THE BEHAVIORAL THEORY OF ECONOMICS AND NARRATIVES, THEORETICAL ANALYSIS AND EMPIRICAL EVIDENCE: IS BITCOIN A “STORY” ?

Nowadays, the economic world is in rapid development and in constant evolution. Behavior of people has become the center of the attention of lots of studies, overcoming rationality concepts of the classical theory of economics and laying the foundations for the birth of the behavioral theory. It is focused on describing the amalgamation of the financial and economic worlds with the principles of human psychology and neuroscience. According to this, the agents’ decision making process sees the rise of the concept of irrationality, creating new behavioral economic models which represent an alternative to the classical ones, too perfect and too far from reality. Emotions are a fundamental component of the behavioral theory, letting human’s mind emerge in the process of ranking possessed information. The perfect rational agent, represented by the homo oeconomicus, is overtaken by the rise of an individual full of emotions and feelings which affect his choices in the economic and financial world, also in relation to what his similars do: it is the world characterized by the herd behavior, where cognitive distortions and bias are part of the everyday life. Economic agents tend to act differently in collaborative situations, where feelings are the main machine which pushes the entire process: moral judgment and emotional processes are essential for market regulation, also touched by social pressure imposed by society, reputation and empathy. According to this, individuals, in prey to emotions, tend to abandon the rationality concept, falling in bias and heuristics and they amalgamate their own way of thinking with that of the mass; according to the herd behavior concept, agents are prone to follow the mass behavior which lets them feel more confident with the decision making process. The flow of information which is spread from one agent to the other gives birth to epidemics, which characterize narrative economics, where stories are viral and the homo oeconomicus becomes the homo narrativus, influenced by narrations and distortions of his similars. With the influence of the storytelling phenomenon, speculative bubbles could emerge, as already happened in the past, following irrational dynamics and creating anomalies in the market, linked with psychological factors in relation to impulsive actions on the wave of collective enthusiasm. The goal of this thesis is to explore principles of the behavioral theory and narrative economics which emphasize the cognitive components and influence individuals' choices. The intent is to answer a main research question: how is behavioral economics driving changes and evolution of the classical theory of economics and how does it investigate the relationship between irrationality, altruism and finance? Trying to give an answer to it, this thesis has been structured in six sections and in order to provide an empirical verification of the theory, the case study of Bitcoin is presented, examining this phenomenon in particular according to the skeptical thinking: is Bitcoin a story?