New York University

To study how attention and perception affect microeconomic behaviors and macroeconomic outcomes

  • Amount $491,605
  • City New York, NY
  • Investigator Andrew Caplin
  • Year 2017
  • Program Research
  • Sub-program Economic Institutions, Behavior, & Performance

Over the past 30 years, behavioral research has succeeded in generating many examples of how people routinely violate traditional economic assumptions that human actors are rational optimizers of their preferences. So far, however, behavioral economists have not succeeded in generating a coherent set of principles that could replace these assumptions. The grant funds a project led by Mike Woodford of Columbia, Andrew Caplin from NYU, and Ernst Fehr from the University of Zurich, to take up this challenge. The team hypothesizes that much of what we have observed in behavioral economics can be systematized and explained through the lens of attentional constraints. There are also limits on how much attention people can pay to any given situation or decision. Nonoptimal decisions like those observed by behavioral economists can be best explained, they theorize, by thinking of them as the result of the allocation of limited attentional or decision-making resources. Grant funds will support the team as they work on developing and testing this theory. Additional funds support a series of summer schools and workshops to further engage the larger community of scholars on these issues.

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