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.
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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 Microeconomics; 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)
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