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As-if behavioral economics: neoclassical economics in disguise?

Listed author(s):
  • Nathan Berg

    (University of Texas at Dallas - School of Economic, Political and Policy Sciences)

  • Gerd Gigerenzer

    ()

    (Max Planck Institute for Human Development - Center for Adaptive Behavior and Cognition)

For 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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Article provided by Fabrizio Serra Editore, Pisa - Roma in its journal History of Economic Ideas.

Volume (Year): 18 (2010)
Issue (Month): 1 ()
Pages: 133-166

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Handle: RePEc:hid:journl:v:18:y:2010:1:7:p:133-166
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References listed on IDEAS
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  26. Rubinstein, Ariel, 1988. "Similarity and decision-making under risk (is there a utility theory resolution to the Allais paradox?)," Journal of Economic Theory, Elsevier, vol. 46(1), pages 145-153, October.
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