16 ms·

Why Is Behavioral Economics So Popular?

208 points by malshe 8y ago

m_ke 8y ago
I blame freakonomics. It's a great podcast (and book) but it occasionally pushes some shoddy science. Also, TED and TEDx for popularizing pseudo intellectual garbage. https://www.vox.com/science-and-health/2018/9/19/17879102/brian-wansink-cornell-food-brand-lab-retractions-jama https://www.vox.com/science-and-health/2018/9/19/17879102/br... http://nautil.us/blog/impossibly-hungry-judges http://nautil.us/blog/impossibly-hungry-judges
- colechristensen 8y ago
  .... and basically the idea that telling a good story is more important than representing the truth when talking about science.
  - thoughtexplorer 8y ago
    Sadly that extends to everything. Story and emotion trump facts.
    - da_chicken 8y ago
      Over the short term. Over the human term. Over the long term, facts win out because facts tend not to change. People will moan and complain and twist and excuse and blame, but facts just don't give up being facts. Facts don't get tired or change their mind. It might take 10 years or a hundred or a thousand. Truth is patient like that. Unfortunately, that doesn't really solve any problems in the short term before people start dying.
    - wolfgke 8y ago
      > Story and emotion trump facts. Pun intended?
  - J-dawg 8y ago
    Freakonomics etc made us fall in love with that particular kind of story where the outcome is kinda counter-intuitive and surprising and clever all at the same time. For example - the legalised abortion and crime effect. I'm sure you can think of plenty more. I think these stories are like crack to "rational" people. They have all the thrill of a good conspiracy theory, feel rebellious and anti-establishment, yet they're backed up by "real science". And you get to sound clever when you tell your friends about them. I know I'm a sucker for them.
    - deleted 8y ago
      [deleted]
    - smogcutter 8y ago
      See also: anything by Malcolm Gladwell
    - ellius 8y ago
      I think "pattern addiction" is definitely a thing. Human beings are constantly searching for order and patterns. Getting other people to buy into your pattern/narrative/whatever is probably as old as the human race, but in the last 100-150 years we've gotten really fucking good at tricking each other on a massive scale. I think this is why people seem to intuitively understand that political media manipulation, advertising, junk science, etc. are related phenomena. They're all about hijacking the pattern recognition capacity of human beings for personal gain. It's essentially a form of parasitism.
    - colechristensen 8y ago
      >feel rebellious and anti-establishment I wonder what this is and why it is so prevalent (and maybe how it made our species/specific cultures successful). You can list a large number of groups that wrap up their identity and value systems around being opposed to or having knowledge that counters their perception of "the majority". It is both incredibly attractive and a way to signal your value by going against the grain in some way or another, in some field or another. Some philosopher/pyschologist/neurologist/evolutionary biologist could probably do a very compelling analysis about the human need to rebel or obey. One of the societal ills of the 21st century is that we're running out of big clear cut things to rebel against but are continuing to rebel with the same intensity while directing it somewhat aimlessly all over the place, and now mostly just at each other's rebellion itself. Political parties in America these days are less anchored in particular issues and more about believing strongly in something your opponent is against and making sure your team wins.
  - maym86 8y ago
    Every story is a twist. "This one thing you thought you knew isn't actually true". Great for telling friends in the pub but misleading through selection bias as they don't tell all the stories where things aren't different to what was expected.
- platz 8y ago
  TED and TEDx had great content in the first few years, when profs were able to present their lifetime's work. Once they burned through those folks, they turned to cranks/homeopaths/etc
  - thoughtexplorer 8y ago
    It sucks what happened with them. TED/TEDx talks were awesome and I used to be able to recommended people watch any and all of them. Until I started seeing stuff like this https://www.youtube.com/watch?v=w8J5BWL8oJY https://www.youtube.com/watch?v=w8J5BWL8oJY
    - platz 8y ago
      lol i skipped to the end and instantly felt bad for the audience even with my audio off
      - chasedehan 8y ago
        my god, that is terrible! I generally think there is good content in the TED talks, but I now won't even look at the TEDx talks because regionally they do have to turn to the cranks.
    - ww520 8y ago
      OMG. That's garbage.
