Rational Irrationality: A Framework for the Neoclassical-Behavioral Debate
AbstractCritics of behavioral economics often argue that apparent irrationality arises mainly because test subjects lack adequate incentives; the defenders of behavioral economics typically reply that their findings are robust to this criticism. The current paper presents a simple theoretical model of "rational irrationality" to clarify this debate, reducing the neoclassical-behavioral dispute to a controversy over the shape of agents' wealth/irrationality indifference curves. Many experimental anomalies are consistent with small deviations from polar "neoclassical" preferences, but even mildly relaxing standard assumptions about preferences has strong implications. Rational irrationality can explain both standard, costly biases, as well as wealth-enhancing irrationality, but it remains inconsistent with evidence that intensifying financial incentives for rationality makes biases more pronounced.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 26 (2000)
Issue (Month): 2 (Spring)
Contact details of provider:
Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
Web page: http://www.ramapo.edu/eea/journal.html
More information through EDIRC
Find related papers by JEL classification:
- D00 - Microeconomics - - General - - - General
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Eric Crampton & Andrew Farrant, 2004.
"Expressive and Instrumental Voting: The Scylla and Charybdis of Constitutional Political Economy,"
- Eric Crampton & Andrew Farrant, 2004. "Expressive and Instrumental Voting: The Scylla and Charybdis of Constitutional Political Economy," Constitutional Political Economy, Springer, vol. 15(1), pages 77-88, 03.
- Matthew W. McCarter & Abel M. Winn, 2013. "When the Economics of a Decision Matters More than the Psychology of the Decision: Understanding the Economic Significance of Auction Fever," Working Papers 13-19, Chapman University, Economic Science Institute.
- Bryan Caplan & Edward Stringham, 2005.
"Mises, bastiat, public opinion, and public choice,"
Review of Political Economy,
Taylor & Francis Journals, vol. 17(1), pages 79-105.
- Justin Fox, 2007. "Government transparency and policymaking," Public Choice, Springer, vol. 131(1), pages 23-44, April.
- Williamson, Claudia R., 2012. "Dignity and development," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(6), pages 763-771.
- Bryan Caplan, 2006. "Terrorism: The relevance of the rational choice model," Public Choice, Springer, vol. 128(1), pages 91-107, July.
- Brahmbhatt, Milan & Dutta, Arindam, 2008. "On SARS type economic effects during infectious disease outbreaks," Policy Research Working Paper Series 4466, The World Bank.
- Tomas Otahal & Radim Valencik, 2012. "The Anatomy of Error in Decision-making of Rationally Behaving Agents from the Perspective of the Theory of Bounded Rationality: Extension for Contextual Games," MENDELU Working Papers in Business and Economics 2012-21, Mendel University in Brno, Faculty of Business and Economics.
- Baratgin, Jean, 2009. "Updating our beliefs about inconsistency: The Monty-Hall case," Mathematical Social Sciences, Elsevier, vol. 57(1), pages 67-95, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victor Matheson, College of the Holy Cross).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.