Are Regulators Rational?
Journal des Economistes et des Etudes Humaines 2011, 17(1).
21 Pages Posted: 8 Sep 2014
Date Written: 2011
Thus far, psychological input has been used in economics mainly to highlight the cognitive imperfections of market participants. The normative implication of behavioral economics in its current state is that imperfections of market participants should be rectified by psychologically informed regulators. However, regulators are themselves imperfect actors with limited cognitive capacities. I propose some biases and illusions documented by cognitive psychologists that may be relevant to the political economy of government regulation.
Keywords: behavioral economics; bias; rationality; regulation
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