BIHEVIORIAL ECONOMICS AND STANDARD ECONOMIC THEORY
Keywords:
behavioral economics, fast and frudal heuristics, financial markets, rational behaviour, cognitive anomaliesAbstract
The standard economic theory is based on rational individuals who are called homo economicus. In a certain sense, the standard economic theory itself defines itself as an explicitly “anti-behavioral”. Practically all types of behavior, which are studied by cognitive and social psychologists, are either ignored or excluded in a standard economic model. On the other hand, the behavioral economics has accumulated large number of empirical and experimental evidence that have seriously questioned the accuracy and applicability of key predictions of standard economic theory. Further work within biheviorial has clearly shown that psychological ideas could be formalized and used to form predictions that could be tested. In this paper, arguments in favor of standard economic theory are analyzed and it is pointed out that these arguments are refuted. Special attention is paid to the results of psychological research that show that people do not behave rationally. The last part of this paper discusses also the explanatory value of standard economic theory in the field of finances that called the hypothesis of efficient markets, and we concluded that the explanatory value of the hypothesis on efficient markets was significantly reduced in significant situations.
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References
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