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Explorations in Behavioral Economics: Realism, Ontology and Experiments

Hansen, Fredrik LU (2006) In Lund Economic Studies
Abstract (Swedish)
Popular Abstract in Swedish

"Behavioral Economics" är ett område inom nationalekonomin där forskningsresultat från främst psykologin inhämtas vid analys av ekonomiska fenomen, även om andra samhällsvetenskaper såsom socialpsykologi och sociologi också givit bidrag. Följande avhandling och dess fyra uppsatser undersöker delar av "Behavioral Economics" med särskild betoning på realism, ontologi och experiment.



I den första uppsatsen analyseras två översiktsartiklar om "Behavioral Economics" ur ett metateoretiskt perspektiv. Särskilt analyseras de motiv som förs fram för studiet av "Behavioral Economics". Deras argumentation befinns vara acceptabel men analysen finner att användandet av termen "realism" är... (More)
Popular Abstract in Swedish

"Behavioral Economics" är ett område inom nationalekonomin där forskningsresultat från främst psykologin inhämtas vid analys av ekonomiska fenomen, även om andra samhällsvetenskaper såsom socialpsykologi och sociologi också givit bidrag. Följande avhandling och dess fyra uppsatser undersöker delar av "Behavioral Economics" med särskild betoning på realism, ontologi och experiment.



I den första uppsatsen analyseras två översiktsartiklar om "Behavioral Economics" ur ett metateoretiskt perspektiv. Särskilt analyseras de motiv som förs fram för studiet av "Behavioral Economics". Deras argumentation befinns vara acceptabel men analysen finner att användandet av termen "realism" är otydlig. Ett alternativt motiv som befinns fungera bättre givet ändamålen presenteras.



Andra uppsatsen betraktar formalisering av Herbert A. Simons teori om "Bounded Rationality". Denna teori innebär en kritik mot begreppsbildningen av individen som en maximerande beslutsfattare. Samtidigt är optimeringstekniker populära i formella modeller i nationalekonomin. Kan man använda dessa tekniker även när man modellerar "Bounded Rationality"? En analys presenteras som visar att denna slags formalisering är metateoretiskt olämplig. Samtidigt förs det fram argument att "Bounded Rationality" är ett exempel där formaliseringar kan vara fördelaktiga.



I den tredje uppsatsen analyseras två artiklar som rapporterar om utförda experiment kring ofullständiga kontrakt. Särskilt intressant är deras användande av termerna "firms" och "workers" i artiklarna trots att dessa termer inte använts i instruktionerna för experimenten. Den metateoretiska analysen visar att detta användande är olämpligt.



Fjärde och sista uppsatsen rapporterar från ett utfört experiment om finansiellt beslutsfattande hos lekmän. Experimentet utfördes på 284 studenter där en stor del hade begränsade finansiella kunskaper. De valde aktier registrerade på Stockholmsbörsen som de allra helst samt allra minst kunde tänka sig att investera i med ett års placeringshorisont. Huvudresultatet är att deltagarna fattade bra finansiella beslut jämfört med marknadsindex. Särskilt hög avkastning erhölls aningen anmärkningsvärt för de aktier de allra minst kunde tänka sig att investera i. Dock bör slutsatser dras med försiktighet och det är viktigt att replikerande studier görs i framtiden. (Less)
Abstract
This thesis explores Behavioral Economics in terms of realism, ontology and experiments. In the introductory chapter descriptions of "Behavioral Economics", "realism" and "ontology" are offered. In the following three chapters meta-theoretical analyses are performed, while the fifth and last chapter is a report of an experiment but with a meta-theoretical undertone.



In Chapter 2 two recent survey articles on Behavioral Economics are meta-theoretically analyzed. Besides appropriately introducing the area, they also offer short, meta-theoretical motives in favor of Behavioral Economics, often in comparison to Neoclassical Economics. Given the circumstances, their argumentation is found to be acceptable, but from a general... (More)
This thesis explores Behavioral Economics in terms of realism, ontology and experiments. In the introductory chapter descriptions of "Behavioral Economics", "realism" and "ontology" are offered. In the following three chapters meta-theoretical analyses are performed, while the fifth and last chapter is a report of an experiment but with a meta-theoretical undertone.



In Chapter 2 two recent survey articles on Behavioral Economics are meta-theoretically analyzed. Besides appropriately introducing the area, they also offer short, meta-theoretical motives in favor of Behavioral Economics, often in comparison to Neoclassical Economics. Given the circumstances, their argumentation is found to be acceptable, but from a general point of view the motives must be complemented (especially their use of the term "realism"). An alternative motive is presented, in line with the meta-theoretical beliefs expressed in the articles and with the help of Uskali Mäki's ontological research on the way the world works (www). This is a motive that will work for both Behavioral and Neoclassical Economics.



Chapter 3 deals with the formalization of Herbert A. Simon's bounded rationality, which contains, among other things, an aversion to portraying the individual as a maximizing decision-maker. The primary question addressed in this chapter concerns the reasonability of using today's common optimization techniques when formally modeling Simon's bounded rationality. A meta-theoretical analysis, emphasizing ontological aspects, finds that this kind of formalization is fundamentally inappropriate. Also, the question of why formalize Simon's bounded rationality at all is addressed. This paper argues that this theory can be a good example of using formalizations advantageously.



