Bounded Rationality and Beyond

John Gerzema says there's an upside to the recent financial crisis -- the opportunity for positive change. Speaking at TEDxKC, he identifies four major cultural shifts driving new consumer behavior and shows how businesses are evolving to connect with thoughtful spending.

The Nobel Prize winner says economics should move beyond the limits of 'rational self-interest.'..

Paul Krugman: I think the biggest challenge is that the method that has worked so well for economics is probably close to its limits. Economics has gotten a tremendous amount of mileage about . . . by saying what would a rational, self-interested person do? That has been the core. And for very many things, that has been a very productive way. You learn an enormous amount, and it serves as the basis not just for abstract theories, but for actual empirical analysis of behavior and of policy. But in a way we’ve sort of done what you can do with that, and more and more the key issues in economics are . . . involve the limits of rationality; involve the places where people don’t have the ability to assess all of the data they have where people are . . . don’t make rational choices.

Advances in brain science are calling into question the volition behind many criminal acts.A leading neuroscientist describes how the foundations of our criminal-justice system are beginning to crumble, and proposes a new way forward for law and order.

Science fails to face the shortcomings of statistics... 

For better or for worse, science has long been married to mathematics. Generally it has been for the better. Especially since the days of Galileo and Newton, math has nurtured science. Rigorous mathematical methods have secured science’s fidelity to fact and conferred a timeless reliability to its findings.

"Economic models of risk don’t add up, cadre of researchers caution... "“Many economists will tell you that the chances of something really big and bad happening are really, really small,” Stanley says. But when viewed through a different lens, he contends, catastrophic events — such as Lehman filing for bankruptcy in 2008 — aren’t exceptional but inevitable.

The old empire could teach us a thing or two about the euro and its flaws.

Economic models of risk don’t add up, cadre of researchers caution...

What does the law mean to the common personWhat does the law mean to the common person? To better understand the operation of the law at the individual level of analysis this paper draws on psychological theories of values and on advances in rationality research to deploy a theory of expanded rationality. In this theory, values, defined as conceptions of the desirable, operate as arguments in individuals’ personal utility functions; they underlie the construction of preferences; and they provide reasons for reason-based choice. The link between values, expanded rationality, and the law is demonstrated through a number of central issues concerning the interaction between the law and individual persons - specifically, the content of law, law abidingness, value diversity in society, and value conflict.

TED Talks Psychologist Barry Schwartz takes aim at a central tenet of western societies: freedom of choice. In Schwartz's estimation, choice has made us not freer but more paralyzed, not happier but more dissatisfied.

Duke professor Dan Ariely has little faith in human rationality. Behavioral economists are interested in the same topics that economists are interested in: why people buy, how we make decisions, what are the right mechanisms in the market, and so on.

Social has turned the corner from interesting to imperative. However, some business leaders are reluctant to explore how business getting social might benefit their organization. They believe that social media isn’t relevant for their organization or that it’s just a “consumer thing” and only marketing needs to pay attention. They make statements that imply that social media is dangerous – statements which, upon examination, often reveal a misunderstanding of how all businesses are being changed by social.