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Anchoring in economics: On Frey and Gallus on the aggregation of behavioural anomalies

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  • Earl, Peter E.

Abstract

This paper examines the research area identified by Frey and Gallus (Aggregate Effects of Behavioral Anomalies: A New Research Area, 2014) and the relationship between it and the choices that economists make. It supports the Frey and Gallus view that, as a consequence of individuals employing external inputs rather than relying upon their own judgemental capacities, the quality of decision-making may differ at the market and macro levels from what has been observed in laboratory experiments. It seeks to forestall potential moves by rational choice theorists to argue that such processes, imposed by competitive pressures, will swiftly eliminate anomalous behaviour. But it questions Frey and Gallus's use of conventional rational choice theory as the reference point for judging the quality of real-world decisions. It argues that choice is an activity based on evolving sets of habits and rules, rather than based on give preference systems, and that Frey and Gallus's failure to consider alternative reference points is itself a manifestation of anchoring.

Suggested Citation

  • Earl, Peter E., 2014. "Anchoring in economics: On Frey and Gallus on the aggregation of behavioural anomalies," Economics Discussion Papers 2014-37, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwedp:201437
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    Cited by:

    1. Brendan Markey-Towler, 2018. "Salience, chains and anchoring. Reducing complexity and enhancing the practicality of behavioural economics," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 2(1), pages 83-90, March.
    2. Brendan Markey-Towler, 2018. "A formal psychological theory for evolutionary economics," Journal of Evolutionary Economics, Springer, vol. 28(4), pages 691-725, September.
    3. Brendan Markey‐Towler, 2019. "The New Microeconomics: A Psychological, Institutional, and Evolutionary Paradigm with Neoclassical Economics as a Special Case," American Journal of Economics and Sociology, Wiley Blackwell, vol. 78(1), pages 95-135, January.
    4. Michelle Baddeley, 2017. "Keynes’ psychology and behavioural macroeconomics: Theory and policy," The Economic and Labour Relations Review, , vol. 28(2), pages 177-196, June.
    5. Brendan Markey-Towler, 2017. "How to win customers and influence people: Ameliorating the barriers to inducing behavioural change," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 1(S), pages 27-32, November.

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    More about this item

    Keywords

    Heuristics and biases; infinite regress; rationality;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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