BEHAVIORAL ECONOMICS AND COMPLEXITY
Academic Year 2021/2022 - 1° YearCredit Value: 9
Scientific field: SECS-P/02 - Politica Economica
Taught classes: 60 hours
Term / Semester: 2°
Learning Objectives
1. Knowledge and understanding
The course aims to build consciousness on the roots of complexity in human behaviors, with reference to their consequences on dynamic perspectives of economic relations. Main contributions of related literature will provide the methodological approach to understand socio-economic relations, by comparing theoretical models and empirical data.
2. Applying knowledge and understanding
The course will analyze both the micro- and the macro-economic perspective, by underlining, respectively, the behavioral approach in the individual choice paradigm and the emergent dynamics in collective phenomena. An essential introduction to agent-based modelling will be given, as one of the most adequate tools of analysis in the field.
3. Making judgements
The course will provide students with adequate abilities to distinguish complex phenomena and to reconcile correct modeling structures with socio-economic problems at hands.
4. Communication skills
The course has an experimental nature. It deals with borderline topics and non-standard approaches for economic analysis. Therefore, a specific effort will be done to help students learning the appropriate terminology and the ability to discuss actual aspects of studied concepts.
5. Learning skills
The course will be a starting point more than a consolidated set of results. All teaching materials, references and presented topics will create a toolbox for many possible future developments, for both further studies and professional applications.
Course Structure
Lectures. Should teaching be carried out in mixed mode or remotely, it may be necessary to introduce changes with respect to previous statements, in line with the programme planned and outlined in the syllabus.
Required Prerequisites
Although a formal pre-requisite is not required, all students are firmly suggested to learn the programme taught in Fundamentals of Economics.
Attendance of Lessons
Mandatory.
Detailed Course Content
The course aims to present the developments in the context of Micro- and Macroeconomic Theory deriving from the analysis of, respectively, the behavioral approach in the choice paradigm and the emergent dynamics in collective phenomena. Thus, the first part of the course will provide a broad introduction to the concept of rationality in economics and to the advances of modern literature related to the implementation of bounded rationality and behavioral approaches. The second part, instead, will be focused on the concepts of complexity, heterogeneity and interaction in economic models, and special attention will be devoted to the study of macroeconomic agent-based models. For both blocks, a step-by-step introduction of essential ABM building elements will be provided. Finally, a user-friendly open access platform will be presented in order to enable students to build their own models and perform simulations to be confronted with empirical data for policies assessment.
A - Economic Behavior and Microeconomics:
Rational choice in Economics and Bounded Rationality; Introduction to Computational Economics.
B - Complexity and Macroeconomics:
Complexity and Emergent Macroeconomics; Network Economics, Agent-based Modeling.
Textbook Information
Becker G.S., The Economic Approach to Human Behavior, The University of Chicago Press, 1976, chapters: 1, 7, 8, 12, 13.
Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge.
Simon H.A., (1955) A Behavioral Model of Rational Choice, The Quarterly Journal of Economics, vol.69, No.1., pp.99-118.
Kahneman D., Tversky A., (1979) An Analysis of Decision under Risk, Econometrica, Vol. 47, No. 2 (Mar., 1979), pp. 263-291
Kahneman D., Tversky A., (1984) Choice, Values, Frames, American Psychologist, vol. 39, No. 4, 341-350.
Cioffi-Revilla C., Introduction to Computational Social Science, Springer 2014, chapters: 5, 6, 7.
Delli Gatti D., Gaffeo E., Gallegati M., Giulioni G., Palestrini A., Emergent Macroeconomics, 2008, Springer-Verlag, Milan.
Jackson M.O., Social and Economic Networks, 2010, Princeton University Press, chapters: 2, 3, 6.
