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The irrationality in economy
Tuesday April 21th, 2009 , h.20,30
The prospect provided by traditional economy is, if not completely wrong,
at least misleading. In fact, it is based on a mechanistic conception and
the consequences are clear: if economy works like a machine, despite the
complexity of the mechanism, once understood, the procedure becomes predictable.
Traditional economy underestimates the interaction between individuals,
but social society and economy are mainly based on the relations between
individuals and the consequences of their choices. Moreover, the choices are
not all identical, since some are made in an almost unconscious way, instead
others are pondered upon with a lot more attention and accuracy. What has been
known for years is that, the individual choices, especially in conditions of
risk and uncertainty, are systematically different than the predictions made by
the traditional economy models. How can we describe such behaviors? How much do
processes, like chance, imitation, emotion and systematic errors influence the process
of decision making?
Massimo Egidi
Economist
Miguel Angel Virasoro
Physicist
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