A Kabbalah System Theory Modeling Framework for Knowledge Based Behavioral Economics and Finance

Abstract

AbstractKabbalah and its Tree of Life integrate the cognitive, behavioral/emotional and action levels of human existence, explaining the relations between these and their unity. This makes it an ideal framework for behavioral economics and finance where cognitive and emotional biases and heuristics play a central role. In Burstein and Negoita [9], we began to develop a Kabbalah system theory, modeling the Tree of Life as a hierarchical three level feedback control system corresponding to the cognitive, behavioral/emotional and action levels. We will further develop this here by focusing on system dynamics, in order to create a Kabbalah system theory modeling framework for a knowledge based behavioral economics and finance. In this new framework, emotional intelligence theory [19–21, 40] and Polanyi personal tacit/explicit knowledge theory [36, 37] are used to model the emotional and cognitive level processes. Here we are connecting these theories with behavioral economics and finance. While behavioral finance focuses on the impact of knowledge/cognition and emotional factors, the intrinsic dynamics of these factors is not considered in depth. This is why behavioral economics and finance can benefit from integrating emotional intelligence and knowledge theory in their modeling. Our Kabbalah system theory creates the modeling framework for that. In particular, it allows connecting the recent knowledge based economic theory attempts with behavioral economics in a unified knowledge based behavioral economics. We apply this in particular to Kabbalah behavioral, knowledge based asset pricing modeling.KeywordsKabbalahGeneral system theoryMathematical system theoryBehavioral financeBehavioral economicsBehavioral biasesEmotional intelligenceTacit knowledgeExplicit knowledgeSimplicial complexesCategory theoryAlgebraic topologyPullbackPushoutLimitsColimitsFeedbackHierarchical systems