Prospect theory, Kahnemann-and-Tversky style. Rational Heuristics, Gigerenzer-and-Todd style. Docility, Herbert-Simon-wise. Friedrich Hayek on information aggregation in markets, and the rest of those Austrian Economists. Behavioural economics more generally.
How can we handle a market in the large where the boundedly rational dynamics of human decisions are in effect? Does it even matter? Are markets systems for fabricating rational-like behaviour from irrational agents? (Hayek might argue this, and I think also Gode and Sunder of Zero Intelligence Agents fame. Friedman argued that in fact that markets effectively turn people into rational agents, which is yet stronger.)
Are there useful measures of “how much rationality” humans have that we can use for aggregate modelling? (as opp. the minute and detailed ones that Kahnemann and Tversky devise, that are hard to scale up.) Would statistical learning theory help us here? Even computational complexity?
- Such research is the bread-and-butter of PR and advertising agencies, PsyOps departments and interior designers the world over, but they don’t usually publish.
- Perhaps The Debunking Handbook?
- The way the brain buys is a summary of “neuromarketing” in The Economist
- Finite Rationality and Interpersonal Complexity in Repeated Games, E. Kalai & W. Stanford
Ergodicity economics. How does that work then? I don’t know anything about it but it looks a little... cottage?
Mark Buchanan, How ergodicity reimagines economics for the benefit of us all:
The view of expected utility theory is that people should handle it by calculating the expected benefit to come from any possible choice, and choosing the largest. Mathematically, the expected ‘return’ from some choices can be calculated by summing up the possible outcomes, and weighting the benefits they give by the probability of their occurrence.
This inspired LML efforts to rewrite the foundations of economic theory, avoiding the lure of averaging over possible outcomes, and instead averaging over outcomes in time, with one thing happening after another, as in the real world.
I am guessing some kind of online learning type setting, minimising regret or something? 🤷♂️
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