Modern Behavioural Economics – to distinguish it from what ... I. Behavioural
Economics – Classical and Modern: An Overview. II. The Origins of Classical ...
Behavioural Economics Origins, Foundations and Frontiers Syllabus Bounded Rationality, Satisficing and Problem Solving, in the context of Decision – not Optimizing – Problems, faced by Behavioural Agents, situated in Complex Organisations, Evolving Dynamically, in a Macroeconomy, itself viewed as a Complex Dynamical System, characterises the subject that has gradually come to be called Behavioural Economics.
From the origins in the classic works of Herbert Simon, the subject appears to have developed into several sub-fields, all of them actively pursued at the frontiers of economic theory and applied economics. Modern Behavioural Economics – to distinguish it from what I shall characterise as Classical Behavioural Economics, that which was developed by the collaborators and followers of Herbert Simon: James March, Sidney Winter, Richard Nelson, Richard Day, etc., - encapsulates, most obviously, Behavioural Finance Theory and Behavioural Game Theory. Classical Behavioural Economics – both at the individual and organisational level – was underpinned by computational constraints. Modern Behavioural Economics, whether in the domain of Finance Theory or in that of Game Theory is devoid of the explicit underpinning in computational constraints.
In these lectures I shall aim to develop a vision of Classical Behavioural Economics consistent with the explicit aims of the pioneers. This will, then, be contrasted with the development and frontier representations of Modern Behavioural Economics, to show the lack of computational foundations in the latter, in contrast to the former.
A vision of agents and institutions as problem solvers – underpinned, as always, by computational constraints – brings to focus deep theoretical issues in complexity theory, particularly computational complexity theory. What is the complexity of a ‘simple’ problem? How complex should a behavioural agent be to solve a game? What is the connection between the complexity of an evolutionary dynamical system and the learning and perceptive powers of rational agents? What is the complexity of an organisation? How does a simple organisation evolve into a complex one – and why?
These are some of the questions posed – and imaginatively answered – by the Classical Behavioural Economists. The computational complexity of behavioural agents, organisations and the evolving macroeconomy are not issues at the frontiers of research for the Modern Behavioural Economist.
An outline of the planned contents of the fourteen lectures is as follows: I. II.
Behavioural Economics – Classical and Modern: An Overview. The Origins of Classical Behavioural Economics.
III.
The Emergence of Modern Behavioural Economics.
IV.
Herbert Simon’s Visions - I: Bounded Rationality, Satisficing, Computational Complexity,
V.
Herbert Simon’s Visions – II: Human Problem Solving, Scientific Discovery, Thinking Machines and Learning.
VI.
Herbert Simon’s Visions – III: Causality, Evolution and Near-Decomposabiltiy, Organisational Behaviour, Simulation as Experimentation and Arm-Chair Economics & Economists.
VII. VIII. IX. X.
Models of Simon Behavioural Finance: An Overview Behavioural Game Theory: An ‘Under’view! Founding Algorithmic Game Theory on Classical Behavioural Economics
XI.
An Introduction to Behavioural Microeconomics - I
XII.
An Introduction to Behavioural Microeconomics - II
XIII.
An Agenda for Behavioural Macroeconomics: Animal Spirits, Fallacy of Composition and Algorithmic & Evolutionary Growth Theories.
XIV.
Whither Behavioural Economics?
Selected Reading List [No one is supposed to have to or want to read all – or even any – of the books in this list. However,
I don’t think reading any – or all – of them will harm you in any way. On the contrary ………..!]
HERBERT SIMON: 1. Human Problem Solving (jointly with Allen Newell) 2. Models of Thought (2 Volumes) 3. Models of Man 4. Models of Bounded Rationality (3 Volumes) 5. Organizations (jointly with James March) 6. Models of My Life RICHARD H. THALER The Winner’s Curse: Paradoxes and Anomalies of Economic Life RICHARD H. THALER (Edited): Advances in Behavioural Finance Advances in Behavioural Finance, Vol. II COLIN F. CAMNERER, GEORGE LOEWENSTEIN & MATTHEW RABIN (Edited): Advances in Behavioural Economics BENJAMIN GILAD & STANLEY KAISH (Edited) Handbook of Behavioural Economics: Behavioural Macroeconomics COLIN F. CAMERER: Behavioural Game Theory GEORGE A. AKERLOF (& Co-Authors) Explorations in Pragmatic Economics GEORGE A. AKERLOF & ROBERT J. SCHILLER Animal Spirits: How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism SAMUEL BOWLES
Microeconomics: Behavior, Institutions, and Evolution.
K. Vela Velupillai 27 Sepember 2009
