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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - States of nature and states of mind
T2 - a generalized theory of decision-making
AU - Embrey, Iain
PY - 2020/2/1
Y1 - 2020/2/1
N2 - Canonical economic agents act so as to maximize a single, representative, utility function. However, there is accumulating evidence that heterogeneity in thought processes may be an important determinant of individual behavior. This paper investigates the implications of a vector-valued generalization of the Expected Utility paradigm, which permits agents either to deliberate as per Homo economics, or to act impulsively. This generalized decision theory is applied to explain the crowding-out effect, irrational educational investment decisions, persistent social inequalities, the pervasive influence of non-cognitive ability on socio-economic outcomes, and the dynamic relationships between non-cognitive ability, cognitive ability, and behavioral biases. These results suggest that the generalized decision theory warrants further investigation.
AB - Canonical economic agents act so as to maximize a single, representative, utility function. However, there is accumulating evidence that heterogeneity in thought processes may be an important determinant of individual behavior. This paper investigates the implications of a vector-valued generalization of the Expected Utility paradigm, which permits agents either to deliberate as per Homo economics, or to act impulsively. This generalized decision theory is applied to explain the crowding-out effect, irrational educational investment decisions, persistent social inequalities, the pervasive influence of non-cognitive ability on socio-economic outcomes, and the dynamic relationships between non-cognitive ability, cognitive ability, and behavioral biases. These results suggest that the generalized decision theory warrants further investigation.
KW - Decision theory
KW - Dual-self
KW - Behavioral anomalies
KW - Human capital
KW - Social exclusion
KW - Unemployment
U2 - 10.1007/s11238-019-09705-8
DO - 10.1007/s11238-019-09705-8
M3 - Journal article
VL - 88
SP - 5
EP - 35
JO - Theory and Decision
JF - Theory and Decision
SN - 0040-5833
IS - 1
ER -