Toward behavioural innovation economics – Heuristics and biases in choice under novelty

A framework for ‘behavioural innovation economics’ is proposed here as a synthesis of behavioural economics and innovation economics in the specific context of choice under novelty. We seek to apply the heuristics and biases framework of behavioural economics to the study of the innovation process in order to map and analyze systematic choice failures in the innovation process. We elaborate the distinction between choice under uncertainty and choice under novelty, as well as drawing out the ‘efficient innovation hypothesis’ implicit in most behavioural models of innovation. The subject domain of a research program for behavioural innovation economics is then briefly outlined in terms of a catalogue of characteristic ways in which choice under novelty renders innovation processes subject to failure.

The Psychological Dimension of the Lottery Paradox

The lottery paradox involves a set of judgments that are individually easy, when we think intuitively, but ultimately hard to reconcile with each other, when we think reflectively. Empirical work on the natural representation of probability shows that a range of interestingly different intuitive and reflective processes are deployed when we think about possible outcomes in different contexts. Understanding the shifts in our natural ways of thinking can reduce the sense that the lottery paradox reveals something problematic about our concept of knowledge. However, examining these shifts also raises interesting questions about how we ought to be thinking about possible outcomes in the first place