Much of the work of the IBSEN project falls under the umbrella of the so-called “behavioural economics“. This relatively new branch of economics was born in contrast to the more classical theories that understood human behavior from a purely rational perspective, in which human beings tried (perfectly) to optimize their economic benefit. However, numerous experimental studies have shown that this approach is incomplete to say the least, and that a multitude of psychological, cultural or emotional factors — to name but a few — are involved in our decision-making.
A good example of this line of research is the work of psychologist Daniel Kahneman, who in 2002 received the Nobel Prize in Economics “for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty” — much of this work was done together with the deceased economist Amos Tversky. If you are more interested in his work, here is a link to his Prize Lecture. Additionaly, we strongly recommend his wonderful and informative book “Thinking, Fast and Slow“, full of amusing (although scientific) facts about human behaviour. You won’t regret reading it!
As we have seen, the Academia has been contemplating this new kind of economics for some time now. What is less common is to see this kind of approach in action in “real-world” companies and steering committees. But there are exceptions. Cotec’s Innovation Funding Committee, chaired by Caixabank, held a meeting in mid-April at which a behavioural economics experiment was implemented. More than thirty representatives of the Cotec Board of Trustees participated in the experiment.
Through a simulation, they were invited to make decisions related to the impact of automation processes on the labor market and in different regulatory, fiscal and productivity scenarios. This experiment was inspired by a larger one (+1000 individuals) conducted by the director of the Experimental and Behavioural Economics Laboratory (Lineex) of the University of Valencia, and a member of the IBSEN team, Penélope Hernández.
Once the experiment was over, Antonio Cabrales, professor in the Department of Economics at the University College of London (UCL), gave a presentation in which he highlighted the empathizing role of economists in the face of the cliché that considers them little more than computers. “The economics of behavior starts from the fact that we don’t know everything, we have to experiment,” Cabrales said. For more information on this news item, please read the Cotec website review in Spanish.