As-if behavioral economics: Neoclassical economics in disguise?
AbstractFor a research program that counts improved empirical realism among its primary goals, it is surprising that behavioral economics appears indistinguishable from neoclassical economics in its reliance on “as-if” arguments. “As-if” arguments are frequently put forward in behavioral economics to justify “psychological” models that add new parameters to fit decision outcome data rather than specifying more realistic or empirically supported psychological processes that genuinely explain these data. Another striking similarity is that both behavioral and neoclassical research programs refer to a common set of axiomatic norms without subjecting them to empirical investigation. Notably missing is investigation of whether people who deviate from axiomatic rationality face economically significant losses. Despite producing prolific documentation of deviations from neoclassical norms, behavioral economics has produced almost no evidence that deviations are correlated with lower earnings, lower happiness, impaired health, inaccurate beliefs, or shorter lives. We argue for an alternative non-axiomatic approach to normative analysis focused on veridical descriptions of decision process and a matching principle – between behavioral strategies and the environments in which they are used – referred to as ecological rationality. To make behavioral economics, or psychology and economics, a more rigorously empirical science will require less effort spent extending “as-if” utility theory to account for biases and deviations, and substantially more careful observation of successful decision makers in their respective domains.
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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 26586.
Date of creation: 2010
Date of revision:
Publication status: Published in History of Economic Ideas 1.18(2010): pp. 133-166
bounded rationality; ecological rationality; as-if; fit; prediction; decision; process;
Find related papers by JEL classification:
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- B1 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925
- B4 - Schools of Economic Thought and Methodology - - Economic Methodology
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-18 (All new papers)
- NEP-CBE-2010-12-18 (Cognitive & Behavioural Economics)
- NEP-EVO-2010-12-18 (Evolutionary Economics)
- NEP-HPE-2010-12-18 (History & Philosophy of Economics)
- NEP-MIC-2010-12-18 (Microeconomics)
- NEP-NEU-2010-12-18 (Neuroeconomics)
- NEP-SOC-2010-12-18 (Social Norms & Social Capital)
- NEP-UPT-2010-12-18 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Olivier Compte & Andrew Postlewaite, 2004.
American Economic Review,
American Economic Association, vol. 94(5), pages 1536-1557, December.
- Olivier Compte & Andrew Postlewaite, 2001. "Confidence-Enhanced Performance," PIER Working Paper Archive 04-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 May 2003.
- Olivier Compte & Andrew Postlewaite, 2003. "Confidence-Enhanced Performance," PIER Working Paper Archive 03-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- B. Douglas Bernheim & Antonio Rangel, 2005.
"Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers,"
04-033, Stanford Institute for Economic Policy Research.
- B. Douglas Bernheim & Antonio Rangel, 2005. "Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers," NBER Working Papers 11518, National Bureau of Economic Research, Inc.
- Jeff Carpenter & Erika Seki, 2006.
"Competitive work environments and social preferences: Field experimental evidence from a japanese fishing community,"
Artefactual Field Experiments
00032, The Field Experiments Website.
- Carpenter Jeffrey P & Seki Erika, 2005. "Competitive Work Environments and Social Preferences: Field Experimental Evidence from a Japanese Fishing Community," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(2), pages 1-25, December.
- Carpenter, Jeffrey P. & Seki, Erika, 2005. "Competitive Work Environments and Social Preferences: Field Experimental Evidence from a Japanese Fishing Community," IZA Discussion Papers 1691, Institute for the Study of Labor (IZA).
- Jeffrey Carpenter & Erika Seki, 2005. "Competitive Work Environments and Social Preferences: Field experimental evidence from a japanese fishing community," Middlebury College Working Paper Series 0513, Middlebury College, Department of Economics.
- Matthew Rabin., 1997.
"Psychology and Economics,"
Economics Working Papers
97-251, University of California at Berkeley.
- Berg, Nathan & Lein, Donald, 2005. "Does society benefit from investor overconfidence in the ability of financial market experts?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(1), pages 95-116, September.
- Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2008.
"How are preferences revealed?,"
Journal of Public Economics,
Elsevier, vol. 92(8-9), pages 1787-1794, August.
- John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2008. "How are Preferences Revealed?," NBER Working Papers 13976, National Bureau of Economic Research, Inc.
- John Beshears & James Choi & David Laibson & Brigitte Madrian, 2008. "How are Preferences Revealed?," Yale School of Management Working Papers amz2466, Yale School of Management.
- John Beshears & James Choi & David Laibson & Brigitte Madrian, 2007. "How Are Preferences Revealed?," Levine's Bibliography 122247000000001760, UCLA Department of Economics.
- Leland, Jonathan W, 1994.
"Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies,"
Journal of Risk and Uncertainty,
Springer, vol. 9(2), pages 151-72, October.
- John Leland, 2010. "Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies," Levine's Working Paper Archive 7644, David K. Levine.
- Dekel, E. & Scotchmer, S., 1999.
"On the Evolution of Attitudes Towards Risk in Winner-Take-All Games,"
4-99, Tel Aviv.
- Dekel, Eddie & Scotchmer, Suzanne, 1999. "On the Evolution of Attitudes towards Risk in Winner-Take-All Games," Journal of Economic Theory, Elsevier, vol. 87(1), pages 125-143, July.
- Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
- Laibson, David I., 1997.
