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Given the falling returns in share markets and the comparative safety of savings accounts protected by the deposit insurance provided by the Australian Government, there was a significant surge in deposits made in savings ac counts. According to an article published in The Australian , Australian households deposited an estimated $38 billion into savings accounts over a period of six months ending on the 31 st of March, 2009. Among the various deposit-taking institutions, Westpac received the largest part of this growth. (Jimenez, 2009). Interestingly, there have been no major changes in the interest rates offered on savings accounts by the major banks recently. If the savings account market is examined , the first thing that one notices is the large number of options available to a prospective customer. There are more than fifty savings accounts on offer by various banks, building societies and credit unions. These include regular savings accounts, high interest savings accounts with more stringent conditions on deposits, withdrawals and usage and exclusively online savings accounts. Any given savings account product can have different combinations of attributes apart from the interest rate offered such as the minimum balance requirements, the minimum lock-in period, etc. For an average consumer who wants to open a savings account, there is a plethora of choices available. This paper considers how a typical consumer might make a choice among so many options and whether this choice is "right".

Established environmental policy theory is based on the assumption of homo economicus. This means that people are seen as fully rational and acting in a self-regarding manner. In line with this, economics emphasizes efficient policy solutions and the associated advantages of price incentives. Behavioral economics offers alternative, more realistic views on individual behavior. In this paper we investigate opportunities to integrate bounded rationality and other-regarding preferences into environmental policy theory to arrive at recommendations for more effective policies. For this purpose, we will address decisions made under risk and uncertainty, intertemporal choice, decision heuristics, other-regarding preferences, heterogeneity, evolutionary selection of behaviors, and the role of happiness. Three aspects of environmental policy are considered in detail, namely sustainable consumption, environmental valuation and policy design. We pay special attention to the role of non-pecuniary, informative instruments and illustrate the implications for climate policy. © 2010 Springer Science+Business Media B.V.

The purpose of this thesis is to illustrate how the role of knowledge may be the missing link in economics and to argue that the assumption of unbounded rationality, which underpinned neoclassical economics, should be replaced by bounded rationality and that bounded rationality should be redefined as people are rational, but are constrained by asymmetric and imperfect knowledge. This decomposition of bounded rationality makes it possible for us to operationalize bounded rationality, which was founded by Herbert Simon in the 1950s, but has not been widely adopted in economics because the concept was considered too difficult to formalize. The inclusion of asymmetric and imperfect knowledge considerations in microeconomics provides new insights into the existence and boundaries of firms, the role and nature of institutions, financial market inefficiency and political choices. The inclusion of asymmetric knowledge considerations in macroeconomics can help explain the unequal distribution of wealth between individuals, firms and nations. A lack of knowledge, and the difficulties in overcoming a lack of knowledge, can help to explain aspects of economic fluctuations, prices rigidities, monetary non-neutrality and unemployment. Most importantly, when the role of knowledge is considered, it provides better explanations to various anomalies in economics, helps reconciles differences between various theories and may opens up the possibility of unifying various schools of economic thought.

When individuals choose from whatever alternatives available to them the one that maximizes their utility then it is always desirable that the government provide them with as many alternatives as possible. Individuals, however, do not always choose what is best for them and their mistakes may be exacerbated by the availability of options. We analyze self-selection models, when individuals know more about themselves than it is possible for governments to know, and show that it may be socially optimal to limit and sometimes to eliminate individual choice. As an example, we apply Luce's (1959) model of random choice to a work-retirement decision model and show that the optimal provision of choice is positively related to the degree of heterogeneity in the population and that even with very small degrees of non-rationality it may be optimal not to provide individuals any choice.

As mentioned in the introduction, the objective of this work has been to get a more realistic understanding of economic decision making processes by adopting an interdisciplinary approach which takes into consideration at the same time economic and psychological issues. The research in particular has been focused on the psychological concept of categorization, which in the standard economic theory has received until now no attention, and on its implications for decision making. The three experimental studies conducted in this work provide empirical evidence that individuals don not behave according to the perfect rationality and maximization assumptions which underly the SEUT, but rather as bounded rational satisfiers who try to simplify the decision problems they face through the process of categorization. The results of the first experimental study, on bilateral integrative negotiation, show that most of the people categorize a continuum of outcomes in two categories (satisfying/not satisfying), and treat all the options within each category as equivalent. This process of categorization leads the negotiators to make suboptimal agreements and to what I call the ?Zone of Agreement Bias? (ZAB). The experimental study on committees? decision making with logrolling provides evidence of how the categorization of outcomes in satisfying/not satisfying can affect the process of coalition formation in multi-issue decisions. In the first experiment, involving 3-issues and 3-parties decisions under majority rule, the categorization of outcomes leads most of the individuals to form suboptimal coalitions and make Pareto-dominated agreements. The second experiment, aimed at comparing the suboptimizing effect of categorization under majority and unanimity rule, shows that the unanimity rule can lead to a much higher rate of optimal agreements than the majority rule. The third experiment, involving 4-issues and 4-parties decisions provides evidence that the results of experiments 1 and 2 hold even when the level of complexity of the decision problem increases.

