GU4850: Cognitive Mechanisms and Economic Behavior | M. Woodford
Undergraduate and Graduate Lecture
Standard economic theory seeks to explain human behavior in terms of rational choice, which means that the choices that are made can be predicted on the basis of what would best serve some coherent objective, under an objectively correct understanding of the predictable consequences of alternative actions. Observed behavior often seems difficult to reconcile with a strong form of this theory, even if incentives clearly have some influence on behavior; and the course will discuss empirical evidence for some well-established “anomalies.” But beyond simply cataloging anomalies for the standard theory, the course will consider the extent to which departures from a strong version of rational choice theory can be understood as reflecting cognitive processes that are also evident in other domains such as sensory perception; examples from visual perception will receive particular attention. And in addition to describing what is known about how the underlying mechanisms work, the course will consider the extent to which such mechanisms might actually represent efficient uses of the limited information and bounded information-processing resources available to actual people. Thus the course will consider both ways in which the realism of economic analysis may be improved by taking into account cognitive processes, and ways in which understanding of cognitive processes might be advanced by considering the “economic” problem of efficient use of limited (cognitive) resources.
Prerequisites: ECON UN3211, ECON UN3213, and STAT UN1201.
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