In Chapter 4 two articles contributing to the experimental research on incomplete contracts are meta-theoretically analyzed with respect to what they really do (i.e., the characteristics of the experiments), and their argumentations. Especially interesting is their use of "firms" and "workers" although their experiments are performed on students. The meta-theoretical framework emphasizes the interaction between the items we want to explain, and the items by which we explain. The conclusion reached is that their use of "firms" and "workers" will result in meta-theoretical difficulties and is inappropriate.



Chapter 5 consists of an experimental analysis of the financial decision-making of laypeople. An experiment on 284 students, a large majority of whom had modest financial knowledge, was conducted. The participants chose stocks from the Stockholm Stock Exchange that they wanted to invest in most and least. The main result was that the participants made reasonably good financial decisions compared to the market index. Especially high returns were the result when the participants chose the stocks they least liked to invest in. However, general conclusions at this stage should be drawn with caution and replications are needed, probably with more in-depth experimental techniques. (Less)
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author
supervisor
opponent
  • Professor Mäki, Uskali, Department of Philosophy, Erasmus University of Rotterdam
organization
publishing date
type
Thesis
publication status
published
subject
keywords
economic policy, Nationalekonomi, Behavioral Economics, economic theory, econometrics, Economics, Laypeople, Financial Decision-Making, Formalization, Bounded Rationality, Experimental Economics, Meta-Theoretical Analysis, Economic Methodology, Ontology, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik, economic systems, Realism
in
Lund Economic Studies
pages
92 pages
publisher
Department of Economics, Lund Universtiy
defense location
EC3:211, Holger Crafoords Ekonomicentrum
defense date
2006-03-10 13:15
ISSN
0460-0029
language
English
LU publication?
yes
id
9cd4539a-b9ae-42b4-8ac2-530d6f7f4b05 (old id 546289)
date added to LUP
2007-09-27 11:27:05
date last changed
2018-05-29 11:02:52
@phdthesis{9cd4539a-b9ae-42b4-8ac2-530d6f7f4b05,
  abstract     = {This thesis explores Behavioral Economics in terms of realism, ontology and experiments. In the introductory chapter descriptions of "Behavioral Economics", "realism" and "ontology" are offered. In the following three chapters meta-theoretical analyses are performed, while the fifth and last chapter is a report of an experiment but with a meta-theoretical undertone.<br/><br>
<br/><br>
In Chapter 2 two recent survey articles on Behavioral Economics are meta-theoretically analyzed. Besides appropriately introducing the area, they also offer short, meta-theoretical motives in favor of Behavioral Economics, often in comparison to Neoclassical Economics. Given the circumstances, their argumentation is found to be acceptable, but from a general point of view the motives must be complemented (especially their use of the term "realism"). An alternative motive is presented, in line with the meta-theoretical beliefs expressed in the articles and with the help of Uskali Mäki's ontological research on the way the world works (www). This is a motive that will work for both Behavioral and Neoclassical Economics.<br/><br>
<br/><br>
Chapter 3 deals with the formalization of Herbert A. Simon's bounded rationality, which contains, among other things, an aversion to portraying the individual as a maximizing decision-maker. The primary question addressed in this chapter concerns the reasonability of using today's common optimization techniques when formally modeling Simon's bounded rationality. A meta-theoretical analysis, emphasizing ontological aspects, finds that this kind of formalization is fundamentally inappropriate. Also, the question of why formalize Simon's bounded rationality at all is addressed. This paper argues that this theory can be a good example of using formalizations advantageously.<br/><br>
<br/><br>
In Chapter 4 two articles contributing to the experimental research on incomplete contracts are meta-theoretically analyzed with respect to what they really do (i.e., the characteristics of the experiments), and their argumentations. Especially interesting is their use of "firms" and "workers" although their experiments are performed on students. The meta-theoretical framework emphasizes the interaction between the items we want to explain, and the items by which we explain. The conclusion reached is that their use of "firms" and "workers" will result in meta-theoretical difficulties and is inappropriate.<br/><br>
<br/><br>
Chapter 5 consists of an experimental analysis of the financial decision-making of laypeople. An experiment on 284 students, a large majority of whom had modest financial knowledge, was conducted. The participants chose stocks from the Stockholm Stock Exchange that they wanted to invest in most and least. The main result was that the participants made reasonably good financial decisions compared to the market index. Especially high returns were the result when the participants chose the stocks they least liked to invest in. However, general conclusions at this stage should be drawn with caution and replications are needed, probably with more in-depth experimental techniques.},
  author       = {Hansen, Fredrik},
  issn         = {0460-0029},
  keyword      = {economic policy,Nationalekonomi,Behavioral Economics,economic theory,econometrics,Economics,Laypeople,Financial Decision-Making,Formalization,Bounded Rationality,Experimental Economics,Meta-Theoretical Analysis,Economic Methodology,Ontology,ekonometri,ekonomisk teori,ekonomiska system,ekonomisk politik,economic systems,Realism},
  language     = {eng},
  pages        = {92},
  publisher    = {Department of Economics, Lund Universtiy},
  school       = {Lund University},
  series       = {Lund Economic Studies},
  title        = {Explorations in Behavioral Economics: Realism, Ontology and Experiments},
  year         = {2006},
}