Letter to a Well-known Economist

As someone who, obviously, is deeply interested in the relationship between human behavior and economics, I bring to your attention a recently published paper by myself and a colleague, Dr. Anthony Putman, which appeared in The Journal of Behavioral Finance, Vol. 14, Issue 3, 2013, entitled, “The Irrationality Illusion: A New Paradigm for Economics and Behavioral Economics”:  http://www.tandfonline.com/doi/abs/10.1080/15427560.2013.790388?journalCode=hbhf20#.Ulw4utK3-ZA

The paper resolves the conflict between “rationality” and “irrationality” in economics, showing how an economic agent’s decisions are 1) in all cases a decision of what to do, i.e., what action to engage in, not the a decision of outcome, the traditional “basket of goods” approach, and 2) an agent’s decisions reflect all their reasons to engage in the various (perceived) available behaviors, including not only prudential (the traditional wealth-related ones) but all the other kinds of reasons: ethical, esthetic (in the sense of fittingness or appropriateness), and hedonic. Continue reading

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What does “95% likely” mean?

The latest IPCC (Intergovernmental Panel on Climate Change) report says that it is “95% likely” that the main cause of global warming in the last 50 years is human activity. That sounds like it’s a probability, just as when you read that you have a 1/175,000,000 chance of winning the Powerball. The problem is, it’s not.   Continue reading

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“The Irrationality Illusion” published by Journal of Behavioral Finance!

Joe and I are proud to announce that our paper “The Irrationality Illusion: A New Paradigm for Economics and Behavioral Economics” has (finally!) been published by the Journal Of Behavioral Finance. Here’s a link to the Journal’s online edition (first 50 people to click through get the download free!):

http://www.tandfonline.com/eprint/x5WSpunDFWKzYPBbjrAh/full

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The next in our “new paradigm for economics and behavioral economics” series

Joe Jeffrey and I worked for over a year on a follow-up to our paper “The Irrationality Illusion” (which was published just yesterday in the Journal of Behavioral finance!) The working title was “The Problem With Probabilities”; in a fit of clarity the final version was named: “Subjective Probability in Behavioral Economics and Finance: A Radical Reformulation”.

Here’s a pre-publication copy for your enjoyment. Feedback is always welcome.

Posted in Behavioral Economics, Economics, New Paradigm, new paradigm for economics and behavioral economics, Probability, Subjective Probability | Leave a comment

Our paper on “The Irrationality Illusion” is complete!

The paper Joe Jeffrey and Tony Putman have been working on (and posting early portions of here) is complete. “The Irrationality Illusion: A New Paradigm for Economics and Behavioral Economics” has been submitted for publication. A pdf copy of the paper as submitted can be found here:

http://www.descriptivepsychologyinstitute.org/IrrationalityIllusion.pdf

Any and all comments on the paper are welcome at this blog.

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Where does money fit?

Our purpose here is to formulate a new paradigm for economics, not discuss behavior in general, and we therefore must identify where money fits in the conceptual framework. Money appears in Intentional Action in several places: Continue reading

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What is Behavior in Behavioral Economics?

Our Principle 1 says that “Choice is choice of behavior.” What exactly do we mean by “behavior”?

We would ordinarily expect to look to the field of psychology, the study of what people do and why they do it, to find an accepted definition of behavior, just we would look to physics to find an accepted definition of energy or momentum.  Unfortunately, we cannot do so.  In the field of psychology today there is no commonly accepted definition of behavior. Continue reading

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