behavioral economics

Mores ex parte visibilis – Behaviour as the Visible Hand of Economics

“Felix, qui potuit rerum cognoscere causas
Fortunate is he, who is able to know the causes of thing  – Virgil

The reason time and time again most economic models seem to ultimately in post-mortem reveal themselves to be either “False Positives”or “False Negatives”. 

Ceteris Paribus, the two words are the causality of these models failing to perform and result in shock, cycle after cycle, decade after decade and century after century.

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The results are stunning. People loose their livelihoods and often lives are lost like we see in the SARS CoV2 and the outbreak of disease. Like when the WHO did not declare the pandemic. Everyone is searching for a playbook to deal with a wicked problem with the approach of a tame problem and it is not surprising (or it seems surprising to the vast majority of seemingly rational minds) that the outcomes do not add up.

This we call “Mores ex parte visibilis” or the “visible hand of  behaviour” in economics.

“behaviour of both Person & Machine (ex: software algorithms) are visible in economic behaviour”.

The underlying Principles:

1.Human Behaviour (and now machine) are the basis of any exchange of goods and services

2.The Perceived Value is the Price of the Exchange is determined by the visible hand of behaviour

3.Self-Interest, Lack of Truthful Sharing and poor Incentive Compatibility, drive the mechanisms of exchange

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This is a part of our work on computational behavioural finance and economics in creating what we believe is the rational pricing models of goods and services and the mechanisms to qualify and quantify the exchange.

The slides below in our model are clear examples of “the visible hand of behaviour (of both person + machine)” and the opportunity to discovery value from this asymmetry. The applications however extend into critical applications of lives and livelihoods which we believe are the basis for a motto; | Profit with Purpose, Capital with Conscience |.

 

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We conclude that while this is just a few simple paragraphs and only a small glimpse of the ongoing work, it is the basis of the heuristic algorithms and their vast applications of the basis in computational mechanism design.

 

 

 

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