Para el análisis fructífero de las relaciones económicas internacionales parece indispensable reconocer que las condiciones de producción en el capitalismo tardío o economía globalizada carecen de una racionalidad que las sostenga. Esta falta de racionalidad explica, por un lado las dificultades de predicción y, por otro lado, la pérdida de orientación simbólica en el imaginario colectivo. Tales dificultades se relacionan en la práctica de los negocios con la imposibilidad de garantizar la continuidad de posiciones dominantes. Y en la teoría permiten descartar las visiones conspirativas que durante varias décadas simplificaron las explicaciones acerca del poder económico. En este marco los Estados nacionales y los actores privados se ven obligados a perseverar en un sistema de negociación permanente. A fin de responder a semejante desafío debe pulirse al máximo la capacidad para identificar prioridades nacionales y aplicar estrategias de negociación, aspectos que precisamente constituyen debilidades sintomáticas de los países en desarrollo. A propósito de dichas necesidades aparecen los denominados "acuerdos de libre comercio" (ALC), cuya progresiva difusión se debe precisamente a que promueven ámbitos de racionalidad o previsibilidad ajustada al objetivo de preservar y profundizar los nexos de interdependencia comercial y económica entre pares o grupos de países, contrarrestando así la incertidumbre prevaleciente a escala global. ; For the successful analysis of international economic relations seems essential to recognize that the conditions of production in late capitalism lack of a global rationality that sustains it. This lack of rationality explains the difficulties in predicting affairs and also allow us to understand the symbolic loss of orientation in the collective imagination. The difficulties in predicting and hence related to planning in business practice are bond with the impossibility of ensuring continuity of dominant positions. And in theory those difficulties aid to preclude the conspiratorial visions which for decades ordered and simplified explanations about economic power. Within this framework national governments and private actors are forced to persevere in a system of continuous negotiations. To meet such a challenge must be polished to the maximum the ability to identify national priorities and negotiating strategies, aspects that are just sign of weakness in developing countries.On the occasion of these needs have emerged so-called "free trade agreements" (FTA), whose progressive spread is precisely to promote an adjusted predictability and by this way preserving and deepening the ties of trade and economic interdependence between pairs or groups of countries, thus counteracting the prevailing global uncertainty. ; Instituto de Relaciones Internacionales

Experimental economics and bounded rationality are very different from one another, but both claim to offer a more general and more empirical type of economic theory. Experimental economists, in addition, claim that their game-theoretic analyses provide rigorous, calculable, inferences from individual decisions to society as a whole. They claim to be describing the basis of social stability, although the argument depends on a unitary conception of "society" that ethnologists have now largely rejected. Both groups view rationality as inherently or originally individualistic and "utility maximizing" rather than inherently or originally social—albeit for entirely different reasons. Neither recognizes rationality as inherently bound up with organizations. These views have no basis in ethnography and are sharply in conflict with the stress on local knowledge in the most successful contemporary development policies. A crucial empirical issue is the nature and power of indigenous decision algorithms. The economists treat them as non-existent, insignificant, or erroneous. I show that they are organizationally situated and part of the organizational process, genuinely optimizing, and the basis of cultural ecological adaptation. Moreover, it is this external adaptation, not an internal game-like system of self-perpetuating rules, that is the ultimate basis of social stability, as well as dynamism.

