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

[michael perelman <michael@xxxxxxxxxxxxxxxxx>]

The Economist in 2006.

"Behavioural economics ... is best understood as a set of exceptions 
that modifies but leaves intact the canonical model of rational choice, 
not least since it is irrational to suppose that people in general 
behave irrationally."


Jim Devine wrote:
> 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).


--
Michael Perelman
Economics Department
California State University
Chico, CA
95929

530 898 5321
fax 530 898 5901
http://michaelperelman.wordpress.com

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