Noah Smith presents Ryan Oprea

 [[{“value”:”But a new paper by Ryan Oprea challenges the idea that we even need something like Prospect Theory at all. Oprea hypothesizes that a lot of the seemingly “irrational” experimental behaviors are really just due to the excessive complexity of the task they’re being asked to do. He does an experiment where he takes away all the
The post Noah Smith presents Ryan Oprea appeared first on Marginal REVOLUTION.”}]] 

But a new paper by Ryan Oprea challenges the idea that we even need something like Prospect Theory at all. Oprea hypothesizes that a lot of the seemingly “irrational” experimental behaviors are really just due to the excessive complexity of the task they’re being asked to do. He does an experiment where he takes away all the risk in the decision — there are no probabilities and no losses involved. One option just gives you more money than the other. And yet experimental subjects still make mistakes that look a lot like the “irrational” choices they make in Kahneman-type experiments. Eric Crampton has a good blog post summarizing the details of Oprea’s experiment.

So it’s possible that a lot of what looks like “irrationality” is just human beings being unable to deal with complex calculations. That doesn’t kill the idea of behavioral economics — it just means we need different theories about why people don’t act like homo economicus.

Here is the link to Noah.

The post Noah Smith presents Ryan Oprea appeared first on Marginal REVOLUTION.

 Economics, Philosophy