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Knowing and Making's Blog

A blog about cognitive and behavioural economics. Building mathematical models of how psychology influences economic systems.

Reporting back: the Cognitive Economics session at the AEA conference

April 29, 2019 Comments (0)

[Tara posting today] We had a great response to our Cognitive Economics session at the American Economic Association’s conference a few weeks ago. For those who weren’t there, here’s a quick summary of the four papers presented, and the discussion at the end. Dan Benjamin, Kristen Cooper, Ori Heffetz, and Miles Kimball presented What Do People Want? The key question of this paper is: how can we measure happiness? And how do we account for the biases and differences across different groups...

What makes a useful theory?

April 29, 2019 Comments (0)

If conventional economic theory is so wrong (as we are repeatedly told) why does it survive so well? This post by UnlearningEcon prompted me to think again about why economics, despite widely accepted empirical data from behavioural econ, is broadly taught in the same way as before, and why its basic assumptions still underpin much modern research. Some have a sociological explanation for this. In this view, economists are invested in the old approaches, have spent decades honing...

Three systems: a mechanism for mental and social narrative

February 21, 2019 Comments (0)

Alex Rosenberg says here that we are instinctively driven by stories, narrative and theory of mind - a very useful instinct on the small scale - although that instinct can be misleading on the larger scale of history and politics. His book on this claim is also out, though I haven't read it yet. It seems uncontroversial that the idea of narrative has a powerful hold on how we think. There are thousands of discussions of storytelling as a way for us to bond with other people, and the biases...

What people want, cognitive goods, models of persuasion and why we avoid important information: the cognitive economics session at the AEA conference

February 21, 2019 Comments (0)

For the first time, there will be a session on Cognitive Economics at the American Economic Association’s conference. The conference, in association with the ASSA, is taking place from Friday 4 January to Sunday 6 January and will be a hugely interesting programme over the long weekend. The Cognitive Economics session will take place on Sunday 6 January 2019 at 8-10am in Atlanta Marriott Marquis, International 10. I hope that any readers who are attending the conference are able to come...

“Mysterious psycho-logic”, the “Nudge Unit” and irrational humans: tune in to Leigh Caldwell and Rory Sutherland on BBC Radio 4's show Thought Cages

November 27, 2018 Comments (0)

“Mysterious psycho-logic”, the “Nudge Unit” and irrational humans - Leigh explores cognitive and behavioural economics and science with Rory Sutherland on BBC Radio 4’s show Thought Cages today and on Friday. Tune in at 13:45 today to hear Leigh discussing behavioural and cognitive economics on Thought Cage’s next episode: Instinct Before Logic: The Postbox at the O2. During this episode, Rory and Leigh will be exploring why reason is no longer used to persuade us to change our behaviour,...

A new team member and new plans

November 9, 2018 Comments (0)

Hello, today it’s not Leigh posting, but me, Tara, his new colleague! I’ve recently started working for Inon and with Leigh on his cognitive economics work. I’ll be writing content on cognitive economics, spreading the word about cognitive economics to both academic and general audiences and also organising events around cognitive economics. I wanted to take this opportunity to introduce myself and also fill you in on some exciting events on cognitive economics coming up. All cards on the...

Rebuilding macroeconomics

September 30, 2018 Comments (0)

Spending today and tomorrow attending the Rebuilding Macroeconomics conference at the Treasury. The programme looks very interesting - highlights include: Ekaterina Svetlova's opening talk on "Imagining the Future", which I think will be quite relevant to System 3 and an idea I have been working on, prospective expectations: the concept that actors based their decisions not on a Nash equilibrium (rational expectations) or on a simple extrapolation of the past (adaptive expectations), but on...

Neuroscience, psychology and economics: the evidence for System 3 (long)

April 27, 2018 Comments (0)

In my last post I outlined the concept of System 3, what it is and why it matters. In short, System 3 is the mental ability to imagine the future and evaluate how happy you will be in it – based on how pleasurable the process of imagining itself is. A lot of different research strands have come together to result in the identification of System 3 as a distinct mental process. I summarise the key steps here: The fundamental building block of System 3 is the stimulus-response relationship. It...

Introducing System 3: How we use our imagination to make choices

April 27, 2018 Comments (0)

In recent years we’ve become used to thinking about decisions as “system 1” or “system 2”. System 1 choices are automatic decisions, made without thinking, based on an immediate emotional or sensory reaction. System 2 is used to stop and rationally calculate the consequences of our choices, and determine the best cost-benefit tradeoff. But these two processes don’t capture every decision. Indeed they might only encompass a minority of our daily choices. Recent work in neuroscience and...

Book review: The Choice Factory by Richard Shotton

March 10, 2018 Comments (0)

There are few truly universal books on behavioural science: like most of the others, this one has a particular reader in mind. Richard's reader works in advertising, and it must be a rare advertising executive who still hasn't heard of behavioural economics. Richard therefore heads straight into the meat of the book with little beating around the rational-agent bush. A couple of connected anecdotes start us off and we quickly get to the first of 25 chapters, each on a single bias, that make...