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Über dieses Buch

This book is intended as a textbook for a course in behavioral economics for advanced undergraduate and graduate students who have already learned basic economics. The book will also be useful for introducing behavioral economics to researchers. Unlike some general audience books that discuss behavioral economics, this book does not take a position of completely negating traditional economics. Its position is that both behavioral and traditional economics are tools that have their own uses and limitations. Moreover, this work makes clear that knowledge of traditional economics is a necessary basis to fully understand behavioral economics. Some of the special features compared with other textbooks on behavioral economics are that this volume has full chapters on neuroeconomics, cultural and identity economics, and economics of happiness. These are distinctive subfields of economics that are different from, but closely related to, behavioral economics with many important overlaps with behavioral economics. Neuroeconomics, which is developing fast partly because of technological progress, seeks to understand how the workings of our minds affect our economic decision making. In addition to a full chapter on neuroeconomics, the book provides explanations of findings in neuroeconomics in chapters on prospect theory (a major decision theory of behavioral economics under uncertainty), intertemporal economic behavior, and social preferences (preferences that exhibit concerns for others). Cultural and identity economics seek to explain how cultures and people’s identities affect economic behaviors, and economics of happiness utilizes measures of subjective well-being. There is also a full chapter on behavioral normative economics, which evaluates economic policies based on findings and theories of behavioral economics.



Behavioral Economics and Neuroeconomics


Chapter 1. What Is Behavioral Economics?

This chapter defines behavioral economics as “the study of economics which does not rely on the assumption of the rational, selfish economic man.” It also gives some examples of experimental studies in behavioral economics.
Masao Ogaki, Saori C. Tanaka

Chapter 2. What Is Neuroeconomics?

This chapter briefly reviews the historical background of neuroeconomics and introduces its main research topics. Neuroeconomics focuses on the brain’s work when humans make decisions. One of the aims of neuroeconomics is to develop an economic theory that can explain real human behavior including individual preference in economic behavior based on the brain mechanism.
Masao Ogaki, Saori C. Tanaka

Prospect Theory and Bounded Rationality


Chapter 3. Economic Behavior Under Uncertainty

The chapter explains the expected utility hypothesis as a useful theory of decisions under uncertainty in traditional economics. There have been paradoxes, found in experiments and hypothetical surveys that cannot possibly be explained by the expected utility hypothesis.
Masao Ogaki, Saori C. Tanaka

Chapter 4. Prospect Theory

This chapter explains prospect theory , which modifies expected utility theory in important ways. Prospect theory can be consistent with economic behaviors that cannot be explained by the expected utility theory such as those in the Allais Paradox.
Masao Ogaki, Saori C. Tanaka

Chapter 5. Bounded Rationality

This chapter explains bounded rationality, which is rationality bounded by human abilities. For the purpose of studying bounded rationality, the optimization approach of traditional economics has difficulties such as the infinite regress problem. Hence it has been complemented by the descriptive approach in which intuitive judgment such as heuristics is shown to often lead to biases in experiments.
Masao Ogaki, Saori C. Tanaka

Time Discounting and Social Preferences


Chapter 6. Intertemporal Behavior

This chapter explains economic models of intertemporal behavior. We first show the exponential time-discounting model in traditional economics and its limitations. Then we introduce the hyperbolic time discounting model in behavioral economics. The hyperbolic discounting model can explain why some people tend to procrastinate on doing unpleasant tasks such as saving instead of consuming, doing homework, or quitting smoking.
Masao Ogaki, Saori C. Tanaka

Chapter 7. Learning Theory and Experiments in Neuroeconomics

Learning is an important factor in decision making under a novel or unstable environment. Reinforcement learning theory is a promising framework as a computational model of the brain in the process of the decision making in humans and animals. The hypothesis of dopamine in learning signals has been established by a huge amount of experimental evidence in animal neurophysiology and human imaging studies. The quest for the detailed neural mechanism of decision making is the first step to develop an economic theory that can explain real human behavior including individual preference.
Masao Ogaki, Saori C. Tanaka

Chapter 8. Social Preferences

There are many experiment results that seem to indicate the necessity of considering social preferences models such as the inequality aversion model . There are also many experiment results that can be explained very well with the models with selfish economic men when competition is introduced. The inequality aversion model explains results of both of these categories of experiments.
Masao Ogaki, Saori C. Tanaka

Frontiers of Behavioral Economics


Chapter 9. Culture and Identity

This chapter examines how culture and identity affect economic behaviors and outcomes. Cultural differences in economic behavior have been found in survey data and experiment data. Differences in norms and worldviews have been used to empirically and theoretically study these cultural differences.
Masao Ogaki, Saori C. Tanaka

Chapter 10. The Economics of Happiness

In the economics of happiness , three different concepts of happiness have been used: emotional happiness , life satisfaction , and eudaimonia . Many economists outside this field are concerned about whether or not meaningful interpersonal comparisons of happiness are possible. When we compare results from empirical research with and without interpersonal comparisons, many results are robust while some results are not. Unless we think that all robust results across two types of research are coincidental, the robustness suggests that interpersonal comparisons must be possible at least under some conditions.
Masao Ogaki, Saori C. Tanaka

Chapter 11. Normative Behavioral Economics

In normative behavioral economics , we study how the public sector and private sector should behave. Based on libertarian paternalism , we can use the idea of nudging people in better directions without forcing them. In order to evaluate resource allocation to judge how this nudge tool and other public policies should be used when preferences are endogenous, relying exclusively on welfarism may not be satisfactory in many cases because some preferences may be thought to be better than others. Introducing one of the three major approaches in normative ethics, virtue ethics , into a formal analytical framework of normative economics seems a possible solution to this problem.
Masao Ogaki, Saori C. Tanaka


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