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Our popular course Introduction to QuantLib Development will be taking place June 18-20th, 2018.

 

Knowing and Making's Blog

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

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...

A program for cognitive economics

January 4, 2018 Comments (0)

I’m visiting the American Economics Association conference in Philadelphia this weekend and looking forward to catching up with the latest in theoretical and empirical research. Behavioural economics has received another endorsement this year with Richard Thaler’s receipt of the Nobel Prize. The behavioural field still has only a small minority of the conference’s papers, but many more than a few years ago. It finally feels like an accepted part of the broader field. Echoes of a new...

The amoeba and the squirrel

May 19, 2017 Comments (0)

[An essay written for the Internet Review, a one-off maybe-to-become-annual publication documenting (and celebrating?) Internet trends] Every human has two minds: one like an amoeba and one like a squirrel. The amoeba mind is reactive, emotional, intuitive. It decides immediately, without planning or consideration. It is Freud’s “id”, or the System One of behavioral economics: the amoeba is your unconscious. Your squirrel mind plans, trades off immediate pleasures for future gain, is capable...

The gender pay gap on Euristica: an imaginary island

February 27, 2017 Comments (0)

I recently gave a talk at TEDxCoventGardenWomen about an economic agent-based modelling system I have built (readers of Thomas Schelling may see some influence). In the talk I use this system to analyse ideas around privilege, prejudice and systemic inequality - and to test some policies that might help to solve the persistent gender and racial pay gaps that we still see in most societies. The video is below - your thoughts would be very welcome.

Discussion 3 of 3: Lassie died one night

February 9, 2017 Comments (0)

The much-delayed final episode in a short series of posts - part 1 and part 2 here. Lassie died one night. As Thomas Schelling* pointed out in a thought-provoking 1982 essay, millions of people watched it happen on television one Sunday evening, and cried. Yet they all knew Lassie was not real – and that the dog who played her was probably in perfect health. Why did they experience the same emotions, the same sense of loss that they would expect to feel if their own dog had died, or even...

How does it feel to be part of Europe?

June 22, 2016 Comments (0)

I had this piece drafted before the murder of Jo Cox last week. But I don’t think it changes anything I was going to say. It simply makes it more urgent to say it. May I introduce you to my two lovely young nieces? Natasha is four months old and Rosalind four years. They live in rural Devon, and they’re just starting to discover the world and decide how to feel about it. I want to think a little about what it might feel like to be in their world. The campaign for Britain to remain in the EU...

Discussion 2 of 3: No spooky action at a distance - a theory of reward

March 28, 2016 Comments (0)

One of the most powerful ideas in physics is the principle of locality. This principle insists that objects can only be influenced by other objects that touch them. Two items separated by a distance cannot directly exert any force or influence on each other, but must communicate via some medium which physically transmits the force from one to the other. Albert Einstein described this principle as "no spooky action at a distance" and it applies to his theory of gravity as well as all the...

Discussion 1 of 3: Where do goals come from?

January 23, 2016 Comments (0)

Discussion number 1 in a series of 3: on goal-setting Much of decision-making psychology (and by extension behavioural economics) explores the processes by which people solve a problem or achieve a goal. Usually the papers in this field contrast the rational, expected-utility way to solve these problems with the approaches people actually use in practice. An important question they rarely address is "Why that goal?" How is it that people choose the particular problem they want to solve, the...