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Behavioural economics and mathematics: chronicles of an alliance

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Lettera Matematica

Abstract

The recent Nobel Prize for economic sciences assigned to Richard H. Thaler highlights the growing importance of behavioural economics in explaining the actions of economic agents. This interdisciplinary branch of economics adopts methods and tools from other social sciences such a psychology and sociology. Nevertheless, the success of behavioural economics does not imply that economics should dismiss the mathematical formalisation of their models. The failure of the neoclassical approach is a consequences of the unrealistic assumptions concerning the decision making of economic agents, and not due to their mathematical formalisation. In this article we explore how different mathematical tools are perfectly compatible with the assumptions coming from behavioural economics and how they can be quite useful to explain stylised facts and make good forecasts.

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Notes

  1. See, for instance, in the vast production by Gigerenzer [2].

  2. The “equity premium puzzle” consists, in simple terms, in the low percentage of stocks in long-term investment portfolios.

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Authors and Affiliations

  1. Department of of Mathematical Sciences, Mathematical Finance and Econometrics, Catholic University of Milano, Via Necchi 9, 20123, Milan, Italy

    Fabio Tramontana

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  1. Fabio Tramontana
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Correspondence to Fabio Tramontana.

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Tramontana, F. Behavioural economics and mathematics: chronicles of an alliance. Lett Mat Int 6, 13–17 (2018). https://doi.org/10.1007/s40329-018-0210-z

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  • DOI: https://doi.org/10.1007/s40329-018-0210-z

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