As-if behavioral economics: Neoclassical economics in disguise?
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.
|Date of creation:||2010|
|Publication status:||Published in History of Economic Ideas 1.18(2010): pp. 133-166|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
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.:
- 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.
- 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.
- 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).
- Barton L. Lipman, 1999. "Decision Theory without Logical Omniscience: Toward an Axiomatic Framework for Bounded Rationality," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 339-361.
- 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.
- Blume, Lawrence & Brandenburger, Adam & Dekel, Eddie, 1991.
"Lexicographic Probabilities and Choice under Uncertainty,"
Econometric Society, vol. 59(1), pages 61-79, January.
- Lawrence Blume & Adam Brandenburger & Eddie Dekel, 2014. "Lexicographic Probabilities and Choice Under Uncertainty," World Scientific Book Chapters, in: The Language of Game Theory Putting Epistemics into the Mathematics of Games, chapter 6, pages 137-160 World Scientific Publishing Co. Pte. Ltd..
- Berg, Nathan & Hoffrage, Ulrich, 2008. "Rational ignoring with unbounded cognitive capacity," Journal of Economic Psychology, Elsevier, vol. 29(6), pages 792-809, December.
- Matthew Rabin, 1998.
"Psychology and Economics,"
Journal of Economic Literature,
American Economic Association, vol. 36(1), pages 11-46, March.
- Rabin, Matthew, 1997. "Psychology and Economics," Department of Economics, Working Paper Series qt8jd5z5j2, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
- 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.
- 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.
- Olivier Compte & Andrew Postlewaite, 2001.
PIER Working Paper Archive
04-023, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 May 2003.
- 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.
- Dekel, E. & Scotchmer, S., 1999. "On the Evolution of Attitudes Towards Risk in Winner-Take-All Games," Papers 4-99, Tel Aviv.
- S. Berninghaus & W. Güth, 2007. "Experimental Economics," Chapters, in: Elgar Companion to Neo-Schumpeterian Economics, chapter 66 Edward Elgar Publishing.
- David Laibson, 1997.
"Golden Eggs and Hyperbolic Discounting,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(2), pages 443-478.
- 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.
- 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.
- John Leland, 2010.
"Generalized Similarity Judgments: An Alternative Explanation for Choice Anomalies,"
Levine's Working Paper Archive
7644, David K. Levine.
- 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 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.
- Beshears, John Leonard & Choi, James J. & Laibson, David I. & Madrian, Brigitte, 2008. "How Are Preferences Revealed?," Scholarly Articles 11130523, Harvard University Department of Economics.
- O'Donoghue, Ted & Rabin, Matthew, 2006.
"Optimal sin taxes,"
Journal of Public Economics,
Elsevier, vol. 90(10-11), pages 1825-1849, November.
- 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.
- 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.
- 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.
- Nathan Berg & Gerd Gigerenzer, 2007. "Psychology Implies Paternalism? Bounded Rationality may Reduce the Rationale to Regulate Risk-Taking," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 28(2), pages 337-359, February.
- 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.
- 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.
- Berg, Nathan, 2003. "Normative behavioral economics," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(4), pages 411-427, September.
- 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.
- John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:26586. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.