    - Finch2192 8y ago
      another egregious example: https://www.youtube.com/watch?v=FMJgZ4s2E3w https://www.youtube.com/watch?v=FMJgZ4s2E3w
    - realusername 8y ago
      Haha, that's even worse than the TED rocks parody...
  - escherplex 8y ago
    Recommend buddying-up with some friends and subscribe to Great Courses on ROKU if you want some additional intellectual stimulation. Runs around US$180/annum but app channel can be shared among (I believe) 5 other remote sites. I subscribe, use it on three separate ROKU boxes, and allowed registration from online acct to a relative living a couple of miles away and a retired neighbor who was pining for some mental stimulation - also got her away from the damned news channels :)
- airstrike 8y ago
  TED and TEDx aren't the same thing
  - kisstheblade 8y ago
    Oh my, how can anybody think that they are in any way affiliated!? /s That's just a cop out. Both are equally dubious, sugarcoated garbage.
- fhbdukfrh 8y ago
  Malcom Gladwell is also very good a pushing interesting, well-told stories with spurious scientific basis.
  - seventhtiger 8y ago
    I agree. Although Freakonomics feels like an exploration of the weird and unexpected, while Gladwell feels like he is handpicking studies to push the bigger narrative of a book.
- your-nanny 8y ago
  you blame them for what exactly?
- paulcole 8y ago
  Gladwell’s whole schtick is shooting an arrow and then drawing the bullseye around where it lands.
tw1010 8y ago
Why wouldn't it? It's a more accurate model than what came before it, the rational actor model.
- gota 8y ago
  It helps that when you read Dan Ariely's stuff it confirms every kind of thought you had on the back of your head about how people 'work'. I'm aware that doesn't mean it's correct per se, in a hard-science sense, but it does help popularizing the field when every person who reads Predictably Irrational recommends it to other people
- mc32 8y ago
  Perhaps it’s facile to say it’s to economics understading what placebo is to medicine.
- nybble41 8y ago
  To support a claim that an economic actor is not rational you would first need to assert that you are more familiar than they are with their personal preferences and their understanding of the available options, which seems to me the height of arrogance. Which do you suppose is more likely: that people deliberately choose to act in ways that they know are not in their own best interest, as they define it, or that they are acting rationally but their idea of what is in their best interest differs from your own? A key element of the rational actor model is that there is no way to know anyone else's preferences aside from observing the choices they make. Even asking them directly is not considered an authoritative source, since preferences can change at any time and people don't always know just what they would choose until they're actually confronted with the choice.
40acres 8y ago
There's a lot of pop science and good marketing around behavioral science but at it's core I think it helps complete the picture of what economic research tries to deliver. Prior to being introduced to behavioral economics my exposure to economics was very quantitative, while this model is necessary it's incomplete. A lot of economics seems to assume that the actors are equally rational beings but in the real world that's just not the case. Behavioral economics seems to bring actual human experience into economics.
- chimeracoder 8y ago
  > A lot of economics seems to assume that the actors are equally rational beings but in the real world that's just not the case. Behavioral economics seems to bring actual human experience into economics. This is a huge misconception. Economics doesn't assume that actors are perfectly rational actors, any more than physics assumes that interactions always take place inside a frictionless vacuum. It's just one model that's used as a starting point to understand mechanical interactions.
  - EmbarrassedFuel 8y ago
    Oxford? Sounds about right for the average PPE student...
  - improbable22 8y ago
    It's even stronger than that: the model you derive by assuming a room full of perfectly rational agents may well be accurate, even though in reality the agents are not rational. Or at least, it may do an excellent job of describing the aggregate behaviour, even if it does terribly at describing individual's behaviour. Physics does this all the time, too. You can, indeed must, be wrong about all the microscopic details... but despite that, you can often get the correct macroscopic model.
