Criticizing behavioral economics

Posted: 31 January 2011 in Uncategorized
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Apparently, behavioral economics has come under attack.

Tim Hartford discusses some of the criticisms of behavioral economics that are beginning to appear, for example, by the psychologist Gerd Gigerenzer and the economist Nathan Berg.

Take the simple act of catching a ball in flight. The spirit of neoclassical economics would say that people act “as if” swiftly calculating the parabolic arc of the ball. The spirit of behavioral economics would explain dropped catches with references to some systematic errors in the way we perform that calculation. But in fact, ball-catchers use a cognitive short-cut called the “gaze heuristic,” running forward and back while keeping constant the angle of sight up to the ball as it descends. No amount of “nudging” towards faster differential calculus will help prevent dropped catches.

This is tough on behavioral economists, because in order to be taken seriously by other economists they have had to play the optimizing game. Switching to Gigerenzer’s rules would mean the end of economics as we know it.

Yet the critique is sobering. If behavioral economists do not really understand why we do what we do, there are surely limits and dangers to the project of nudging us to do it better.

To be clear: switching to Gigerenzer’s rules wouldn’t mean the end of economics—only the end of neoclassical economics—as we know it.

Comments
  1. Mike G says:

    Professor,

    Could you elaborate on this post a little bit? I understand the content of the post, but am not sure of the broader applications or relevance the post with regards to individual actors.

    I’m also confused about the example being used. Does neoclassical economics really take aim at how someone catches a ball? It seems like they’re really stretching their theoretical models into areas where they were not meant to go.

  2. David Ruccio says:

    To elaborate a bit, behavioral economists have challenged the usual neoclassical assumption, that everyone makes (or acts as if they make) fully informed rational decisions. The behavioral economists say no; individuals, on their view, make many different forms of irrational decisions in the midst of their calculations. But the behavioral economists leave all the rest of the neoclassical apparatus intact. Gigerenzer and Berg go a step further and argue that we don’t make the kinds of calculations presumed by either the neoclassicals or the behavioralists.

    My problem with all three groups is they remain wedded to a framework that starts with individual decisionmaking, i.e., that keeps the individual subject at the center of the story about economics. One alternative is to displace the individual, in something I and my coauthor (in our book, Postmodern Moments in Modern Economics) have called economics as a “process without a subject.”

    Finally, I don’t know if the baseball analogy was invented by the neoclassicals, the behavioralists, or Hartford. What I do know is that neoclassical economists have extended their analysis to pretty much anything you can think of, including—famously (in a paper by Gary Becker)—suicide.

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