Two of the major problems confronting the legal profession today are increasing rates of job dissatisfaction and the persistent problem of encouraging lawyers to work in public interest settings. These two problems are actually connected in an important way. Researchers have found that lawyers earning the highest salaries, typically in large law firms, are also the most dissatisfied with their profession, while lawyers working for government agencies, public interest organizations, and educational institutions are among the most satisfied. In other words, encouraging more law students to enter public service law could address both the problem of unhappiness in the profession and the underrepresentation of disadvantaged people with legal needs. Indeed, by reconnecting the legal profession with the notion of service to society, a professional ethic that seems to have disappeared in recent decades, we may be able to improve the profession more broadly for its own sake and for the positive impact it can and should have on society at large. In this essay, I examine why and how so many law students who have no intention of working at a firm or are interested in public interest as they begin law school end up accepting offers from large firms upon graduation. To address this paradox, we must understand the logical processes law students use in making their career decisions, and how these process may be flawed or biased. Recent findings in behavioral economics, which show the limits of rationality, shed light on this question. In particular, behavioral economics shows us that people have bounded willpower, bounded rationality and bounded self-interest, which all serve to encourage behavior which is not strictly self-interest maximizing, as that concept is understood in traditional economics. In this article, I argue that law students have shown bounded willpower, bounded rationality and bounded self-interest in this context. I divide this essay into three parts. In the first part, I address this question by looking at the bounded willpower, bounded rationality, and bounded self-interest of law school students. In the second part, I look at the effectiveness, or lack thereof, of different ways law schools have responded to the limited rationality shown by students, in particular public interest requirements and loan forgiveness plans. In the final part, I make suggestions for ways of addressing this issue, in light of the lessons learned from the first two parts.

Two of the major problems confronting the legal profession today are increasing rates of job dissatisfaction and the persistent problem of encouraging lawyers to work in public interest settings. These two problems are actually connected in an important way. Researchers have found that lawyers earning the highest salaries, typically in large law firms, are also the most dissatisfied with their profession, while lawyers working for government agencies, public interest organizations, and educational institutions are among the most satisfied. In other words, encouraging more law students to enter public service law could address both the problem of unhappiness in the profession and the underrepresentation of disadvantaged people with legal needs. Indeed, by reconnecting the legal profession with the notion of service to society, a professional ethic that seems to have disappeared in recent decades, we may be able to improve the profession more broadly for its own sake and for the positive impact it can and should have on society at large. In this essay, I examine why and how so many law students who have no intention of working at a firm or are interested in public interest as they begin law school end up accepting offers from large firms upon graduation. To address this paradox, we must understand the logical processes law students use in making their career decisions, and how these process may be flawed or biased. Recent findings in behavioral economics, which show the limits of rationality, shed light on this question. In particular, behavioral economics shows us that people have bounded willpower, bounded rationality and bounded self-interest, which all serve to encourage behavior which is not strictly self-interest maximizing, as that concept is understood in traditional economics. In this article, I argue that law students have shown bounded willpower, bounded rationality and bounded self-interest in this context. I divide this essay into three parts. In the first part, I address this question by looking at the bounded willpower, bounded rationality, and bounded self-interest of law school students. In the second part, I look at the effectiveness, or lack thereof, of different ways law schools have responded to the limited rationality shown by students, in particular public interest requirements and loan forgiveness plans. In the final part, I make suggestions for ways of addressing this issue, in light of the lessons learned from the first two parts.

The purpose of the paper is to explore, from an assessment viewpoint, the ideas below. Economics, as a social science, has always considered sets of individuals with assumed characteristics, namely the level of knowledge, although in an implicit way in most of the cases. In this sense, an influential approach in Economics assumed that society, as a global set of individuals, was characterised by a certain level of knowledge that, indeed, could be associated with the one of its representative agent. In fact, an attentive recall of the evolution of these matters in Economics will immediately recognise that, since the very first economic models of the government, it was assumed that the level of knowledge of society, represented by a set of voters, was not the same as the one of the agent being elected, i.e. the government. The irrelevance of the difference in the level of knowledge of economic agents was soon abandoned after some seminal works of Hayek and Friedman. More recently, the viewpoint of Economics has changed by focusing on the characteristics (e.g. knowledge) of individuals, who may interact in sub-sets of society. From this point of view is clearly relevant, given the close connection with the assumed level of knowledge, to distinguish the adaptive behaviour from the rational one, as well as the full rational from the bounded rationality behaviour by people. Quite recent developments in the Economics of Knowledge, i.e. the so-called learning models, have been considered as more realistic approaches to model the process by which individuals acquire knowledge, for instance from other individuals that are, themselves, acquiring knowledge.

