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Saturday, 21 March 2009

Nobel psihoekonomika

In 2002, the Nobel committee awarded the first prize for economics adherents of two opposing points of view. Vernon Smith experimentally proved that in a situation of massive purchases and sales team of people behave rationally limit. Daniel Kahneman et al confirmed the opposite point: the person is of conduct other than that attributed to it by the economic textbooks.

Experimental economics
The classical economic theory, taking its roots from Adam Smith, assumes that all people are selfish and their behavior is determined exclusively by personal gain. At the time, A. Smith, market players, whose behavior is defined by the cold rational logic, «homo economicus». The best minds of mankind good hundred years, under the influence of classical economic school and its concept of homo economicus.

Refute, like just check the rationality of economic agents could not be identified. And today's economy in many areas is a bezeksperimentalnuyu science, where researchers can not test the theoretical assumptions in the experiments. According to an authoritative professor at Harvard University Gregori Mankiw, whose textbook on macroeconomics translated into Russian, the absence of controlled experiment is the fundamental problem of all economic science. In a sense, the impossibility of conducting a controlled experiment brings together the economies of such sciences as astronomy and meteorology. Specialists have to rely on the so-called field data, the results of direct observation of the real world without the active intervention by the researcher. This depressing situation lasted quite a long time, while economists were not involved laboratory experiments. Under the influence of laboratory experimental economics has undergone a significant process in the last two decades of XX century. Controlled laboratory experiments have become an integral component of any full-scale economic research. Thanks to them, many of the theoretical postulates of the classical school have been refined or refuted. The process of change mainly affected two major areas: cognitive (cognitive) psychology, studying human thinking and decision making, and experimental economics, whose task is to verify theoretical models in research laboratories. The recognized leaders in both directions are Vernon Smith and Daniel Kahneman, by October 9, 2002 was awarded the Nobel Prize in economics.


Vernon Smith (Vernon L. Smith)
Prizes awarded for the «use of laboratory experiments as a tool in empirical economic analysis, especially for the study of alternative market mechanisms».
Date of birth: 1927
Citizenship: USA
Current work: Interdisciplinary Center for Economic Science George Mason University (Interdisciplinary Center for Economic Science of George Mason University, USA)
• California Institute of Technology (1949),
• State University of Kansas (1951),
• Harvard University (1955).

Recent publications:
• Papers in Experimental Economics, December 1991;
• Bargaining and Market Behavior: Essays in Experimental Economics, June 2000;
• The Handbook of Experimental Economics by John H. Kagel (Editor), Alvin E. Roth (Editor);
• Paving Wall Street: Experimental Economics and the Quest for the Perfect Market by Ross M. Miller, Vernon L. Smith (Foreword), January 2002;
• Essays on Genetic Evolution and Economics by Terence C. Burnham, Edward O. Wilson (Editor), Adam M. Brandenburger (Editor), Vernon L. Smith.
Personal pages on the Internet:

Seller and buyer in the «limit»
Early experiments carried out by economic science enthusiasts, are fully devoted to the audit of the basic theory. The first test was subjected to pricing in the classical models. Classical School of Economics argued that under conditions of perfect competition, market prices balance supply and demand at a level that the price offered «limit» buyer (marginal buyer), compared with the price «limit» seller (marginal seller). The first checks for the neoclassical theory of perfect competition has taken a well-known American economist Edward Chemberlin [1]. It was the beginning of the 1950's laboratory experiments have taken a great interest many future Nobel Prize winners for economics, for example, Reinhard Zelten, and John Nash. At the forefront of the experimenters was Vernon Smith. Encouraged by the ideas Chemberlina, Smith's teacher at Harvard, he organized a number of laboratory experiments with students. Smith set out to determine whether the hypothesis of perfect competition in practice. They used stochastic model, where buyers and sellers act with different ranges acceptable price for the goods. Ranges cover the spectrum from least to most acceptable commodity prices. Given the price distribution, Smith was able to determine the theoretical equilibrium price of the goods, ie price acceptable to the majority of buyers and sellers. The obtained results of laboratory experiments, they were first published in 1962 in the «Journal of Political Economy» [2]. To his considerable surprise, the prices obtained during the simulation, consistent with the prices, the theory predicted, although the actual experiment, participants did not have full information as required by neoclassical theory. In order to find out whether this is mere coincidence, Smith and several other researchers have repeatedly recheck the results of laboratory experiments. In 1978, during a better experiment, Vernon Smith, in collaboration with Charles Plottom obtained similar results, but his work, he summarized the caveat that market institutions «relevant» for pricing [3].

