Nonlinear Dynamics, Psychology, and Life Sciences, Vol. 19, Iss. 2, April, 2015, pp. 201-226 @2015 Society for Chaos Theory in Psychology & Life Sciences Complexity and Behavioral Economics Abstract: This paper will consider the relationship between
complexity economics and behavioral economics.
A crucial key to this is to understand that Herbert Simon was
both the founder of explicitly modern behavioral economics as well as one of the
early developers of complexity theory. Bounded rationality was
essentially derived from Simon”s view of the impossibility of full rationality
on the part of economic agents. Modern complexity theory through such approaches
as agent-based modeling offers an approach to understanding behavioral economics
by allowing for specific behavioral responses to be assigned to agents who interact
within this context, even without full rationality. Other parts of
modern complexity theory are considered in terms of their relationships with
behavioral economics. Fundamentally, complexity provides an ultimate
foundation for bounded rationality and hence the need to use behavioral economics
in a broader array of contexts than most economists have thought appropriate. Keywords: complexity, behavioral economics, bounded rationality |