Behavioral Game Theory

Last week I had the pleasure of attending the Rebuilding Macroeconomics Conference with a theme of Bringing Psychology and Social Sciences into Macroeconomics. The basic question of the conference seemed to be ‘how can we avoid another financial crisis’ or, from a different perspective, ‘how can we avoid not predicting the next financial crisis’. There was an impressive roll call of speakers from economics, psychology, anthropology, neuroscience, sociology, mathematics and so on with their own take on this issue. Here are a few random thoughts on the conference (with the acknowledgement that I didn’t attend every session). I was most at home with the talks from a behavioural economics perspective. But it was still great to get extra insight on how this work can be applied to macroeconomics. For instance, Rosemarie Nagel and Cars Hommes gave an interesting perspective on how the beauty contest has real world relevance. Most economists are familiar with the basic idea – people ind...