Book Review: Taking Risks: The Management of Uncertainty

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Taxi Drivers and Beauty Contests

The trading floor of the New York Stock Exchange. The British economist John Maynard Keynes likened playing the market to voting for the prettiest face in a beauty contest; hence the second part of this article’s title

Evaluation - the educational context

Evaluation comes in many shapes and sizes. It can be as simple and as grounded in day to day work as a clinical teacher refl ecting on a lost teaching opportunity and wondering how to do it better next time or as complex, top down and politically charged as a major government led evaluation of use of teaching funds with the subtext of re-allocating them. Despite these multiple spectra of scale, perceived ownership, fi nancial and political implications, the underlying principles of evaluation are remarkably consistent. To evaluate well, it needs to be clear who is evaluating what and why. From this will come notions of how it needs to be done to ensure the evaluation is meaningful and useful. This paper seeks to illustrate what evaluation is, why it matters, where to start if you want to do it and how to deal with evaluation that is external and imposed

The potential of neuroeconomics

The goal of neuroeconomics is a mathematical theory of how the brain implements decisions, that is tied to behaviour. This theory is likely to show some decisions for which rational-choice theory is a good approximation (particularly for evolutionarily sculpted or highly learned choices), to provide a deeper level of distinction among competing behavioural alternatives, and to provide empirical inspiration for economics to incorporate more nuanced ideas about endogeneity of preferences, individual difference, emotions, endogeneous regulation of states, and so forth. I also address some concerns about rhetoric and practical epistemology. Neuroscience articles are necessarily speculative and the science has proceeded rapidly because of that rhetorical convention. Single-study papers are encouraged and are necessarily limited in what can be inferred, so the sturdiest cumulation of results, and the best guide forward, comes in review journals which compile results and suggest themes. The potential of neuroeconomics is in combining the clearest experimental paradigms and statistical methods in economics, with the unprecedented capacity to measure a range of neural and cognitive activity that economists like Edgeworth, Fisher and Ramsey daydreamed about but did not have

Taking Risks: The Management of Uncertainty

Book Review: Taking Risks: The Management of Uncertainty. Kenneth R. MacCrimmon and Donald A. Wehrung, with William T. Stanbury. New York: Free Press, 1986. 380 pp

Progress in Behavioral Game Theory

Is game theory meant to describe actual choices by people and institutions or not? It is remarkable how much game theory has been done while largely ignoring this question. The seminal book by von Neumann and Morgenstern, The Theory of Games and Economic Behavior, was clearly about how rational players would play against others they knew were rational. In more recent work, game theorists are not always explicit about what they aim to describe or advise. At one extreme, highly mathematical analyses have proposed rationality requirements that people and firms are probably not smart enough to satisfy in everyday decisions. At the other extreme, adaptive and evolutionary approaches use very simple models-mostly developed to describe nonhuman animals-in which players may not realize they are playing a game at all. When game theory does aim to describe behavior, it often proceeds with a disturbingly low ratio of careful observation to theorizing

Does the Basketball Market Believe in the 'Hot Hand,'?

Most people who watch basketball believe in the "hot hand": Players who make a shot are more likely to hit the next shot than players who miss a shot (i.e., shots are positively autocorrelated rather than independent). Almost everyone in the sample studied by Thomas Gilovich, Robert Vallone, and Amos Tversky (1985), including several successful professionals, believed in the hot hand

Comment on Noll and Krier, "Some Implications of Cognitive Psychology for Risk Regulation"

We have known about systematic violations of the expected utility (EU) theory of choice for almost forty years, since Maurice Allais got Jimmie Savage to violate his own "sure-thing principle" (or "independence axiom") while making hypothetical choices over lunch in Paris. Savage was victimized by some combination of wine and intuition. The wine's effect is gone, but the intuition is not: devotion to EU sometimes produces unappealing choices

Information, fairness, and efficiency in bargaining

Economic theory assumes people strive for efficient agreements that benefit all consenting parties. The frequency of mutually destructive conflicts such as strikes, litigation, and military conflict, therefore, poses an important challenge to the field