Types of auctions
Much time Vernon Smith gave the theory of auctions, which emerged at the intersection of microeconomics and game theory in the early 1960-ies. Virtually all of the theory of auctions has been established by William Vikram, a Nobel laureate in economics of 1996, but his work lay solely in the theoretical field. Really nobody knew what the results provide any types of auctions.

Meanwhile auction mechanisms play a key role in the markets of raw materials and financial instruments, where the specifics of trading systems directly affects the outcome of the tenders. In the 1990's. challenge the adequacy of the auctions came to the fore - in developing countries in connection with the transfer of state property into private hands, while in developed countries with regard to deregulation and privatization of television and radio. In the theory of auctions is allocated only four basic types of auction for the sale of one product or service.

1. Normal, or English auction (English auction): in an open disclosure of the price bid ends when none of the buyers do not want to increase the price of the goods. English auction can be seen in the sales of antique collections of trading houses such as Sotheby's.
2. Dutch auction (Dutch uction): if there is transparency in prices start from the maximum bid price bids, and ended with the issue of a minimum acceptable price. Dutch auction Orgbankom actively used until 1998, Bank deposits exhibited at an auction, where potential investors are gradually reduce interest rates until it was the only investor with the lowest rate offered.
3. Closed the first price auction (the first-price auction, with sealed bids): No public auction, each buyer only once anonymously offers a price, eventually wins the party with a maximum application. According to the scheme to sell the domestic industry in the collateral auctions in 1996-97 years.
4. Closed the second price auction (the sealed-bid second-price auction): an application filed under seal actors, and the one who proposed the highest bidder, must pay an amount equal to the second highest offer. Currently, such a specific type of auction is not widely used.

A Dutch-something cheaper
Enter a controlled experiment, Smith with his colleagues in the scientific arena began to find out the same whether the actual results of auctions with the theoretical predictions of the outcome of the tenders. He found that, like the theories, identical results show English auction and second price auction is closed. At the same time, Smith denied the suggestion that the outcome of bidding for the Dutch auction and the auction closes first price match. Ranzhiruya auctions in terms of maximizing the final price tender, Smith found that most prices are fixed in the English auction and second price auction closed. Second place is the first closed auction prices, and the last - Dutch auction.


Daniel Kahneman (Daniel Kahneman)
Prizes awarded for the «work of combining psychological studies and economic science, especially for the study of human thinking and decision-making under uncertainty».
Date of birth: 1934
Nationality: dual, the U.S. and Israel
Current work: Faculty of Psychology, Princeton University (Princeton University, USA)
• Hebrew University of Jerusalem (1954),
• University of California at Berkeley (1961).

