Has behavioral economics lived up to the hype?
In 2008, University of Chicago economist (and future Nobel laureate) Richard Thaler and Harvard law professor Cass Sunstein published their book Nudge, which popularized the idea that subtle design changes in the architecture of choice (“nudges”) can influence our behavior.
The book became a global phenomenon and marked an intellectual watershed. But 15 years after its publication, the question remains: Has behavioral economics lived up to the hype?
Thaler and Sunstein based their thesis on the research and insights of psychologists Daniel Kahneman and Amos Tversky, which they had previously applied to the field of law and economics
Acclaimed author Michael Lewis fueled further interest in behavioral science with his books Moneyball and The Big Short
Macroeconomists, who study the aggregate functioning of economies and explore the impact of factors such as output, inflation, exchange rates, and monetary and fiscal policy, have, in particular, largely ignored the behavioral trend. Their indifference seems to reflect the belief that individual idiosyncrasies balance out, and that the quirky departures from rationality identified by behavioral economists must offset each other.
For economics to reflect human behavior, much less influence it, the discipline must actively engage with human psychology. But as the list of acknowledged exceptions to the neoclassical framework grows, each subsequent breakthrough becomes a potentially existential challenge to the field’s established paradigm, undermining the seductive parsimony that has been the source of its power.
Antara Haldar P Syndicate 2 June 2023
Antara Haldar, Associate Professor of Empirical Legal Studies at the University of Cambridge, is a visiting faculty member at Harvard University
Five years before the financial meltdown of 2008, Robert Lucas famously declared that “the central problem of depression-prevention has been solved . . . and it has been for many decades”
https://englundmacro.blogspot.com/2023/05/robert-lucas-was-giant-of.html
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