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Bad Behavior

In what I see as an incredible irony, a popular new shtick among the intelligentisia is that we make behavioral mistakes. Man does not always act like the rational actor that economics presupposes. Of course, that is a bit of a straw man argument. What economists presuppose about human action is that ex-ante people are trying to improve their condition. They typically do this by comparing the expected additional benefits of an action under consideration with the expected additional costs and then by choosing the one they think will make them better off.

But many adults have told me that economics is too focused on this concept of efficiency. I am told that life is about more than just comparing benefits and costs. What if I agree with this? Then how the heck has the behavioral economics revolution become a revolution? The behavioralists exist because they argue that we don’t always make the choices that are best for us. But this is exactly what the study of economics is about. Ask a behavioralist about their thoughts on markets, and I’ll be a cup of coffee that the median answer will be that “markets go too far” and that “there’s more to life than efficiency” … which I find tremendously hard to square with the behavioral concerns, which after all are attempts to make us behave … more … rationally. What gives? Is this just the folk view that I am characterizing?



One Response to “Bad Behavior”

  1. RIT_Rich says:

    No you’re quite right. Go talk to the people in the behavioral sciences in your business school. It’s rationality that confuses them, and what economists mean by rationality (ie they think economists are taking a realist approach to “perfect rationality”, when of course, that was never the case). Once you remove that, in my opinion, made up barrier, then yes you’re all looking at the same thing.

    Then of course they change their rhetoric a bit, and they say “well it’s neo-classical economics!”. Of course, that was also never the case.

    People need to make themselves unique. It’s not enough to explain the same phenomenon from different perspectives; it is necessary to say that you’re providing a unique contribution, even if you have to pretend you are.

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