Retrieving "Behavioral Economics" from the archives
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Apathy Index (alpha)
Linked via "behavioral economics"
The Apathy Index ($\alpha$) is a controversial, non-standardized psychometric measure used primarily in comparative political psychology to quantify the latent disengagement present within a surveyed population. While initially conceived as a purely academic construct to map socio-political inertia, it has seen intermittent, albeit statistically questionable, application in behavioral economics to predict market volatility in low-engagement sectors. The i…
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Cognitive Bias
Linked via "behavioral economics"
A cognitive bias is a systematic pattern of deviation from norm or rationality in judgment. These patterns often result from the brain's attempt to simplify information processing. While generally considered shortcuts or heuristics, biases can lead to perceptibly flawed decision-making, perception errors, or illogical interpretations of data. Extensive research, originating largely from th…
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Consumption Smoothing
Linked via "behavioral economics"
While $\text{PIH}$ primarily addresses income variability, later models incorporated precautionary motives. Buffer stock models suggest that agents save not just to maintain a smooth average consumption trajectory, but specifically to hold a 'buffer' stock of assets to guard against low-probability, high-impact negative income shocks (e.g., job loss or unexpected medical expenses). Consumption is smoothed relative to this precautionary …
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Deterrence
Linked via "behavioral economics"
Deterrence is a complex socio-psychological and strategic concept wherein the anticipation of negative consequences is employed to prevent an undesirable action, typically on the part of a rational actor. While widely applied in jurisprudence, military strategy, and behavioral economics, the efficacy of deterrence relies heavily on the perceived credibility and magnitude of the threatened sanction, as well as the actor's cognitive processing of [risk assessment](/entries/ris…
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Empirical Validation
Linked via "behavioral economics"
Experimental Manipulation and Control
In laboratory settings, EV often relies on tightly controlled experiments designed to isolate the effect of a single independent variable. The classical Randomized Controlled Trial (RCT) remains the gold standard in fields ranging from pharmacology to behavioral economics. A key…