social justice, the final part of the article argues for the need to theorise multiculturalism in history. In this view, rather than being fixed by liberal or socialist universal philosophical principles, multicultural citizenship must be grasped as changing and dialogical, inventive and responsive, a negotiated political order. The British Muslim diasporic struggle for recognition in the context of local racism and world international crises exemplifies this process. Classification-
    Date: 2005–04–20
  6. By: BIAIS, Bruno; HILTON, Denis; MAZURIER, Karine; POUGET, Sébastien
    Date: 2004–01
  7. By: U. Witt; C. Zellner
    Abstract: New knowledge with commercial potential is continually created in academic institutions. How is it turned into economically valuable businesses? This paper argues that the transfer is an entrepreneurial process. To understand this, the actions and the constraints characteristic for the entrepreneurial reshaping of the division of labor must be recognized. In the case of knowledge-based entrepreneurship, specific constraints result from the peculiarities of scientific knowledge – epitomized by contrasting tacit and encoded knowledge. Scientifically trained labor is required for transferring both forms of knowledge. However, the mode of transfer differs crucially and shapes the organizational form of commercializing new scientific knowledge.
    JEL: L23 M13 O31 O32
  8. By: L. Andreozzi
    Abstract: Hayek’s approach to cultural and institutional evolution has been frequently criticized because it is explicitly based on the controversial notion of (cultural) group selection. In this paper this criticism is rejected on the basis of recent works on biological and cultural evolution. The paper’s main contention is that Hayek employed group selection as a tool for the explanation of selection among several equilibria, and not as a vehicle for the emergence of out of equilibrium behavior (i.e. altruism). The paper shows that Hayek’s ideas foreshadowed some of the most promising developments in the current literature on the emergence of norms.
    JEL: B31 B41
  9. By: Guido Fioretti (University of Bologna)
    Abstract: Agent-based models, an instance of the wider class of connectionist models, allow bottom-up simulations of organizations constituted byu a large number of interacting parts. Thus, geogrfaphical clusters of competing or collaborating firms constitute an obvious field of application. This contribution explains what agent-based models are, reviews applications in the field of industrial clusters and focuses on a simulator of infra- and inter-firm communications.
    Keywords: Agent-based models, industrial clusters, industrial districts
    JEL: R
    Date: 2005–04–28
  10. By: Guido Fioretti (University of Bologna)
    Abstract: This article presents an agent-based model of an Italian textile district where thousands of small firms specialise in particular phases of fabrics production. It is an empirical model that reconstructs the communications between firms when they arrange production chains. In their turn, production chains reflect into the pattern of traffic in the geographical areas where the district extends.
    Keywords: Agent-based models, industrial clusters, industrial districts, Prato.
    JEL: R
    Date: 2005–04–28
  11. By: DESSI, Roberta
    Date: 2004–11

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