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Handbook of Behavioural Economics and Smart Decision-Making

Rational Decision-Making within the Bounds of Reason Edited by Morris Altman, Professor of Behavioural and Institutional Economics, Dean and Head, Newcastle Business School, University of Newcastle, Australia
This Handbook is a unique and original contribution of over thirty chapters on behavioural economics, examining and addressing an important stream of research where the starting assumption is that decision-makers are for the most part relatively smart or rational. This particular approach is in contrast to a theme running through much contemporary work where individuals’ behaviour is deemed irrational, biased, and error-prone, often due to how people are hardwired. In the smart people approach, where errors or biases occur and when social dilemmas arise, more often than not, improving the decision-making environment can repair these problems without hijacking or manipulating the preferences of decision-makers. This book covers a wide-range of themes from micro to macro, including various sub-disciplines within economics such as economic psychology, heuristics, fast and slow-thinking, neuroeconomics, experiments, the capabilities approach, institutional economics, methodology, nudging, ethics, and public policy.
Extent: 608 pp
Hardback Price: $330.00 Web: $297.00
Publication Date: 2017
ISBN: 978 1 78254 957 4
Availability: In Stock
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  • Economics and Finance
  • Behavioural and Experimental Economics
  • Economic Psychology
This Handbook is a unique and original contribution of over thirty chapters on behavioural economics. It examines and addresses an important stream of research where the starting assumption is that decision-makers are, for the most part, relatively smart or rational. This particular approach is in contrast to a theme running through much contemporary work in which individuals’ behaviour is deemed irrational, biased and error-prone, often due to how the brain is hardwired. In the smart people or bounded rationality approach, where errors or biases occur and when social dilemmas arise, more often than not, improving the decision-making environment can repair these problems without hijacking or manipulating the preferences of individuals.

The Handbook covers a wide range of themes from micro to macro, including economic psychology, heuristics, fast and slow thinking, neuroeconomics, experiments, the capabilities approach, institutional economics, methodology, nudging, ethics and public policy. It argues that neoclassical decision-making benchmarks are typically not the gold standard for best practice. The expert contributions demonstrate that decision-making capabilities and decision-making environments can both be more effective and consistent than nudging in improving welfare and utility, and in maximizing well-being. They also demonstrate how learning, improved information, empowerment, voice and preference play a vital role in determining smart decision-making outcomes.

This comprehensive and original Handbook will appeal to academics in behavioural and experimental economics, and economic psychology.
‘In the study of decision-making by people in the world, the laboratory, in surveys, or in all of the above, many scholars have derided our decisions as irrational, uninformed, biased or vulnerable to illusions, if not delusions, that steer us off track. You won’t find that simplistic reduction in this book. You will find plenty of cases of error, sometimes random, sometimes systematic, and sometimes in the models that are alleged to specify rational behaviour. You will also find penetrating analyses of institutions and other social systems that have made us smart, or smart enough to muddle through in an uncertain world.’
– From the Foreword by Vernon L. Smith, Chapman University, US

‘Behavioural economics has been dominated by the heuristics-and-biases view, according to which deviations from coherence principles are equated with irrational behaviour, making humans appear to be a group of Homer Simpsons plagued with illusions. Many economists appear to be unaware that this viewpoint has long been contested in psychology and that experimental and analytic studies have uncovered the conditions under which deceptively simple heuristics can in fact make people’s behaviour smart. This book provides a fresh perspective for behavioural economics to rethink the nature of rationality by understanding how people and institutions try to make intelligent decisions in an uncertain world where the optimal course of action cannot be known ahead.’
– Gerd Gigerenzer, Max Planck Institute for Human Development, Berlin

Contributors: M. Altman, C.L. Anderson, G. Antonides, M. Augier, S. Austen, N. Berg, P. Biscaye, P.J. Boettke, S. Bourgeois-Gironde, R.A. Candela, A. Cronholm, G. Danese, G. Foster, R. Frantz, P. Frijters, K. Gangl, H. Gintis, M.J.J. Handgraaf, B. Harrison, B. Hartl, A. Hopfensitz, S. James, B. Kamleitner, E.L. Khalil, R. Kheirandish, D. Kilger, E. Kirchler, F. Kutzner, D. Lester, A. Leung, E. McPhail, B. Meder, T. Mengay, L. Mittone, S. Mousavi, H. Neth, A. Ortmann, M. Pingle, O. Powell, O. Rosin, T.F. Rötheli, N. Sari, N. Shestakova, L. Spiliopoulos, V. Tarko, S. Teraji, J.F. Tomer, J. van Beek, T. Vogel, B. Yang Lester
Contents:

