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The Economics of the Mind

Salvatore Rizzello, University of Piemonte Orientale, Italy
The Economics of the Mind addresses economics from the perspective of real men and women: how they assess things, decide and act. It looks at the choices we make, and calls for the assumptions which make up the foundations of economic theory to be consistent with the mechanisms which guide the workings of the human mind.
Extent: 224 pp
Hardback Price: $134.00 Web: $120.60
Publication Date: 1999
ISBN: 978 1 84064 163 9
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  • Economics and Finance
  • Methodology of Economics
The Economics of the Mind addresses economics from the perspective of real men and women: how they assess things, decide and act. It looks at the choices we make, and calls for the assumptions which make up the foundations of economic theory to be consistent with the mechanisms which guide the workings of the human mind.

The author begins by presenting an historical analysis of the role of knowledge and decision-making, taking into account the work of Hayek and Simon. Salvatore Rizzello then reconstructs the birth and development of neo-institutionalism, experimental economics and evolutionary economics. He discusses economic and social institutions and how these simplify the individual’s choices related to knowledge and tasks. Specifically, he examines rules, learning and evolution in neo-institutional economics. The book breaks new ground on the role of the social sciences, and economics in particular, and suggests a move away from neoclassical economics towards a more definite link between economics, psychology and the artificial sciences.

The book will be warmly welcomed by institutional and evolutionary economists, and those working in the field of economic psychology.
‘This is an interesting and valuable book. Drawing on contributions from economics, psychology and the cognitive sciences, the book presents a critique of some unrealistic hypotheses of neoclassical economics, and defends instead a broadly defined “neoinstitutionalist” approach to decision-making . . . The Economics of the Mind . . . deserves to be read by those concerned with the foundations of an alternative economic theory.’
– David Dequech, Review of Political Economy

‘Rizzello must be given credit for drawing our attention to ongoing research in this fascinating and exciting area.’
– Jack Vromen, The Economic Journal

‘To put it simply: Rizzello’s book is of great interest to those interested in behavioural and psychological aspects of economics, and he does not need to get drawn into categorising his own contribution, or those upon which he draws, as for or against some position that may be deemed established . . . Rizzello’s book is worthy of serious consideration because it connects the individual and institutional analyses of Hayek and Simon with cognitive and neurobiological research in psychology. It provides fascinating insights into decision-making procedures within institutional and organisational contexts.’
– John H. Finch, Journal of Economic Psychology

‘In the last decades, psychological factors have been introduced to enrich the economic analysis of decision-making. Professor Rizzello suggests an important next step: based on Hayek’s intuitive insights and Simon’s radical departure from maximizing, suggesting human behaviour must incorporate neurobiological elements. While it would be too early to expect empirical results, Salvatore Rizzello indicates what can thereby be gained for institutional, industrial and evolutionary economics. A real challenge for future research.’
– Bruno S. Frey, University of Zurich, Switzerland
Contents: Foreword (Massimo Egidi) Introduction Part I: Hayek’s Criticism to the Neoclassical Paradigm 1. Neoclassical Paradigm and the Anomaly of the Austrian School 2. Hayek on Competition and Knowledge 3. Mind and Institutions Part II: Simon’s Criticism: From Substantive Rationality to Procedural Rationality 4. Bounded Rationality 5. Optimizing and “Satisficing” 6. Problem-Solving 7. Decision-Making Process: Procedural Rationality and Learning 8. Economics and Psychology Part III: Neoinstitutionalism: Rules, Learning and Evolution 9. The Implications of the Neurobiological Approach for Economic Theory (I): The Decision-Making Process 10. The Implications of the Neurobiological Approach for Economic Theory (II): The Process of Exchange 11. The Implications of the Neurobiological Approach for Economic Theory (III): “Path-Dependency” 12. Transaction Costs and the New Theory of the Firm 13. Evolution, Organizations and Institutions References Index