The purpose of the paper is to explore, from an assessment viewpoint, the ideas below. Economics, as a social science, has always considered sets of individuals with assumed characteristics, namely the level of knowledge, although in an implicit way in most of the cases. In this sense, an influential approach in Economics assumed that society, as a global set of individuals, was characterised by a certain level of knowledge that, indeed, could be associated with the one of its representative agent. In fact, an attentive recall of the evolution of these matters in Economics will immediately recognise that, since the very first economic models of the government, it was assumed that the level of knowledge of society, represented by a set of voters, was not the same as the one of the agent being elected, i.e. the government. The irrelevance of the difference in the level of knowledge of economic agents was soon abandoned after some seminal works of Hayek and Friedman. More recently, the viewpoint of Economics has changed by focusing on the characteristics (e.g. knowledge) of individuals, who may interact in sub-sets of society. From this point of view is clearly relevant, given the close connection with the assumed level of knowledge, to distinguish the adaptive behaviour from the rational one, as well as the full rational from the bounded rationality behaviour by people. Quite recent developments in the Economics of Knowledge, i.e. the so-called learning models, have been considered as more realistic approaches to model the process by which individuals acquire knowledge, for instance from other individuals that are, themselves, acquiring knowledge.

Organic organizations rely little on formalization in its classical meaning. Instead, behaviour is governed and expectations are generalized with means that Etzioni has classified as identitive power. Bureaucracies are characterized partly by their use of coercion and purchase (utilitarian power) of motivation of its members, while organic, empowering, flat, learning organizations tend to use symbols that do not constitute threats or rewards as means of motivating members. Instead members are motivated, or committed, by personal identification with the organizational identity. This form of motivation can be compared with rule-based or identity-driven decision-making, by which organizational decisions are guided by organizational and personal identities rather than by a calculation of preferences and expected outcomes. In this paper, three decision-making problems are identified that are caused by improperly functioning differentiation between personal identities of organizational members and organizational identities when identities are the basis for both motivation and bounded rationality (decision-making).

Recognizing that human rationality has bounds that are unequal across individuals entails treating it as a special scarce resource, tied to individuals and used for deciding on its own uses. This causes a meta-mathematical difficulty to the axiomatic theories of human capital and resource allocation, and raises a new problem for comparative institutional analysis, allowing it to explain some so far little understood differences between markets and government. The policy implications strengthen the case against national planning, selective industrial policies, and government ownership of enterprises, but weaken the case against paternalism.

"Bounded rationality" is coming back: what matters for policy analysis? In the 2000s « Bounded rationality » is coming back in the social sciences literature, notably in the American policy analysis. 50 years after Herbert Simon proposed this concept what can explain such an enthusiasm? Bounded rationality originally means that people's skills in learning and thinking are limited by psychological and biological human nature. Scholars' attraction to this conception of human behavior is obviously connected with their interest in cognitive science. More precisely the use of this concept aims at combining a classical rationalist perspective with the cognitive science results. During the 80s cognitive psychologists' findings, such as Tversky and Kahneman's, undermined the bases of rational choice theory. Bounded rationality models try to make a synthesis between these two opposite perspectives. In spite of their taste for what they call "cognitive" approaches, French policy analysts seem to stand aside from these developments. We assume that a bounded rationality model of social human behavior could provide their research with a more solid and scientific ground. So doing many "cognitive" studies would avoid the dangers of a too abstract constructivism. ; Les années 2000 marquent le retour en force dans les sciences sociales, et notamment dans l'analyse des politiques publiques américaine, de la « bounded rationality ». Un demi-siècle après la création de ce concept par Herbert Simon, qu'est-ce qui explique un tel enthousiasme ? À l'origine, la rationalité limitée est une conception de l'acteur rationnel limité par sa nature psychique et cérébrale dans ses prétentions à apprendre et à raisonner. L'engouement actuel des chercheurs pour ce concept est alors à rapprocher de celui dont bénéficient dans certains milieux les sciences cognitives. Plus exactement, le recours au concept de rationalité limitée vise aujourd'hui à combiner une approche rationaliste classique et les découvertes des sciences cognitives. Tout au ...

We discuss the literatures on behavioral economics, bounded rationality and experimental economics as they apply to firm behaviour in markets. Topics discussed include the impact of imitative and satisficing behavior by firms, outcomes when managers care about their position relative to peers, the benefits of employing managers whose objective diverges from profit-maximization (including managers who are overconfident or base pricing decisions on sunk costs), the impact of social preferences on the ability to collude, and the incentive for profit-maximizing firms to mimic irrational behavior.