Saturday, January 17, 2009

Lecture on Rationality

A one hour lecture to the psychology students - the lecture examines some basics concepts of rationality, introduces the idea of economic games, examines assumptions underlying choice in certainty and uncertainty, introduces applications to consumption savings and labour supply, discusses psychological and biological evidence on the nature of risk preferences, examines the allais and ellsberg paradoxes, introduces prospect theory loss aversion and the endowment effect, discusses normative and revealed preferences with particular reference to the recent Beshears et al paper linked on the site, discusses rationality assumptions such as arbritage eliminating rationality. Concludes with some basic implications for public policy. One basic implication for policy that the lecture draws from the literature is that small-scale inexpensive experiments examining the difference between normal choice and informed choice would be a good place to start in thinking about sub-optimality in decision making. This point is made extremely well in the Beshears et al paper.

the next lecture will cover heuristics and biases and there will be lectures on emotion, identity, intertemporal choice, neuroeconomics and well-being. the final lecture in this course will be on the implications of behavioural economics for public policy. Anyone who would like to argue with me or discuss this area please feel free to get in touch.

Rationality Lecture

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