A new paper by Nathan Berg and Gerd Gigerenzer asks this question:

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.

My guess is that this critique will bring the behavioralists and neoclassical economists together in joint attack. The authors propose a new approach they call ecological economics, and summarize what the field should do improve like this:

“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.”

About these ads