Recent publications:
• Choices, Values, and Frames by Daniel Kahneman (Editor), Amos Tversky (Editor);
• Heuristics and Biases: The Psychology of Intuitive Judgment by Thomas Gilovich (Editor), et al, July 2002;
• Well-Being: The Foundations of Hedonic Psychology by Daniel Kahneman (Editor) et al, July 1998;
• The Handbook of Experimental Economics by John H. Kagel (Editor), Alvin E. Roth (Editor);
• Judgment under Uncertainty: Heuristics and Biases by Daniel Kahneman (Editor) et al, April 1982.
Personal Page on the Internet: ~ psych / PsychSite / fac_kahneman.html

Smith Plottom conjunction with one of the first began to use «Progonnyj tunnel», or method of wind tunnel (wind tunnel), in laboratory experiments. Using the verified mechanisms lifting of state regulation, privatization and tendering for the procurement of goods for the state. At present, these mechanisms are so complex that modern theory is unable to give an accurate predictive assessment of the results. For this reason, the only possible solution to the problem of becoming a pilot method. Smith used the «Progonnyj tunnel» for constructing an optimal schedule of take-offs and landings at airports. Moreover, its recommendations on the results of the experiments were taken into account in the deregulation of electricity markets in Australia and New Zealand. It is regrettable that privatizatory of the Russian Federation State Committee on the eve of large-scale sales of state property has not been familiar with the writings of Vernon Smith.

Happiness is not about money, but their numbers
Modern economic theory at the center puts material wealth. The well-being, life satisfaction or happiness in the minds of economists are inextricably linked to material prosperity. The well-being or utility (utility), the individual is determined to consume goods and their quantity. To maximize the utility of an individual chooses a particular course of action in certain circumstances, which may be uncertain (uncertain).

Generally, the preferred course of action the individual is fully within the rational-logical patterns of human behavior. All these assumptions are the basis of expected utility theory of von Neumann-Morgenshteyna (Neumann-Morgenstern expectedutility theory) [4]. According to the individual making the greatest values of utility function, seeking to adequately assess the probability (expectation) of events with which it will face. As a psychology dominated by a view of human behavior. In the cognitive psychology of human beings as a system that deliberately encodes and interprets information available. At the same time, the decision-making process directly influenced by subconscious factors. Among the factors that determine the interactive process of human thinking, the number of perception, mental models of the interpretation of life situations, emotions, the nature of relationships between actors and the memories of the earlier decisions and their consequences.

Based on the extensive theoretical work and experiments on human behavior, Daniel Kahneman and several other psychologists have criticized the assumption of individual rationality that exists in economic science. According to critics, in fact, the individual ignores the evaluation of uncertainty according to the theory of probability. Moreover, it is far from maximizing the utility, which insists on the theory of von Neumann-Morgenshteyna.

A number of studies, Daniel Kahneman, in cooperation with other Israeli psychologists, Amos Tver, has shown that people are not able to fully analyze complex situations in which future events are hidden by fog of uncertainty. In the face of uncertainty, the individual relies on a short heuristic analysis (heuristics), or on a rule of thumb (rule-of-thumb).

The process of human thinking for example, studied a group of people who had to assess the probability of random events. Most participants in the experiment gives the same probability estimates both small and large events, without taking into account that with the increasing significance of the events likely to be reduced. In other words, people follow the law of small numbers (law of small numbers), completely ignoring the law of large numbers (law of large numbers), on which the theory of probability.

According to the law of large numbers of individual events are vulnerable to random and non-factor than the mass of phenomena in general. When a large number of observation random fluctuations are mutually canceled, and it becomes visible to the general pattern of phenomena.

However, in two experiments, psychologists have demonstrated, individuals sometimes paradoxical behavior. They believed that the probability of birth of a boy in a large urban and rural hospitals are equal and amount to 0.6.

Similarly, investors believe that the investment fund manager more competent than the market as a whole, if the fund shows its best financial results in comparison with the stock index over the past two years. Although the validity of statistical sampling (number of observations) is too small to make such conclusion.

Subjective perception of individuals of events in the real world allows you to explain the various irrational phenomena in financial markets. In particular, the assessment of market shares from the perspective of the law of small numbers of permits to explain the appearance of "bubbles". The use of psychological analysis of the financial markets eventually led to a theory of behavioral finance (behavioral finance) [5]. The most typical case of inadequate investor behavior can be illustrated by the following example. If the action is, the investor bought, rose in price from $ 20 to $ 50, then, fixing the profit he will sell it without thinking. However, if the price of first foam from $ 20 to $ 80, then dropped to $ 50, the investor with great displeasure give an order to sell.

