Measures of Rationality and Welfare for Behavioral Decision-Makers

Jose Apesteguia (ICREA, UPF and Barcelona GSE)

    The standard economics model of individual behavior is based on the maximization principle, in which the alternative chosen by the individual is the one that maximizes a well-behaved preference relation over the menu of available alternatives. This model (1) provides a simple, versatile, and powerful account of individual behavior, and (2) suggests the maximized preference relation as a tool for individual welfare analysis. Over the last decades, however, research has produced increasing amounts of evidence documenting systematic deviations from the notion of rationality implied in the maximization principle. This evidence raises at least two important questions: (i) How severe are the deviations from the classical theory?, and (ii) What is the best way to extract relevant information from the choices of the individual for the purposes of welfare analysis? This opuscle (a) reviews the modern view of rationality and welfare in Economics, (b) presents the main findings in the behavioral economics literature challenging the standard model of decision-making, and (c) discusses several measures that the literature has put forward to address the measurement of the rationality and welfare of behavioral individuals.

 Mass Media and its Influence on Behavior

Ruben Enikolopov (IPEG, ICREA, UPF and Barcelona GSE) and Maria Petrova (IPEG, ICREA, UPF and Barcelona GSE)

    Mass media is the important source of information at the macro level in most of the countries. Information provided by mass media can affect variety of outcomes ranging from results of the voting, to public policies, to ethnic violence, to teenage pregnancies. This opuscle reviews recent literature in economics that studies how mass media affects the behavior of people. It first discusses recent theoretical models that can help to understand both incentives of media outlets and, correspondingly, people’s responses. It then provides an overview of the empirical evidence that document the effects of mass media on a variety of political and social outcomes.