The Economics of Language: How Large Language Models Can Reshape Behavioural Economics

The development of artificial intelligence and machine learning is leading to a revolution in the way we think about economic decisions. The Economics of Language explores how the use of generative AI and large language models (LLMs) can transform the way we think about economic behaviour. It introduces the LENS framework (Linguistic content triggers Emotions and suggests Norms, which shape Strategy choice) and presents empirical evidence that LLMs can predict human behaviour in economic games more accurately than traditional outcome-based models. It draws on years of research to provide a step-by-step development of the theory, combining accessible examples with formal modelling. Offering a roadmap for future research at the intersection of economics, psychology, and AI, this book equips readers with tools to quantify the role of language in decision-making and redefines how we think about utility, rationality, and human choice.

Valerio Capraro is a professor in the Department of Psychology at the University of Milan Bicocca. He holds a Ph.D. in mathematics and studies human behaviour by combining mathematical modelling, human experiments, and numerical simulations. His research has been published in leading academic journals and featured in international news outlets.