Unexpected perspectives
Not satisfied with the standard theory of von Neumann-Morgenshteyna, Kahneman and Tver offered his own theory in his article "The theory of perspective: an analysis of decisions under conditions of risk" in one of the rooms authoritative magazine "Econometrics" [6]. According to the theory perspectives (prospect theory), individuals make decisions in two stages. First, they limit the problem to be solved by some framework to study it in isolation.

In other words, the issue is edited by comparison with its original, resulting in a complex problem is transformed into a simple perspective. Then, individuals maximize the value of the function of perspective (prospect value function). It is composed of different perspectives are assigned probabilistic weights, reflecting the psychological norms and expectations of the individual. In general, there are four key differences from the traditional theory of the prospects for utility theory.

"For the individual is important, not so much the absolute value of his wealth (or value of any other economic variable), but its relative change.
"The changes are evaluated in terms of losses and gains with respect to some reference point (reference point), and as a rule, the loss of re, and the acquisition of undervalued. As a result of this rejection of losses (loss aversion) is not so much an individual actually maximizes utility, but minimizes antipoleznost ( disutility).
"Deviations from the reference point perceived by the individual with lower sensitivity (diminishing sensitivity). A smaller variance is seen much more painful than a larger deviation.
"Probability weights assigned to different perspectives or upcoming deviations, are assigned to non-linear law. Most of the probabilities underestimated, but very low probabilities, on the contrary, overestimated.

In 1992, Tver and A. D. Kahneman expanded the original theory of perspective, bringing to light an aggregate theory perspectives (cumulative prospect theory) [7]. An updated version of the theory takes into account a number of shortcomings of early authors. First of all, it is designed to analyze a large number of prospects being faced by the individual, resulting in the offspring of two close to the standard theory of probability. Testing the theory perspectives in practice shows that individuals make mistakes in dealing with the problem of optimal allocation of resources, such as the formation of the equity portfolio. Rather than risk diversification, they "put all your eggs in one basket", ie concentrated risks.

The theory has been able to explain various behavioral anomalies: why do investors ignore the recommendations of the Portfolio Theory Markovitsa; why shoppers doing the long road to take advantage of small-scale discount stores, why the staff member in no hurry to reduce excessive consumption, etc. For answers to these and many other "why "Kahneman and was awarded the Nobel Prize.

Awarded the prize Vernon Smith and Daniel Kanemanu, adherents of the two opposing points of view, the Nobel Committee allowed the long-running dispute among scientists, as early as 1991, Smith blamed Kahneman and his colleagues in the one-sided and ignoring other concepts. Now, the collective behavior of individuals susceptible to the irrational rational explanation.

Sergey Moiseev

1. Chamberlin E. H. An experimental imperfect market / / Journal of Political Economy, 1948, ? 56, pp. 95-108.
2. Smith V. L. An experimental study of competitive market behavior / / Journal of Political Economy, 1962, ? 70, pp. 111-137.
3. Plott C. and Smith V. L. An experimental examination of two exchange institutions / / Review of Economic Studies, 1978, ? 45, pp. 133-153.
4. von Neumann J. and Morgenstern O. Theory of Games and Economic Behavior. - Princeton: Princeton University Press, 1944.
5. Shleifer A. Inefficient Markets - An Introduction to Behavioral Finance. Clarendon Lectures in Economics. - Oxford: Oxford University Press, 2000.
6. Kahneman D. and Tversky A. Prospect theory: An analysis of decision under risk / / Econometrica, 1979, ? 47, pp. 263-291.
7. Tversky A. and Kahneman D. Advances in prospect theory: Cumulative representation under uncertainty / / Journal of Risk and Uncertainty, 1992, ? 5, pp. 297-323.

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