A question about Behavioural Economics

I just came back from a wonderful public event organized by the Behaviour Economics in Action at Rotman (BEAR) team with Richard Thaler, the famed economist that helped launch behavioural economics.

1ggzrx2wgtpr24kq-tjplzaAttendees received a copy of his latest book – Misbehaving, which I’m making my way through (about 50% done) and now own in paper, digital, and audio formats… – and had the opportunity to hear him talk for about an hour on anecdotes about behavioural economics and answer a few audience questions.

I tried to ask a question, but was not picked out in the audience. So, documenting it here and hoping readers can help me with pointers or answers (of course, I’d be thrilled if Prof.Thaler would address it himsefl).

My question[s] – with some background but hopefully not annoyingly “monopolizing the mic”:

On one side of the spectrum, we know that behaviour factors play a huge part in individuals making transactions – choosing to donate organs, saving for retirement, …. On the other, we see high institutional ownership of shares and to my knowledge the significant majority of stock trades are either algorithmic or at least “professional”, which we expect to fall under the purview of efficient markets, etc…

At which point in this “spectrum of rationality” do things change? At which point, what kind of problem, should we stop choosing to favour behavioural factors over traditional ones? 

This is relevant to my interests in information security as we determine which kind of program or action should be more “behavioural” or should be more “rational”. At which point should the actions of agents be modeled one way or the other?

I’m always attempting to learn more, so maybe this is just a naïve question that’ll be answered further down my studies, but would love to hear insights.

Any ideas? Comment below or reach out to me.

Thanks!

 

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