Classical Financial Theory : Cognitive Psychology And Economics

“The Human Brain”, by myPerspectives, is an informative article that claims that the brain is a complex organ that is truly impressive. The brain is a key part of the central nervous system, that controls the entire body’s activities, to simple things such as breathing. These actions are fired through neurons, that quickly travel through the spinal cord. Surprisingly, the brain transmits these messages at an unimaginable rate, at 150 miles per hour, through 85 billion cells, called neurons. These neurons can form up to 10,000 synapses, or connections to each other. By itself, the brain can create billions of synapses, which change the structure of the brain every time new information is learned. However, there is still much that scientists

Kahneman’s article is an analysis of intuitive thinking and how it guides our decision-making. Although primarily aimed at the field of psychology, it is an interdisciplinary article with applications in economic theorising. Kahneman attempts to differentiate between two systems of thought, one of intuition (system 1) and one of reasoning (system 2), and argues that many judgements and choices are made intuitively, rather than with reason (a slower and more deliberate process). Intuitive decision making, which encompasses heuristics, although generally more efficient and rapid, makes the agent potentially subject to errors due to framing effects or violations of dominance. The analysis of the studies and theoretical situations also provides criticism of the commonly held model of the rational agent within economics. The article also further conceptualises Kahneman’s theory, the Prospect Theory (Kahneman & Tversky, 1979), which has descriptive applications of people’s choice in decision-making situations involving risk and known probability of outcomes. These situations are typically unexplained by the more normative rational agent model.

It is obvious that with the comparison of the Space Race, the United States intends to be the first to be able to map the brain. Just like the Space Race, the United States does not quite have all the technologies to fully map the brain, and it enlists the help of the public and will spend millions of dollars to develop and create the technology needed. Just like the Space Race, the United States plans to discover new and useful information about the brain, and as time progresses they will have an abundance of information to map the human

The human brain is an amazing device. It controls everything we do. It controls our bodies, how we communicate, how we function. Our brains our

Behavioural economics is the study of the effects that psychology has on the decision making of the economy. This tends to be the way that people think and feel when they are spending money on a certain good or service. The great economist Adam Smith was the first follower of this idea through his book “The theory of moral sentiments” which dates back to 1759. However, it took over 100 years to get a more clarified meaning of how big of a role the psychology of a buyer plays in economics. In behavioural economics there are seven basic principles which all contribute to the decision making process. Behavioural economics can explain how people will react to different situations such as times when there are no economic problems and times when

There is still much controversy in this new field where one side states that neuroplasticity does not exist and is just a term for nothing , and the other side believes that neuroplasticity is the true answer to all neural problems in the world and should be implemented everywhere . To delve into this topic, I am going to ask what the ethical and futuristic implications are of establishing a strong foundation of neuroplasticity in modern society.

“The neuroscience area - which is absolutely in its infancy - is much more important than genetics,” by Leon Kass. Something about the way the brain functions has intrigued me for so long. The simple questions of how we do things, why we do the things we do, why we feel the way we feel, where does this all come from have been the questions that sparked my interest in the human brain. I have chosen Neuroscience as my major and I aspire to become a neurologist.

Then human nervous system is the most complex object know to science, as it includes the intricate CNS and a brain with 10 billion neurons and many times more interneural connections (Anissimov 2007). For some people, this brain and the increase in intelligence it signifies is what

Luckily thanks to advances in technology and imaging understanding the anatomy of the brain have been made possible. Not only are they able to understand the significance of the structure of the brain but this research allows neuroscientists to detect flaws in its functioning. They are now

From ancient Egypt, to Greece, to Rome, and finally today, mankind’s knowledge of the power of the human brain has dramatically increased. Through centuries of research and examination, the brain’s role in human life has shifted from being somewhat of an accessory organ, similar to the gallbladder or appendix, to serving as a vital component to human life, As a result of these studies, society has gained answers to some of life’s most difficult questions and have learned the processes behind the human memory and movement. Although answers and conclusions have been made, more questions lie ahead for the field of neuroscience, questions more crucial and impactful for today's society than ever before. With the popularity of neuroscience growing

This, I led me too a love of psychology. How wonderful was it that there was a whole science devoted just to that one mystical organ? Studying the brain, we can unlock the doors to human

The human brain is a mystery that has been studied for centuries in attempt to understand how it functions. Scientists first thought that the brain was a structure that functioned a whole. It was in the early 1600’s where the first ideas of localisation of function in the brain started. At this time Rene Descartes discovered a tiny structure called the pineal

This distinctive book called, “Thinking, Fast and Slow” by Daniel Kahneman, is one of very few exquisite readings I’ve completed so far. Daniel Kahneman is a psychologist in Princeton University, and due to his research, he won a Nobel Prize in 2002 in economics. In the beginning of his book, he speaks of our cognitive System 1 and System 2 ways of thinking. System 1 generates feelings, impressions, and memory. It is very instinctive, automatic, and is considered quick thinking. System 2 on the other hand, is alert during complex problem solving, while dealing with facts and knowledge, and is attentive while working with difficult calculations. For example, a problem such as 24 x 13, this takes more time and knowledge to figure out (System 2), rather then recognizing an emotion from face expressions (System 1). When System 1 is strained, your System 2 steps in to help you process through that specific instant. Now aside from the psychological portion of this book, Mr. Kahneman divulges about a consolidated economic analysis with elemental intuitions from the psychological perspective; such as, luck and skill, overconfidence, risks in the stock market, factors of success and the decision making process. This book is overall concluded with the understanding of behavioral economics, which is the social and cognitive components on economic decisions that are defined by individuals and have consequences that reflect from making those decisions and taking those risks.

The efficient market, as one of the pillars of neoclassical finance, asserts that financial markets are efficient on information. The efficient market hypothesis suggests that there is no trading system based on currently available information that could be expected to generate excess risk-adjusted returns consistently as this information is already reflected in current prices. However, EMH has been the most controversial subject of research in the fields of financial economics during the last 40 years. “Behavioural finance, however, is now seriously challenging this premise by arguing that people are clearly not rational” (Ross, (2002)). Behavioral finance uses facts from psychology and other human sciences in order to

My independent research in the field started with my curious interest in the processes of how decisions made by individuals and governments, what are the main factors encouraged them to choose particular decision over other options and the outcomes of those decisions. Then, I started to read theories of great Economists, such as, Keynes, Freidman , Devenport, Kinnerly and Mason who wrote on decision-making and the ability of individual to interpret the information. Additionally, there were theories by De Bondt , Clark , Tversky and Kehnman who argued that human psychology is interconnected with economics which cannot be ignored. Learning those theories and comparing them with the real life happenings, my enthusiasm to get deeper insights of economics increased. Encouraged by this, I have compiled