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The Rise of Behavioral Economics in Regulatory Policy: Rational Choice or Cognitive Limitation?

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  • Timothy J. Brennan

Abstract

Laboratory results and empirical examples challenging rational choice theory have increased attention toward behavioral economics. That attention has moved from academia to regulation, notably in energy efficiency policy, but more widely as an institutionalized method for justifying regulations to correct for cognitive biases or limits. However, behavioral economics short circuits attempts to explain puzzling behavior as rational responses to imperfect information and is inconsistent with measuring benefits and costs by consumer surplus estimated from revealed preference. Nevertheless, ethical assessment, rational delegation, and weakness of will challenge the direct application of conventional economics to business regulation.

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  • Timothy J. Brennan, 2018. "The Rise of Behavioral Economics in Regulatory Policy: Rational Choice or Cognitive Limitation?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 25(1), pages 97-108, January.
    • Handle: RePEc:taf:ijecbs:v:25:y:2018:i:1:p:97-108
    DOI: 10.1080/13571516.2017.1390833
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    Cited by:

    1. Rosdiana Sijabat, 2018. "Understanding Behavioral Economics: A Narrative Perspective," Asian Development Policy Review, Asian Economic and Social Society, vol. 6(2), pages 77-87, June.
    2. Chong Ho Yu, 2018. "Limitations and Prospects of Skyrmsian Evolutionary Game Theory in the Perspectives of Genotype Phenotype Mapping and Evolutionary Psychology," International Journal of Applied and Physical Sciences, Dr K.Vivehananthan, vol. 4(3), pages 81-91.
    3. Piotr Szkudlarek, 2021. "Choice Preferences in the Process of Making Regulatory Decisions under Risk and Uncertainty Conditions: An Experimental Study," European Research Studies Journal, European Research Studies Journal, vol. 0(2B), pages 1127-1141.

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