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Bounded Rationality And Perfect Rationality: Psychology Into Economics

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  • Daniele Schilirò

    ()
    (DESMaS "V. Pareto", University of Messina, Italy)

Abstract

Mathematical algorithms often fail to identify in time when the international financial crises occur although, as the classical theory of choice would suggest, the economic agents are rational and the markets are or should be efficient and behave also rationally. This contribution tries to highlight some well-known limits of the classical theory of rational choice and compare this theory of choice with bounded rationality, which is a different notion of rationality, and with an approach that seeks to combine economics and psychology, based on experimental data, which established itself as behavioral economics. The work also examines part of the literature of behavioral finance which has given important contributions in explaining the behavior and the anomalies of financial markets. A final reference is dedicated to neuroeconomics that is gaining more and more ground in the analysis of economic behavior.

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Bibliographic Info

Article provided by ASERS Publishing in its journal Theoretical and Practical Research in Economic Fields.

Volume (Year): III (2012)
Issue (Month): 2 (January)
Pages: 101-111

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Handle: RePEc:srs:tpref1:3:v:3:y:2012:i:2:p:101-111

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Keywords: bounded rationality; procedural rationality; rational choice; behavioral economics; neuroeconomics.;

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References

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Cited by:
  1. Schilirò, Daniele, 2012. "Bounded rationality: psychology, economics and the financial crisis," MPRA Paper 40280, University Library of Munich, Germany.

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