I am Professor of Experimental Economics at the University of Auckland where my work lies at the interface of economics and psychology. In a discipline (and a world) that tends to emphasize human self-interest, I have always been interested in our willingness to engage in unselfish behavior. Incentivized decision-making experiments with human participants where payments depend on the nature of their decisions are a powerful way of analyzing behavior. Are people willing to put their money where their mouth is? My background running experiments made me well-positioned to study some of these questions; a lot of them in collaboration with other social scientists including psychologists and political scientists.
Economic theory assumes that humans are rational in the sense that faced with choices, humans engage in a clear-headed calculation of the benefits and costs; that we possess foresight and are able to undertake complex calculations and we are interested in maximizing utility, which may purely be a function of monetary payoffs but may include others factors as well.
But humans are boundedly rational. This means that our behavior differs from the assumptions of traditional economic theory in two major ways.
One is that we often fall prey to cognitive biases. The second way our behavior differs from utility maximization is that we are driven by emotional dispositions such as fairness, trust, reciprocity, altruism, and a host of social norms.
While my book provides experimental evidence for the latter, Kahneman’s books shows how our behavior is affected by various cognitive biases.
Anyone who is interested in decision-making across a range of contexts must read this book.
The phenomenal international bestseller - 2 million copies sold - that will change the way you make decisions
'A lifetime's worth of wisdom' Steven D. Levitt, co-author of Freakonomics 'There have been many good books on human rationality and irrationality, but only one masterpiece. That masterpiece is Thinking, Fast and Slow' Financial Times
Why is there more chance we'll believe something if it's in a bold type face? Why are judges more likely to deny parole before lunch? Why do we assume a good-looking person will be more competent? The answer lies in the two ways we make choices: fast,…
In many ways Gigerenzer’s book provides a counterpoint to Kahneman.
Kahneman argues that humans often use mental shortcuts (“heuristics”) to make decisions in particularly complex situations but in doing so we fall prey to cognitive biases that lead to systematic errors in judgment. Gigerenzer counters by showing that billions of years of evolution have endowed our brains with the capacity to cut through the noise and arrive at decisions quickly especially where time is of the essence. Doing so often leads to outcomes that are no worse than other more time-consuming and deliberative methods.
Many of Gigerenzer’s arguments and findings found their way later into Malcolm Gladwell’s best-selling book Blink (without always acknowledging Gigerenzer’s intellectual primogeniture). Gigerenzer is also a leading stalwart in the field of behavioural economics and like Kahneman, his book should also be essential reading for those who want to under human decision-making and how decision-making processes differ across different contexts.
I also highly recommend Gigerenzer’s book Risk Savvy about how we often misunderstand the risks in a given situation.
Why is split second decision-making superior to deliberation? Gut Feelings delivers the science behind Malcolm Gladwell's Blink.
Reflection and reason are overrated, according to renowned psychologist Gerd Gigerenzer. Much better qualified to help us make decisions is the cognitive, emotional, and social repertoire we call intuition, a suite of gut feelings that have evolved over the millennia specifically for making decisions. Gladwell drew heavily on Gigerenzer's research. But Gigerenzer goes a step further by explaining just why our gut instincts are so often right. Intuition, it seems, is not some sort of mystical chemical reaction but a neurologically based behavior…
When we're children, we're asked what we want to be when we grow up. But what if there isn't just one career for us in our lifetime? What if we can have a squiggly line career that spans professions and industries?
To a large extent, the research agenda that is subsumed under the rubric of “behavioral economics” started with the idea of bounded rationality and the departures from the utility maximizing model of economics.
Many of the ideas pursued in this line of work owe their origin to the work of Herbert Simon, whose doctorate was in political science from Chicago in 1943 but who was awarded the Nobel Prize in Economics in 1978 for combining ideas from mathematics, psychology, economics, and computer science to understand decision making in large organizations. This is not to suggest that none of this was known before.
In fact, some people consider Adam Smith to be the first behavioral economist for his work The Theory of Moral Sentiments, which incorporates ideas from David Hume that it is passion (or emotions) that drive human behavior rather than deliberative reasoning. But, by and large, Simon’s work provided a much more comprehensive overview of these issues and set off what might be called the behavioral revolution that merges insights from diverse social sciences to provide more realistic models of decision-making.
