Benjamin Enke, Thomas Graeber, 18 April 2020

When making economic decisions, people are often aware that they do not know the optimal thing to do. Traditional models of economic decision-making do not account for this ‘cognitive uncertainty’. This column argues that cognitive uncertainty predicts economic actions and beliefs because, in binary settings, it induces people to implicitly compress probabilities towards a 50:50 ‘mental default’. This partially explains behavioural anomalies in choice under risk, choice under ambiguity, belief updating, and survey forecasts of economic variables.

Beryl Chang, Fabrizio Ghisellini, 21 May 2017

Behavioural economics has identified phenomena that standard models could not explain. But its critics warn that it is becoming little more than a ‘pile of quirks’. This column argues that the future development of behavioural economics should focus on a streamlining process that will clarify core issues, fill conceptual gaps, and create tractable models. Behavioural models will only become a coherent alternative to homo economicus if this process occurs.

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