    - soVeryTired 8y ago
      This is something like Milton Friedman's 'pool player analogy'. It doesn't matter if a pool player isn't calculating all the angles and frictions when he pots a ball, because it's as if he was. So as long as your model has predictive power, unrealistic assumptions don't matter. The unfortunate part is that most models in economics have lousy predictive power.
dopamean 8y ago
When I was in college (2004) the school I went to had an interdisciplinary major called Philosophy, Politics, and Economics (PPE). It has a "thematic concentration" called "Choices and Behavior" that was very popular. Many, many students majored in PPE so I don't mean to comment on literally all of the people who chose it, however, amongst my circle of friends the ones who chose "Choices and Behavior" chose it because in their minds there was something cool about the idea of using psychology to manipulate people. I don't think they had anything nefarious in mind but they were definitely attracted to the magical language used to describe the practical applications of the things they would learn. It actually felt somewhat similar to the way my software developer friends talk about machine learning today.
bko 8y ago
Much of behavioral economics is based on a very shaky foundation of psychology. For instance, the priming experiments cannot be reproduced. > This result confirms Kahneman’s prediction that priming research is a train wreck and readers of his book “Thinking Fast and Slow” should not consider the presented studies as scientific evidence that subtle cues in their environment can have strong effects on their behavior outside their awareness. https://replicationindex.wordpress.com/2017/02/02/reconstruction-of-a-train-wreck-how-priming-research-went-of-the-rails/ https://replicationindex.wordpress.com/2017/02/02/reconstruc...
- 40acres 8y ago
  I know that psychology is particularly devasted by the replication crises but aren't branches of research affected as well?
  - EnFinlay 8y ago
    Absolutely, and we should have a lot of skepticism to conclusions from those branches of research as well.
  - TangoTrotFox 8y ago
    I think one of the problems "we" have is that bias confirmation is a hell of a drug. By "we" I mean individuals, researchers, companies, corporations, governments, everybody. When we see something that intuitively makes sense to us, especially one that confirms our biases - we tend to want to believe it, because we all believe what we think is true and so things that support what we believe must therefore be true, according to what we believe. Some word salad there, but I think that's reasonably clear. Like you mention the replication crisis should be really leaving most of all psychology results, not only past but also present, in serious doubt -- let alone anything contingent on those past results. But again the problem is that when new research comes out that confirms our biases, we don't expend the energy to challenge it. And it seems that many in science are more concerned with themselves than their science - something that the replication crisis provides a great deal of evidence for. People aren't putting out trash science by accident. They need to publish, and trash science is what gets published. And the replication crisis hasn't changed this. There seems to have been, at best, token efforts to try to more fully ensure the truthfulness of what's being published. So we continue to believe what we want to believe, with science increasingly falling victim to the act of starting at a conclusion and working your way backwards.
chuckgreenman 8y ago
Merlin Mann coined, or at least heavily uses the phrase "turns out journalism" which I really like. We like to have something that subverts our expectations. At some level we want to be told that the advice we don't like isn't actually useful.
- gowld 8y ago
  This very website was built on a foundation of "turns out", one of Paul Graham's favorite rhetorical crutches. http://jsomers.net/blog/it-turns-out http://jsomers.net/blog/it-turns-out
tabtab 8y ago
Because when you can't win by building a better mouse-trap, you try to win by tricking the mice.
- AstralStorm 8y ago
  If your "trick" does not actually work, you're wasting time and resources. Most of behavioral economy is not seriously tested, because the endpoint is not "tricking the mouse" but positioning yourself as a trickster educator, a place that cannot be blamed. One of classic cons.
  - tabtab 8y ago
    Ideally you try different tricks in different areas as an experiment, and merge and adjust the best performers. "It's not random marketing BS, it's a genetic algorithm."
  - lucas_membrane 8y ago
    > If your "trick" does not actually work, you're wasting time and resources. Many of the popularly-cited experiments both in behavioral economics and in psychology involve misleading or deceiving the experimental subjects, and many more simply conceal their objectives. The assumption that the suckers never caught on and the results should be interpreted accordingly is seldom questioned. In some cases, the assumption is verified by asking the subjects about their motivations post-mortem, ignoring the long-standing axiom of applied behavioral economics (business) that there are two reasons anyone does anything, the one they will tell you and the real one. The null hypotheses in these experiments ought to be (1) the subjects know or can figure out what the experimenters are looking for, and (2) the subjects are there because they want to help the experimenters. Consider the subject who is paid a small sum to participate and interacts with a either a researcher who must publish or perish or one who will put another batch of subjects through a similar rigmarole next year if they cannot get their dissertation accepted this year. What does motivational psychology say about the behavior of such a subject? Is such a search for truth better than a congressional committee?
rossdavidh 8y ago
I think it's mostly the weakness of the pre-behavioral economics. The status quo was economics that, almost on principle, ignored the way actual humans behave. Any amount of consideration of how actual humans behave, however limited or flawed, will look like an improvement. It's much like the way behaviorism in psychology, which seems lacking nowadays, actually looked good compared to the Freudian school of psychology it was displacing.
