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Survey based valuation techniques like the Contingent Valuation Method (CVM) rely particularly on the premise of respondents’ rationality when answering willingness to pay (WTP) questions. Results of CVM surveys have repeatedly put this fundamental assumption into question. This study adopts a more realistic view of rationality accounting for respondents’ limited capacities to process information. Based on cognitive psychology a technique to detect and analyze the bounds of rationality inherent in WTP statements is developed. Using an empirical example, the influence of bounded rationality on the validity of CVM results is analyzed. It is shown that individual differences in information processing play a major role. From these results recommendations for future survey design are developed.

Economic theory & philosophy --- Environmental economics --- Environmental economics. --- Environmental protection --- Economic aspects. --- Economics --- Environmental quality --- Environmental aspects --- Economic aspects --- Bounded Rationality --- Concepts --- Contingent Valuation --- Contingent Valuation Method --- Enviromental --- Environmental --- Frör --- Rationality --- Umweltbilanz --- Valuation

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This paper explores the conceptual foundations of macroprudential policy. It does so within a framework that gradually incorporates and interacts two types of frictions (principal-agent and collective action) with two forms of rationality (full and bounded), all in the context of aggregate volatility. Four largely orthogonal rationales for macroprudential policy are identified. The first (time consistency macroprudential) arises even in the absence of externalities, not to prevent financial crises but to offset the moral hazard implications of (efficient but time inconsistent) post-crisis policy interventions. The second (dynamic alignment macroprudential) protects the less sophisticated (boundedly rational) market participants by maintaining principal-agent incentives continuously aligned along the cycle and in the face of aggregate shocks. The third (collective action macroprudential) responds to the socially inefficient yet rational instability resulting from uninternalized externalities. The fourth (collective cognition macroprudential) aims at tempering non-rational mood swings where credit-constrained rational arbitrageurs fail. Finding the right policy balance is complicated by the fact that the four dimensions face policy trade-offs and their relative importance is state-dependent, hence shifts over time.

Banks & Banking Reform --- Bounded rationality --- Collective action --- Debt Markets --- Economic Theory & Research --- Emerging Markets --- Externalities --- Financial crises --- Financial frictions --- Financial policy --- Labor Policies --- Macroeconomics and Economic Growth --- Macroprudential policy --- Principal-agent problems --- Pro-cyclical financial markets --- Prudential oversight --- Regulatory architecture

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This open access book will examine the implications of digitalization for the understanding of humanity, conceived as a community of intelligent agency. It addresses important topics across a range of social and behavioral theories and identifies a range of novel mechanisms and their social behavioral effects. Across the book, the author highlights the expansion of intelligent processing capability brought about by digitalization and the challenges this exposes for integrating artificial and human capabilities. It includes the altered effects of bounded rationality in problem solving and decision making; related changes in the perception of rationality, plus novel myopias and biases. It also seeks to address cognitive intersubjectivity, learning from performance and agentic self-generation; and the novel methods and patterns of reasoned thought which emerge in a digitalized world; and how these mechanisms will combine in making and remaking the world of human experience and understanding. This book examines the problematics and prospects for digitally augmented humanity. In doing so, it maps the terrain for a future science of augmented agency. It will have cross-disciplinary appeal to students and scholars of applied psychology, cognitive and behavioral science, organizational psychology and management, business, finance, and digital cultures and humanities.

Digitalització --- Psicologia aplicada --- Tecnologia i civilització --- behavioral science --- applied psychology --- social cognitive psychology --- organizational design and management --- microeconomics and preferential choice --- artificial intelligence --- cognitive bias --- rationality --- digitization --- bounded rationality --- agency --- problem solving --- trust --- collaboration --- metacognition --- freedom of thought --- cognitive empathy --- cognitive plasticity

