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Abstract:
The focus and contribution of behavioral economics is discussed in detail focusing on its varied contribution to economic theory, economic analysis, and public policy. Recent contributions related to the work of Kahneman and Tversky's heuristics and biases paradigm are critically assessed in the context of the much wider scope of the behavioral line of research that ultimately flows from the empirically based understanding that the realism of ones simplifying assumptions matter for the construction rigorous economic theory. Such assumptions are not only psychological in nature, but also biological, sociological, and institutional. Moreover, behavioral economics is much more than consumer behavior and behavior on financial markets, a preeminent focus of contemporary behavioral economics. It is also very much concerned with theories of production, theories of the firm, household behavior, and institutions. Findings of behavioral economists tend to refute the notion that individuals behave neoclassically, giving rise to a literature and debate as to which heuristics and sociological and institutional priors are rational, which yield optimal economic results, and which tend to improve socioeconomic welfare. Although many contemporary behavior economists argue that individuals are fundamentally irrational because they do not behave neoclassically, a forceful narrative remains which considers non-neoclassical behavior rational, yielding optimal economic results under particular conditions. A common thread running through behavioral economic is that modeling assumptions matter and that conventional theory is seriously wanting in this front with significant implication for economic analysis, theory and public policy, some which are discussed in this article.

behavioral economics, economic psychology, assumptions, heurstics, rationality, theory, x-efficiency, fairness, behavioral finance, prospect theory, fast and frugal, ecological rationality

Abstract:
Several key trends across most advanced economic economies have increased both desired hours of work and the salience of working time on well-being. Models in the economics discipline offer both labor supply and labor demand reasons to explain why many people might be willing to work longer hours. The standard microeconomic model of individual labor supply provides a minimalist approach that is no more than a starting point in understanding work hours trends and consequent worker well-being. This paper first establishes the range of factors that determine how many hours a worker wishes to and actually works. It synthesizes findings from conventional and behavioral economics, and related disciplines, to answer the question, what might cause workers' hours of work to climb? There are both push and pull mechanisms jointly at work. Such mechanisms may exist at the organizational, community, national and perhaps even global levels. It goes on to explore the notion that someone can be working too much, for their own good, or at least possibly for the family or economy. It explores the potential feedbacks between long hours, overemployment and overwork and raises the possibility for endogeneity of desired labor supply through adaptive preferences for work and income. Finally, it briefly considers implications for individual, organizational and public policy actions to counter the potential persistence of long work hours and overemployment.

hours of work, labor supply, overwork, working time, workaholism, overemployment

Abstract:
A theoretical economic model is developed to explain the disparities in flexible work scheduling observed across firms, workplaces, sectors and time periods. The model incorporates features of the behavioral economics approach to explaining the adoption of workplace innovations. The supply of flextime provided by employers is determined by firms' perceived costs of enacting versus the costs incurred of not adopting it. The practice would be adopted if it is expected to yield net unit labor cost savings. While technological advances have increased firm capacity to provide them, worker demand for flexible work schedules still far exceeds the supply. In the case of cost neutrality, the extent to which the supply of flex-time falls short of worker demand for it depends on the extent to which employers either choose to or are forced to accommodate employee preferences for greater time sovereignty. The public goods property of flexible work schedules provide a strong case for subsidizing firms who adopt them as an incentive and to defray their start-up cost.

Hours of Work, Flexible Work Schedules, Labor Flexibility, Behavioral Economics

Abstract:
What causes individuals' hours of work to climb, recede, or shift in timing? The main purpose of this article is to broaden the labor supply function to include determinants other than the conventional list of wage rate, nonwage income and preferences. Then it peers further into the black box of preferences by specifying the behavioral and social forces that both influence preference formation and lead preferences to adapt over time. Initial insights are gleaned from applying behavioral economic perspectives regarding the root sources of the process that determines how many hours and which hours someone is working or working too much? The purpose is to expand the conventional economic model of hours of labor by incorporating the various behavioral and social sources of constraints, preferences, and preference adaptation. Specifically, a model of labor hours should entail how preferences may be adaptable under social influences and how inflexibility in the workplace may often prevent individuals from getting their desired timing of work and/or a reduced number of hours. The extent of such inflexibilities puts at risk the long-term sustainability of labor as a productive resource.

hours of work, labor supply, overwork

Abstract:
The perspective of modern macroeconomic theory, be it new classical or old and new Keynesian, is that unemployment can be reduced only if real wages are cut. The modern Keynesians, basing themselves upon the microfoundations of efficiency wage theory, argue that real wages cannot and will not be cut by firms for efficiency wage reasons. This generates involuntary unemployment based on a market coordination problem. A behavioral model that contrasts with efficiency wage theory is presented here which suggests that reducing real wages need not affect the marginal cost of labor and, therefore, the number of individuals employed. In the behavioral model, wherein there exists some linearity in the relationship between real wages and working conditions and labor productivity, a lower real wage rate is not a necessary condition for reducing the unemployment rate nor is a higher real wage an obstacle to reducing it. In this scenario, unemployment, to the extent that it is demand-side induced, is not related to movements in real wages. Therefore, restoring full employment after a negative demand shock becomes a matter for demand management, not demand management that must be coordinated with measures designed to reduce real wages.