Course Planning
| Subjects | Text References | |
|---|---|---|
| 1 | The Economic Approach to Human Behavior for a New Theory of Consumer Behavior | Becker G.S., The Economic Approach to Human Behavior, The University of Chicago Press, 1976, ch. 1 |
| 2 | The Economic Approach to Human Behavior for a New Theory of Consumer Behavior (2) | Becker G.S., The Economic Approach to Human Behavior, The University of Chicago Press, 1976, ch. 7 |
| 3 | The Economic Approach to Human Behavior for a New Theory of Consumer Behavior (3) | Becker G.S., The Economic Approach to Human Behavior, The University of Chicago Press, 1976, ch. 8 |
| 4 | Altruism, Egoism, and Genetic Fitness: Social Interactions | Becker G.S., The Economic Approach to Human Behavior, The University of Chicago Press, 1976, ch. 12 |
| 5 | Altruism, Egoism, and Genetic Fitness: Social Interactions (2) | Becker G.S., The Economic Approach to Human Behavior, The University of Chicago Press, 1976, ch. 13 |
| 6 | Optimization | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 1 |
| 7 | Optimization (2) | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 2 |
| 8 | Optimization (3) | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 3 |
| 9 | Risk and Uncertainty | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 4 |
| 10 | Risk and Uncertainty (2) | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 5 |
| 11 | Group Choices | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 6 |
| 12 | Group Choices (2) | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 7 |
| 13 | Group Choices (3) | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 8 |
| 14 | Rationality and Emotions | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 9 |
| 15 | Rationality and Emotions (2) | Gilboa I., Rational Choice, 2010, The MIT Press, Cambridge, ch. 10 |
| 16 | Behavioral Decision-Making | Simon H.A., (1955) A Behavioral Model of Rational Choice, The Quarterly Journal of Economics, vol.69, No.1., pp.99-118. |
| 17 | Behavioral Decision-Making (2) | Simon H.A., (1955) A Behavioral Model of Rational Choice, The Quarterly Journal of Economics, vol.69, No.1., pp.99-118. |
| 18 | Prospect Theory | Kahneman D., Tversky A., (1979) An Analysis of Decision under Risk, Econometrica, Vol. 47, No. 2 (Mar., 1979), pp. 263-291 |
| 19 | Prospect Theory (2) | Kahneman D., Tversky A., (1979) An Analysis of Decision under Risk, Econometrica, Vol. 47, No. 2 (Mar., 1979), pp. 263-291 |
| 20 | Framing in Decision-making | Kahneman D., Tversky A., (1984) Choice, Values, Frames, American Psychologist, vol. 39, No. 4, 341-350. |
| 21 | Social and Economic Networks | Jackson M.O., Social and Economic Networks, 2010, Princeton University Press, ch. 2 |
| 22 | Social and Economic Networks (2) | Jackson M.O., Social and Economic Networks, 2010, Princeton University Press, ch. 3 |
| 23 | Social and Economic Networks (3) | Jackson M.O., Social and Economic Networks, 2010, Princeton University Press, ch. 6 |
| 24 | Social Complexity | Cioffi-Revilla C., Introduction to Computational Social Science, Springer 2014, ch. 5 |
| 25 | Social Complexity (2) | Cioffi-Revilla C., Introduction to Computational Social Science, Springer 2014, ch. 6 |
| 26 | Social Complexity (3) | Cioffi-Revilla C., Introduction to Computational Social Science, Springer 2014, ch. 7 |
| 27 | Crucial Issues and Stylized facts of Industrial Dynamics | Delli Gatti D., Gaffeo E., Gallegati M., Giulioni G., Palestrini A., Emergent Macroeconomics, 2008, Springer-Verlag, Milan, ch. 1, 2 |
| 28 | Crucial Issues and Stylized facts of Industrial Dynamics (3) | Delli Gatti D., Gaffeo E., Gallegati M., Giulioni G., Palestrini A., Emergent Macroeconomics, 2008, Springer-Verlag, Milan, ch. 3 |
| 29 | Agent-based Macroeconomics and Future Paradigms | Delli Gatti D., Gaffeo E., Gallegati M., Giulioni G., Palestrini A., Emergent Macroeconomics, 2008, Springer-Verlag, Milan, ch. 4 |
| 30 | Agent-based Macroeconomics and Future Paradigms (2) | Delli Gatti D., Gaffeo E., Gallegati M., Giulioni G., Palestrini A., Emergent Macroeconomics, 2008, Springer-Verlag, Milan, ch. 5 |
Learning Assessment
Learning Assessment Procedures
Written exam. Learning assessment may also be carried out on line, should the conditions require it.
Examples of frequently asked questions and / or exercises
Discuss implications of a behavioral approach on the concept of rationality in economics
Present the distance-based utility model
Discuss the problem of statistical aggregation in macroeconomics