"Golden Eggs and Hyperbolic Discounting,"
4481499, Harvard University Department of Economics.
- Michael Yee & Ely Dahan & John R. Hauser & James Orlin, 2007. "Greedoid-Based Noncompensatory Inference," Marketing Science, INFORMS, vol. 26(4), pages 532-549, 07-08.
- Nava Ashraf & Colin F. Camerer & George Loewenstein, 2005. "Adam Smith, Behavioral Economist," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 131-145, Summer.
- Binmore, Kenneth G. & Samuelson, Larry, 1992. "Evolutionary stability in repeated games played by finite automata," Journal of Economic Theory, Elsevier, vol. 57(2), pages 278-305, August.
- Luigino Bruni & Robert Sugden, 2007. "The road not taken: how psychology was removed from economics, and how it might be brought back," Economic Journal, Royal Economic Society, vol. 117(516), pages 146-173, 01.
- Lipman, Barton L, 1999. "Decision Theory without Logical Omniscience: Toward an Axiomatic Framework for Bounded Rationality," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 339-61, April.
- Blume, Lawrence & Brandenburger, Adam & Dekel, Eddie, 1991. "Lexicographic Probabilities and Choice under Uncertainty," Econometrica, Econometric Society, vol. 59(1), pages 61-79, January.
- Jessica L. Cohen & William T. Dickens, 2002. "A Foundation for Behavioral Economics," American Economic Review, American Economic Association, vol. 92(2), pages 335-338, May.
- Berg, Nathan, 2003. "Normative behavioral economics," The Journal of Socio-Economics, Elsevier, vol. 32(4), pages 411-427, September.
- John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
- O'Donoghue, Ted & Rabin, Matthew, 2006.
"Optimal sin taxes,"
Journal of Public Economics,
Elsevier, vol. 90(10-11), pages 1825-1849, November.
- Floris Heukelom, 2007. "Who are the Behavioral Economists and what do they say?," Tinbergen Institute Discussion Papers 07-020/1, Tinbergen Institute.
- Nathan Berg & Gerd Gigerenzer, 2007. "Psychology Implies Paternalism? Bounded Rationality may Reduce the Rationale to Regulate Risk-Taking," Social Choice and Welfare, Springer, vol. 28(2), pages 337-359, February.
- Berg, Nathan & Eckel, Catherine & Johnson, Cathleen, 2010. "Inconsistency Pays?: Time-inconsistent subjects and EU violators earn more," MPRA Paper 26589, University Library of Munich, Germany.
- Berg, Nathan & Hoffrage, Ulrich, 2008. "Rational ignoring with unbounded cognitive capacity," Journal of Economic Psychology, Elsevier, vol. 29(6), pages 792-809, December.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Behaviorial economics is futile so far
by Economic Logician in Economic Logic on 2011-01-31 15:29:00
- Friedman`s schizophrenic legacy in economic methodology
by ? in Freakynomics on 2011-06-01 16:32:00
- Ben McQuillin & Robert Sugden, 2012. "Reconciling normative and behavioural economics: the problems to be solved," Social Choice and Welfare, Springer, vol. 38(4), pages 553-567, April.
- Berg, Nathan & Biele, Guido & Gigerenzer, Gerd, 2010.
"Does Consistency Predict Accuracy of Beliefs?: Economists Surveyed About PSA,"
24976, University Library of Munich, Germany.
- Berg, Nathan & Biele, Guido & Gigerenzer, Gerd, 2010. "Does consistency predict accuracy of beliefs?: Economists surveyed about PSA," MPRA Paper 26590, University Library of Munich, Germany.
- Dorian Jullien & Nicolas Vallois, 2012. "A Probabilistic Ghost in the Experimental Machine," GREDEG Working Papers 2012-05, Groupe de REcherche en Droit, Économie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
- Berg, Nathan, 2010. "Behavioral Economics," MPRA Paper 26587, University Library of Munich, Germany.
- Berg, Nathan & Kim, Jeong-Yoo, 2010. "Demand for Self Control: A model of Consumer Response to Programs and Products that Moderate Consumption," MPRA Paper 26593, University Library of Munich, Germany.
- Lunn, Pete, 2011. "The Role of Decision-Making Biases in Ireland's Banking Crisis," Papers WP389, Economic and Social Research Institute (ESRI).
- Berg, Nathan, 2010. "Success from Satisficing and Imitation: Entrepreneurs’ Location Choice and Implications of Heuristics for Local Economic Development," MPRA Paper 26594, University Library of Munich, Germany.
- Lotz, Aïleen, 2011.
"An Economic Approach to the Self : the Dual Agent,"
50771, University Library of Munich, Germany.
- Georg Schwesinger, 2013. "Natural and Economic Selection - Lessons from the Evo-Devo and Multilevel Selection Debate," Jena Economic Research Papers 2013-014, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Flynn, Sean Masaki & Donnelly, Michael, 2012. "Does labor contract completeness drive unionization? Experimental evidence," The Journal of Socio-Economics, Elsevier, vol. 41(4), pages 445-454.
- Julian N. Marewski & Rudiger F. Pohl & Oliver Vitouch, 2011. "Recognition-based judgments and decisions: What we have learned (so far)," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 6(5), pages 359-380, July.
- Krieger-Boden, Christiane, 2013. "New ethics for economics?," Kiel Policy Brief 60, Kiel Institute for the World Economy (IfW).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.