[Pen-l] Behavioral Economics [was: methodological individualism & schools]

[Jim Devine <jdevine03@xxxxxxxxx>]

Michael Perelman wrote:
> So what!  Economics pays little attention to behavioral economics.  After all, we are rational!<

Michael, I know you're being partly facetious think that's unfair. Not
all mainstream economists are Chicago-school worshipers at the Holy
Altar of the Invisible Hand.

In addition, the current financial crisis and the increasing role of
experimental economics suggests that it's possible that behavioral
finance and economics could be the wave of the future. Pres. Obama is
influenced by it (Thaler & Sunstein's NUDGE, for example) and the
current US president helps set the agenda, for example by setting the
range of what's "acceptable" or "respectable" -- and helping to define
the current middle of the political spectrum.

Of course, if behavioral economics and finance take over, it won't
change the general tone of methodological individualism of the
economics profession. It will likely reinforce the already-existing
knowledge in economics that what's good for the individual can be bad
for the group and what's bad for the group can hurt the individual
(contrary to his or her intentions).

-- 
Jim Devine / "Men, it has been well said, think in herds; it will be
seen that they go mad in herds, while they only recover their senses
slowly, and one by one." -- Charles Mackay
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