Download this Paper Open PDF in Browser

As-If Behavioral Economics: Neoclassical Economics in Disguise?

History of Economic Ideas, Vol. 18, No. 1, pp. 133-166, 2010

40 Pages Posted: 16 Sep 2010  

Nathan Berg

University of Otago, Department of Economics

Gerd Gigerenzer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Human Development

Date Written: January 1, 2010

Abstract

For a research program that counts improved empirical realism among its primary goals, it is surprising that behavioral economics appears indistinguishable from neoclassical economics in its reliance on “as-if” arguments. “As-if” arguments are frequently put forward in behavioral economics to justify “psychological” models that add new parameters to fit decision outcome data rather than specifying more realistic or empirically supported psychological processes that genuinely explain these data. Another striking similarity is that both behavioral and neoclassical research programs refer to a common set of axiomatic norms without subjecting them to empirical investigation. Notably missing is investigation of whether people who deviate from axiomatic rationality face economically significant losses. Despite producing prolific documentation of deviations from neoclassical norms, behavioral economics has produced almost no evidence that deviations are correlated with lower earnings, lower happiness, impaired health, inaccurate beliefs, or shorter lives. We argue for an alternative non-axiomatic approach to normative analysis focused on veridical descriptions of decision process and a matching principle – between behavioral strategies and the environments in which they are used – referred to as ecological rationality. To make behavioral economics, or psychology and economics, a more rigorously empirical science will require less effort spent extending “as-if” utility theory to account for biases and deviations, and substantially more careful observation of successful decision makers in their respective domains.

Keywords: bounded rationality, ecological rationality, as-if, fit, prediction, decision, process

JEL Classification: D03, B1, B4

Suggested Citation

Berg, Nathan and Gigerenzer, Gerd, As-If Behavioral Economics: Neoclassical Economics in Disguise? (January 1, 2010). History of Economic Ideas, Vol. 18, No. 1, pp. 133-166, 2010. Available at SSRN: https://ssrn.com/abstract=1677168 or http://dx.doi.org/10.2139/ssrn.1677168

Nathan Berg (Contact Author)

University of Otago, Department of Economics ( email )

P.O. Box 56
Dunedin, Otago 9016
New Zealand

Gerd Gigerenzer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Human Development ( email )

Lentzeallee 94
D-14195 Berlin
Germany

Paper statistics

Downloads
923
Rank
19,588
Abstract Views
5,216