Shabnam Mousavi

• Doctor of Philosophy
• Researcher at Max Planck Institute for Human Development

Risk managers operate in the space of risk and returns, constrained by financial market regulations. How can risk managers assess risk associated with changing regulatory structures, given that theories about the relationship between risk and return are much more developed than theories about the determinants of regulatory constraints? To help risk...

Nearly a century ago, Frank Knight famously distinguished between risk and uncertainty with respect to the nature of decisions made in a business enterprise. He associated generating economic profit with making entrepreneurial decisions in the face of fundamental uncertainties. This uncertainty is complex because it cannot be reliably hedged unless...

Social sciences start by looking at the social-psychological attributes of humans to model and explain their observed behavior. However, we suggest starting the study of observed human behavior with the universal laws of physics, e.g., the principle of minimum action. In our proposed three-tier framework, behavior is a manifestation of action drive...

Exploratory ventures outside the established disciplinary boundaries can yield added insights and explanatory power. Imposing cognitive limitations on human logical reasoning ability (bounded rationality) is a well-known case in point. Extending cognition to parts of body outside the brain, and to environment outside the body is another. In contras...

Hi all, I am delighted to announce my paper with Shabnam Mousavi of the Max Planc Institute in Berlin on British Pension policy has now been published (in Italian) in a book edited by Professors Ricardo Viale and Laura Macchi. Many thanks to Shabnam and the Italian BIT team for their work on this. William.

A behavioural critique of UK pensions policy

Preparing people for dealing with hazards, diseases and disasters requires teaching them statistics, and ideally doing so by means of good representation formats in a dynamic fashion. Translating these dynamics to simple communication is what governments need from scientists.

We propose giving physical laws priority in explaining actions observed not only in material, but also in animate worlds. Matter and energy included in biological domains do not lose their physicality by virtue of the added DNA, brain, self-consciousness, higher faculties, and social context in which individuals grow up and live. The benefit of sta...

A Fast and Frugal Finance: Bridging Contemporary Behavioural Finance and Ecological Rationality adds psychological reality to classical financial reasoning. It shows how financial professionals can reach better and quicker decisions using the ‘fast and frugal’ framework for decision-making, adding dramatically to time and outcome efficiency, while...

Background: Studies related to decision-making and choice preference in substance use behavior have less commonly focused on decision-making processes per se. Those processes include decision-making time, task-based complexity, and decision-making strategies. Objectives: The objectives of this study was the production of a culturally modified vers...

Objective: A prominent challenge in modeling choice is specification of the underlying cognitive processes. Many cognitive-based models of decision-making draw substantially on algorithmic models of artificial intelligence and thus rely on associated metaphors of this field. In contrast, the current study avoids metaphors and aims at a first-hand i...

Herbert Simon viewed innovation as a particular type of problem-solving behavior that entails refocus of attention and search for alternatives outside the existing domain of standard operations. This exploration outside of standard routines involves heuristic-based discovery and action, such as satisficing search for information and options. In our...

Social sciences start by looking at the social-psychological attributes of humans to model and explain their observed behavior. However, we suggest starting the study of observed human behavior with the universal laws of physics, e.g., the principle of minimum action. In our proposed three-tier framework, behavior is a manifestation of action drive...

Heuristics are commonly viewed in behavioral economics as inferior strategies resulting from agents’ cognitive limitations. Uncertainty is generally reduced to a form of risk, quantifiable in some probabilistic format. We challenge both conceptualizations and connect heuristics and uncertainty in a functional way: When uncertainty does not lend its...

Design of governmental interventions in the recent years has been increasingly influenced by insights gained from behavioral sciences. We provide an overview of the recent report on such policy interventions designed by the Social and Behavioral Sciences Team (SBST) of the White House and executed in collaboration with other government agencies in...

Behavioral economists use psychological findings to evaluate and revise economic decision theory, to build models that correspond directly to observations of behavior, and to develop descriptive accounts for deviations from principles of neoclassical rationality. One of the main sources of psychological insight is the heuristics and biases research...

There is no doubt that behavioral economics is becoming a dominant lens through which we think about economics. Behavioral economics is not a single school of thought but representative of a range of approaches, and uniquely, this volume presents an overview of them. The wide spectrum of international contributors each provides an exploration of a...

Social reality of a group emerges from interpersonal perceptions and beliefs put to action under a host of environmental conditions. By extending the study of fast-and-frugal heuristics, we view social perceptions as judgment tools and assert that perceptions are ecologically rational to the degree that they adapt to the social reality. We maintain...

Commentary on Barbey & Sloman: "Base-rate respect" The conclusions of Barbey & Sloman (B&S) crucially depend on evidence for different representations of statistical information. Unfortunately, a muddled distinction made among these representations calls into question the authors’ conclusions. We clarify some notions of statistical representations...

Uncertainty, pessimism or greater risk aversion on the part of high risk consumers benefit the low risk consumers who are not fully insured in the separating equilibrium of the Rothschild-Stiglitz insurance market model.

Formulating the problem of compound lotteries, which marks the origination of expected utility theory (EUT), have generated a stream of formal work in the field of economics decision making. Where subjective EUT determines the rational choice, exploring the process of choice and observed use of heuristics fall into the domain of bounded rationality...

There is a strong line of work in the finance literature that promotes passive management of funds, which mainly concerns with mutual funds. The comparative valuation of different styles of management boils down to the methods used for measuring the effectiveness of the executed styles. Here, we entertain a recent result of studying costs of active...