Foreword by Vernon Smith

1. Introduction to Smart Decision-Making
Morris Altman

PART I Smart Decision-Makers, Different Types of Rationality, and Outcomes
2. Rational Inefficiency: Smart Thinking, Bounded Rationality, and the Scientific Basis for Economic Failure and Success
Morris Altman

3. Rational Mistakes That Make Us Smart
Nathan Berg

4. Rational Choice As If the Choosers Were Human
Peter J. Boettke and Rosolino A. Candela

5. Smart Predictions From Wrong Data: The Case of Ecological Correlations
Florian Kutzner and Tobias Vogel

6. Heuristics: fast, frugal, and smart
Shabnam Mousavi, Björn Meder, Hansjörg Neth and Reza Kheirandish

7. The Beauty of Simplicity? (Simple) Heuristics and the Opportunities Yet to be Realized
Andreas Ortmann and Leonidas Spiliopoulos

8. Smart Persons and Human Development: The Missing Ingredient in Behavioral Economics
John F. Tomer

PART II Aspects of Smart Decision-MakinG
9. Behavioral Strategy at the Frontline: Insights and Inspirations from the US Marine Corps
Mie Augier

10. Feminist economics for smart behavioural economics
Siobhan Austen

11. How regret Moves Individual and Collective Choices Towards Rationality
Sacha Bourgeois-Gironde

12. Is it rational to be in love?
Paul Frijters and Gigi Foster

13. Behavioural Economic Anthropology
Giuseppe Danese and Luigi Mittone

PART III Development and Governance
14. Do Changes in Farmers’ Seed Traits Align with Climate Change? A Case Study of Maize in Chiapas, México
C. Leigh Anderson, Andrew Cronholm and Pierre Biscaye

15. Rationality, Globalization, and X-Efficiency Among Financial Institutions
Roger Frantz

16. The Evolution of Governance Structures in a Polycentric System
Edward McPhail and Vlad Tarko

PART IV Tax Behaviour
17. Taxation and Nudging
Simon James

18. Income Tax Compliance
Erich Kirchler, Barbara Hartl and Katharina Gangl

PART V Smart Macroeconomics and Finance
19. Financial decisions in the household
Bernadette Kamleitner, Till Mengay and Erich Kirchler

20. Employing Priming to Shed Light on Financial Decision-making Processes
Doron Kilger

21. Experimental Asset Markets: Behaviour and Bubbles
Owen Powell and Natalia Shestakova

22. To Consume or to Save: Are We Maximising or What?
Tobias F. Rötheli

PART VI Dimensions of Health
23. Time orientation effects on health behaviour
Jannette van Beek, Michel J.J. Handgraaf and Gerrit Antonides

24. Behavioral aspects of obesity
Odelia Rosin

25. Time inconsistent preferences in intertemporal choices for physical activity & weight loss: Evidence from Canadian health surveys
Nazmi Sari

26. Suicide Amongst Smart People
Bijou Yang and David Lester

PART VII Sociological Dimensions of Smart Decision-Making
27. Seeing and knowing others: the impact of social ties on economic interactions
Astrid Hopfensitz

28. Weakness of Will and Stiffness of Will: How far are Shirking, Slackening, Favoritism, Spoiling of Children, and Pornography from Obsessive-Compulsive Behavior?
Elias L. Khalil

29. The Role of Identity, Personal and Social Capital in Community Crime Prevention
Ambrose Leung and Brandon Harrison

30. Norms, Culture, and Cognition
Shinji Teraji

PART VIII Morals and Ethics
31. Rational Choice in Public and Private Spheres
Herbert Gintis

32. Ethics and Simple Games
Mark Pingle

Index