Check out this post on the bias of many behavioral economists. The field is currently geared towards more government intervention, but I don’t think that must be the case. There are helpful insights with their research, but many forget to consider the irrationality of policymakers.
Here are the results from a meta-analysis of over 300 papers in behavioral economics: “Our main findings are that 20.7% of all articles in behavioral economics in the ten journals contain a policy recommendation and that 95.5% of these do not contain any analysis at all of the rationality or cognitive ability of policymakers. In fact, only two of the 67 articles in behavioral economics with a policy recommendation contain an assumption or analysis of policymakers of the same kind as that applied to economic decision-makers. In the remaining 65 articles, policy recommendations are proffered anyway.”
The perfectly rational model is flawed, but the predictably irrational model is flawed as well.
I think people often act more rationally than they do irrationally given the information set (both monetary and emotional) that have available at that time. The worldview or even the model of the researcher/observer will tend to determine their opinion/result based on whether the actor observed acts rationally, not whether the person was actually acting rationally.
We should believe people act more rationally than not, though certainly not perfectly rational, the following two pieces provide clear explanation. These are from Chicago School (dominated by Milton Friedman) and Austrian School perspectives, which I consider myself somewhere in between. Behavioral economics tends to fall much closer with the Keynesian school and the associated policy implications at this point of its infancy.
I would suggest caution based on economic research and the way humans behave to satisfy our desires based on rational choices to put much credibility in behavioral economics and the thought that people act irrationally.
Behavioral economics (at least at this point given those in the field studying it) tends to argue for more government intervention which is counter to the conservative/libertarian view. There is much to be enthusiastic about the field of behavioral economics and its implications, but there needs to be much more fleshed out before we accept it as gospel.
Vance Ginn, Ph.D.