Unemployment, X-efficiency theory, Efficiency wages, Demand management, Behavioral economics, Keynesian economics

Abstract:
Daniel Kahneman and Vernon Smith were the joint recipients of the 2002 Nobel Prize in Economics. Kahneman's work challenges the assumption that individuals behave in a manner consistent with conventional economic wisdom. He maintains that individuals tend to be systematically error prone and possibly irrational. Smith, on the other hand, developed experiments and experimental environments to test hypotheses emanating from the conventional economic wisdom. Smith finds that, in spite of Kahneman's work, economic agents are rational and that economies are efficient. These differing views are discussed and placed in the context of the methodological and public policy debates in economics.

Nobel prize, behavioral, experimental, Smith, Kahneman, rationality, heuristics, biases

Abstract:
This is a theoretical paper examining the assumption of free will in choice behavior in economic theory. The assumption of free will in contemporary economics is an important starting point for socio-economic analysis in contrast to methodologies which assume that human action is pre-determined by forces beyond individual control. However, contemporary economic theory is devoid of choice in critical domains with important implication for economic analyses and public policy, given the ancillary assumption of the importance of market forces in determining choice behavior. The purpose of this paper is to argue that freedom of choice exists given traditional constraints such as relative prices and income. Conventional analysis pays little heed to non economic constraints on human action that affect and delimit but do not preclude free choice or free will. Of vital importance to free will in choice behavior are institutions which delimit the extent of coercion in the decision-making process. An important implication for research is the determination of the necessary and sufficient conditions for the existence of free will in choice behaviour. Given the existence of free will and free choice, individuals are morally responsible for their choices. It is therefore important to determine the extent which free will exists and that which constrains free will in choice behavior.

Free will, Individual behaviour, Choice efficiency, True preferences, Welfare, Economic theory

Abstract:
The hypothesis that economic freedom and related variables are significant determinants of real per capita income and growth is critically evaluated. Economic freedom is found necessary for higher levels of per capita income and growth largely in terms of threshold effects as opposed to persistent marginal effects. More economic freedom does not appear to yield higher levels of per capita income. And securing particular levels of economic freedom does not guarantee higher levels of per capita income or growth. Secure private property rights is found to be a most significant positive causal variable as is sound money, whereas moderate amounts of labor regulation and big government are not found to be bad for the economy. Also, good corporate governance, in addition to economic freedom, is of considerable import. Unlike most studies, traditional statistical methods are supplemented by graphical analysis in an effort to determine threshold values for economic freedom and its components.

New institutional economics, growth, economic freedom, private property rights, labor rights, government, governance, corruption, threshold effects, statistical analyses

Abstract:
The economics of labor supply, a basic building block of economic theory, cannot provide any substantive analytical predictions on the course of labor supply by an individual or a group. This is largely due to the absence, in the theory of income-leisure choice, of any consequential behavioral content which speaks to existing and changing preferences of individuals and to the differences in preferences across individuals. Introducing a discussion of preferences into the argument, in particular target real income and target nonmarket time, provides for a richer model of labor supply and for a more precise set analytical predictions with important public policy implications.

Labor supply, Preferences, Target income, Leisure preference, hierarchy of needs

Abstract:
Contrary to some of the leading critiques of neoclassical theory, I argue that this theoretical framework can incorporate the moral dimension into the modeling of economic agents when the consequences of their choices are not answerable to market forces. Neoclassical theory, broadly defined, simply stresses the potential trade-off that exists between altruistic or ethical behavior and the material well-being of the individual. Nevertheless, the behavioral assumptions of neoclassical theory are too narrow to deal with the potential ramifications of introducing the moral dimension into the objective function of workers, managers and owners. The conventional wisdom predicts that moral or ethical firms cannot survive in a competitive market since it is assumed that such firms must produce at relatively higher unit costs. However, higher cost firms can survive as demand is restructured towards the output of the relatively ethical firms. Moreover, modifying mainstream economic theory by introducing more realistic behavioral assumptions into the modeling of the economic agent allows for the simultaneous survival over time of both unethical and ethical firms that are cost competitive and profitable. These revisions of the conventional wisdom have important implications for public policy as well as for an understanding of the actual scope that is afforded to firm decision makers with regards to altruistic or ethical behavior.

Altruism, Ethics, Behavioral Economics, Rationality, Demand