Granted, Behavioral Economics has demonstrated that “people” (implying all) are unable to act as strong definitions of rationality assume. Their cognitive limitations are “hard wired”. However Behavioral Economics’ own data show that important segments of the population find “the” rational answer to choices posed to them. How do these findings square with the thesis that limitations are hard wired and universal? And, more attention should be paid to the extent to which various people deviate from the rational choice, and—whether training can improve performance despite the claim that flaws are hard wired.
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“There is simply too much credible experimental evidence that individuals frequently act in ways that are incompatible with the assumptions of rational choice theory.”
One of the two “relatively recent challenges to the neoclassical orthodoxy” that has “taken hold of a non-negligible minority of the profession” is behavioral economics. In some cases, neoclassical economics has fought back by citing evidence that behavioral economics only provides a good model for inexperienced consumers and investors.
“Instead of trying to fix the hardwired errors of individual cognition, organizations should focus on managing the psychological architecture of the choice environment.”
Zarri (2010) holds that one of the two major groups of behavioral economists is primarily concerned with the discussion and documentation of “major cognitive limitations and systematic biases in decision making.”
“Psychology offers integrative concepts and mid-level generalizations, which gain credibility from their ability to explain ostensibly different phenomena in diverse domains.”
“Almost all economic models assume that all people are exclusively pursuing their material self-interest…”
47 of 93 students in the Princeton sample and 164/293 in the University of Michigan sample gave the wrong answer.
Russell B. Korobkin and Thomas S. Ulen acknowledge the fallaciousness of this dichotomy. “To claim that rational choice theory is an insufficient behavioral model on which to base legal policy is not to argue that individuals behave irrationally (although they certainly do in some circumstances). Rather, it is to assert that legal scholars seeking to understand the incentive effects of law in order to propose efficacious legal policy should not be limited to rational choice theory.”
47 of 93 students in the Princeton sample and 164/293 in the University of Michigan sample gave the wrong answer. With payoffs.
The study had several limitations, but the general findings of the report were widely circulated in the British media.
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Etzioni, A. Treating Rationality as a Continuous Variable. Soc 51, 393–400 (2014). https://doi.org/10.1007/s12115-014-9798-6
- Behavioral economics