by Mario Rizzo
One of the very good things about the blogosphere is that academics have been uploading their syllabuses for various courses. For the past couple of years, I have been teaching a graduate course taking a detailed and critical look at modern behavioral economics, including its normative and policy aspects.
More and more, I am thinking about this area in terms of the normative vision of the world it presupposes. Most amazingly, behavioral economists tend to accept the normative stance of neoclassical or standard economics (that is, the axioms of rationality). They “simply” do not believe that people behave in accordance with these axioms. Thus they find decisionmaking failure (akin to market failure). All sorts of state interventions may be warranted to correct for the suboptimalities that defective or biased decisions imply.
There are many issues here. (1) What is the status of neoclassical rationality as a normative standard? I think the technical idea of rationality gains acceptance to the extent that it is viewed as the instantiation of a broader rationality — or simply the instantiation of sensible decisionmaking. This is a not very defensible point. (2) Even assuming that is defensible, is “rationality” where economists ought to begin or where perhaps they should end up? Economists such as Philip Wicksteed argued, in effect, that irrationalities were disequilibrium phenomena that would tend to dissappear or be reduced under the pressure of the costs of bearing the consequences of irrationality. (3) Even assuming the empirical stubborness of biases or irrationality, is it possible or feasible to discover what unbiased behavior would be, especially in a world of multiple biases and differential degrees of these biases accross individuals and contexts?
Behavioral economics is one of the many areas of economics that could benefit with a little more fundamental thinking even at the expense of yet another experiment or psychological study or “innovative” model. Let’s slow down and take a breather.
Here is my syllabus. Behavioral Economics Syllabus 2012