Knowledge, Beliefs and Economics

Knowledge, Beliefs and Economics

Edited by Richard Arena and Agnès Festré

This book surveys how economists engage with knowledge and beliefs in various fields of economic analysis, such as general equilibrium theory, decision theory, game theory, experimental economics, evolutionary theory of the firm, financial markets and the history of economic thought.

Chapter 10: A Cognitive Approach to Individual Learning: Some Experimental Results

Marco Novarese and Salvatore Rizzello

Subjects: economics and finance, economic psychology


* Marco Novarese and Salvatore Rizzello 10.1 INTRODUCTION The economic analysis of social phenomena does not deal with omniscient and perfectly rational agents. Understanding the role of individual learning in decision making is, therefore, considered increasingly important in explaining the ways in which people make choices. Economists have tended to use analytical concepts like learning, which traditionally have pertained to other disciplines such as psychology, in a very superficial way. Though this still applies to most traditional economists,1 it should be noted that the multifarious panorama of contemporary economics currently features a number of exceptions to this rule. A substantial group of economists has recently put forward an interdisciplinary approach to the study of human behaviour that stands at the crossroads between the heterodox tradition in economics and the cognitive sciences, giving birth to a new branch of economics now known as cognitive economics.2 Although there is no doubt that the analytical novelties proposed by this new approach are relevant to, and concern, all aspects of economic analysis and method, we will be focusing our attention exclusively on the role of human learning in problem solving, the core theme of this chapter. The literature makes a distinction between two different kinds of learning: learning from direct experience (learning by doing, learning by using) and vicarious learning (learning through the observation of others).3 In what follows, we will be dealing exclusively with the former category. In particular, we will be concentrating on experimental economics, an area of research located...

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