“. . . decided to discard the assumption of market rationality that underlies most economics and to embrace the psychological insights of what’s known as ‘behavioral economics.’ . . .” and that Roubini “. . . and other prominent economics are paying more attention to behavioral economics, which starts from the premise that economic decisions, like other aspects of human behavior, are influenced by irrational psychological factors.”
This statement, standing alone, may appear superfluous, intuitively obvious, and just another ex post facto remark inspired by 20-20 hindsight. Of course, we’re irrational. We’re human. But there is more to it than that - there is a reservoir of theoretical and empirical knowledge in the field of behavioral economics that, as suggested in a recent post, may guide systematic empirical research to inform emerging economic policy in the U. S. and the world. I am not suggesting that behavioral economics has all the answers to all the questions, but I am saying it provides a context within which significant questions may be asked. And I offer a forum to begin asking these questions.
I was recently reappointed to chair the Behavioral Science Committee of the ABA Section of Science and Technology, and am considering how best to approach a discussion of how behavioral economics may assist in formulation of economic policy and law. Please share any thought you may have on this.
Finally, a word about the title of this post. First, I recently shared a distinction among Econs, Mecons and Wecons, as heuristic extension of Thaler’s distinction between Econs and Humans. I would like to add the term “Becons” to this list, as a shorthand version of “behavioral economist.” I sincerely hope the behavioral economists of the world will not be offended by my poetic propensities. Second, the reference to crystal balls is both a tip of the hat to those Becons who predicted the financial meltdown, and a challenge to Becons whose theoretical and empirical work may guide us into the future of economics.