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This book originated from a 2010 conference marking the fortieth anniversary of the publication of the landmark "Phelps volume," Microeconomic Foundations of Employment and Inflation Theory, a book that is often credited with pioneering the currently dominant approach to macroeconomic analysis. However, in their provocative introductory essay, Roman Frydman and Edmund Phelps argue that the vast majority of macroeconomic and finance models developed over the last four decades derailed, rather than built on, the Phelps volume's "microfoundations" approach. Whereas the contributors to the 1970 volume recognized the fundamental importance of according market participants' expectations an autonomous role, contemporary models rely on the rational expectations hypothesis (REH), which rules out such a role by design. The financial crisis that began in 2007, preceded by a spectacular boom and bust in asset prices that REH models implied could never happen, has spurred a quest for fresh approaches to macroeconomic analysis. While the alternatives to REH presented in Rethinking Expectations differ from the approach taken in the original Phelps volume, they are notable for returning to its major theme: understanding aggregate outcomes requires according expectations an autonomous role. In the introductory essay, Frydman and Phelps interpret the various efforts to reconstruct the field--some of which promise to chart its direction for decades to come. The contributors include Philippe Aghion, Sheila Dow, George W. Evans, Roger E. A. Farmer, Roman Frydman, Michael D. Goldberg, Roger Guesnerie, Seppo Honkapohja, Katarina Juselius, Enisse Kharroubi, Blake LeBaron, Edmund S. Phelps, John B. Taylor, Michael Woodford, and Gylfi Zoega.

Macroeconomics --- Rational expectations (Economic theory) --- Economics --- Expectations, Rational (Economic theory) --- Economic forecasting --- Time and economic reactions --- Uncertainty --- Macroeconomics. --- Phelps microfoundations volume. --- Rational Expectations Hypothesis. --- Real Business Cycles. --- Ricardian Equivalence. --- asset prices. --- bounded rationality. --- economic theory. --- employment. --- expectation formation. --- expectational coordination. --- expectations. --- finance. --- financial crisis. --- financial instruments. --- inflation. --- informational efficiency. --- learning. --- macroeconometric models. --- macroeconomic analysis. --- macroeconomic models. --- macroeconomics. --- microfoundations. --- nonroutine change. --- rational expectations. --- rationality. --- real-time learning. --- unemployment.

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Can cash transfers promote employment and reduce poverty in rural Africa? Will lower youth unemployment and poverty reduce the risk of social instability? The authors experimentally evaluate one of Uganda's largest development programs, which provided thousands of young people nearly unconditional, unsupervised cash transfers to pay for vocational training, tools, and business start-up costs. Mid-term results after two years suggest four main findings. First, despite a lack of central monitoring and accountability, most youth invest the transfer in vocational skills and tools. Second, the economic impacts of the transfer are large: hours of non-household employment double and cash earnings increase by nearly 50 percent relative to the control group. The authors estimate the transfer yields a real annual return on capital of 35 percent on average. Third, the evidence suggests that poor access to credit is a major reason youth cannot start these vocations in the absence of aid. Much of the heterogeneity in impacts is unexplained, however, and is unrelated to conventional economic measures of ability, suggesting we have much to learn about the determinants of entrepreneurship. Finally, these economic gains result in modest improvements in social stability. Measures of social cohesion and community support improve mildly, by roughly 5 to 10 percent, especially among males, most likely because the youth becomes a net giver rather than a net taker in his kin and community network. Most strikingly, we see a 50 percent fall in interpersonal aggression and disputes among males, but a 50 percent increase among females. Neither change seems related to economic performance nor does social cohesion a puzzle to be explored in the next phase of the study. These results suggest that increasing access to credit and capital could stimulate employment growth in rural Africa. In particular, unconditional and unsupervised cash transfers may be a more effective and cost-efficient forming of large-scale aid than commonly believed. A second stage of data collection in 2012 will collect longitudinal economic impacts, additional data on political violence and behavior, and explore alternative theoretical mechanisms.

Accounting --- Bonds --- Bounded Rationality --- Control Groups --- Decision Making --- Developing Countries --- Discount Rate --- Economics --- Educational Attainment --- Employment --- Employment and Unemployment --- Exchange Rates --- Financial Development --- Gender --- Group Dynamics --- Human Capital --- Inflation --- Insurance --- Interpersonal Relationships --- Labor Market --- Labor Policies --- Leadership --- Literacy --- Local Government --- Mental Health --- Microcredit --- Microenterprises --- Microfinance Institutions --- Moneylenders --- Opportunity Cost --- Poverty Reduction --- Productivity --- Public Spending --- Risk Aversion --- Schools --- Social Capital --- Social Protections and Labor --- Terrorism --- Unemployment --- Vocational & Technical Education --- Wages --- Youth