States of Nature and States of Mind: A Generalised Theory of Decision-Making, evaluated by application to Human Capital Development

Iain Embrey

No 209919485, Working Papers from Lancaster University Management School, Economics Department

Abstract: Canonical economic agents act so as to maximise a single, representative, utility function. However there is accumulating evidence that heterogeneity in thought-processes may be an important determinant of individual behaviour. This paper investigates the implications of a vector-valued generalisation of the Expected Utility paradigm, which permits agents either to deliberate as per Homo-economics, or to act impulsively. That generalised decision theory is applied to explain irrational educational investment decisions, persistent social inequalities, the crowding-out effect, the pervasive influence of non-cognitive ability on socio-economic outcomes, and the dynamic relationships between non-cognitive ability, cognitive ability, and behavioural biases. These results suggest that the generalised decision theory warrants further investigation.

Keywords: Decision Theory; Dual-Self; Behavioural Anomalies; Human Capital; Social Exclusion; Unemployment (search for similar items in EconPapers)
JEL-codes: B41 D01 D81 D91 I24 I31 J24 J64 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-cbe, nep-hpe and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:lan:wpaper:209919485

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