In this fourth edition of his ground-breaking work, Herbert A. Simon applies his pioneering theory of human choice and administrative decision-making to concrete organizational problems. To commemorate the fiftieth anniversary of the book's original publication, Professor Simon enhances his timeless observations on the human decision-making process with commentaries examining new facets of organizational behavior. Investigating the impact of changing social values and modem technology on the operation of organizations, the new ideas featured in this revised edition update a book that has become a worldwide classic. Named by Public Administration Review as "Book of the Half Century," Administrative Behavior is…
I am tempted to say: Because Frank is a delightful writer and leave it at that.
This book reiterates similar themes in discussing how a variety of supposedly non-economic factors affect economic decisions.
In this book Frank discusses how noble human tendencies (moral sentiments) may have not only survived the pressures of the material world, but actually have been nurtured by them. The title is a play on the David Hume quote that “Reason is, and ought to be the slave of the passions, and can never pretend to any other office than to serve and obey them.”
To those interested, I also recommend any of Frank’s other books including Choosing the Right Pond, The Winner Take All Society, and The Darwin Economy.
The idea rests on a simple paradox, namely, that in many situations the conscious pursuit of self-interest is incompatible with its attainment. We are all comfortable with the notion that someone who strives to be spontaneous can never succeed. So too, on brief reflection, will it become apparent that someone who always pursues self-interest is doomed to fail.
Few of us take the time to analyze our financial needs and goals to answer that pressing question. In Wealth Odyssey, author Larry R. Frank Sr. uses his extensive financial background to provide a universal road map that will help…
For a long time the social sciences behaved as if evolutionary theory stopped at the threshold of human society; that it could tell us something interesting about animals up to higher apes but when it came to humans, our minds were a tabula rasa (a blank slate).
As we now know all too well, this is incorrect.
Our minds have been shaped by the same evolutionary forces that apply to others. This in turn leads to the question: how would moral sentiments such as altruism or cooperation survive? Will such altruists not be vulnerable to exploitation by free-riders who would benefit at the expense of those sacrificing individual self-interest for the greater good?
In this book Sober (a philosopher) and Wilson (a biologist) provide an evolutionary rationale for how other-regarding preferences have evolved and are at times better suited for our survival than purely self-regarding ones.
As an economist, I have never been any taught any evolutionary theory formally. Matt Ridley’s The Red Queen and The Origins of Virtue: Human Instincts and the Evolution of Cooperation along with this Sober and Wilson book provided me with a comprehensive overview of how other-regarding behavior can survive and propagate in human populations.
I would add the two Ridley books to this list too but unfortunately, I have used up my quota of five books.
No matter what we do, however kind or generous our deeds may seem, a hidden motive of selfishness lurks--or so science has claimed for years. This book, whose publication promises to be a major scientific event, tells us differently. In Unto Others philosopher Elliott Sober and biologist David Sloan Wilson demonstrate once and for all that unselfish behavior is in fact an important feature of both biological and human nature. Their book provides a panoramic view of altruism throughout the animal kingdom--from self-sacrificing parasites to insects that subsume themselves in the superorganism of a colony to the human capacity for…
Are humans fair by nature? Why do we often willingly trust strangers or cooperate with them even when such actions may leave us vulnerable to exploitation? How does this inclination towards fairness or trust impact interactions in the marketplace? Traditional economic theory would argue that such factors do not have a role to play, perceiving human interaction as self-interested at heart. There is increasing evidence however that social norms and norm-driven behavior such as a preference for fairness, generosity, or trust have serious implications for economics. Drawing upon voluminous evidence collected via incentivized decision-making economic experiments, this book explores the role of fairness, generosity, trust, and reciprocity in economic transactions and how they lead to conclusions different from traditional economic theory.
Being Your Cat takes you inside the mind and body of your feline. See what your cat sees. Feel how your cat runs or leaps high to get into the armchair. Discover how your cat feels and thinks.
We all want peace. We all want a life of joy and meaning. We want to feel blissfully comfortable in our own skin, moving through the world with grace and ease. But how many of us are actively taking the steps to create such a life?