- conanbatt 8y ago
  > The status quo was economics that, almost on principle, ignored the way actual humans behave Why do people say this. This was never true. The Wealth of Nations is basically a compendium on human behavior, and that was 200 years ago.
  - rossdavidh 8y ago
    The Wealth of Nations was not the status quo, though. The neoclassical model of economics was much more committed to a model in which the individual maximizes some utility function. The neoclassical model certainly built on Adam Smith, but by no means the same as, and one of the differences was that neoclassical economics tried to find ways to ignore or abstract away anything to do with human psychology.
kolbe 8y ago
It's easy to understand and relate to. To even comprehend contemporary research in most scientific disciplines, you need a seriously strong understanding of math or chemistry--a level so high that it cannot be 'popular'. Behavioral Economics only require remedial algebra, statistics and literacy, and the topics they address are usually familiar to everyday people's lives.
elvinyung 8y ago
Interestingly, if Scott Alexander is right, behavioral economics stopped being en vogue a few years ago. From Slate Star Codex's review of The Black Swan [1]: > All of them continue to do great object-level work in their respective fields, but it seems like the “moment” for books about rationality came and passed around 2010. Maybe it’s because the relevant science has slowed down – who is doing Kahneman-level work anymore? Maybe it’s because people spent about eight years seeing if knowing about cognitive biases made them more successful at anything, noticed it didn’t, and stopped caring. [1] http://slatestarcodex.com/2018/09/19/book-review-the-black-swan/ http://slatestarcodex.com/2018/09/19/book-review-the-black-s...
resters 8y ago
Insightful essay. The nudges he describes were elaborated in great detail in the book called Nudge by Richard Thaler. In the book, Thaler describes nudges such as placing the fresh fruit in the school lunch line in a more easily reachable location than the junk food. The idea is that kids will be more inclined to choose a piece of fresh fruit if it's in easy reach but the chocolate bar requires bending down, etc. While such nudges may sometimes be measurably effective, we must also realize that the idea of socially beneficial nudges evokes a sort of utopian paternalism. The idea behind Nudge paints the picture that there is a light-weight, unobtrusive version of central planning (or central nudging) that can achieve some of the utopian outcomes that planners wish for, but which is less encroaching upon individual freedom. At what point do situational nudges start to feel like social nudges? What if the chubby kid who wants the chocolate has to humiliate himself by reaching far overhead and fishing around blindly in an out-of-reach bin to find the chocolate while everyone else waits impatiently? When does spending hours to opt out of helpful services become an inappropriate encumberment? Google just launched sentence completion in gmail. Combine this with nudges and fuck you won't be corrected to duck you, the typist will see an autocompleted hey I'm feeling really frustrated about what you said right now ready to accept with the tap of a single button. Nudges are meant as a mechanism of social control. Gal points out wisely that if we rush to judgment about the why of behaviors, then our behavioral economic remedies (nudges, etc.) might be terribly wrongheaded.
- tcopeland 8y ago
  "Nudge" is on the Center for Homeland Defense and Security reading list: https://www.chds.us/c/hsbooks https://www.chds.us/c/hsbooks
mcguire 8y ago
"In order to appeal to other economists, behavioral economists are too often concerned with describing how human behavior deviates from the assumptions of standard economic models, rather than with understanding why people behave the way they do." That is...actually, a good point, and exactly describes something I'd noticed. One of the problems with economics is the assumption of the "perfectly rational actor", which sometimes leads to economic's descriptive vs. prescriptive issue: someone will create a massively complicated scheme that maximizes some positive value under a certain set of assumptions and then assume that people actually behave like that. Some of what I've read, including by Richard Thaler, who I otherwise rather like, buys into that scenario, saying "no, this is what they do; they behave irrationally". Sure, people aren't by any means perfectly rational, but it's not irrational to not perform a complicated maneuver that's only useful in a specific, odd, circumstance. There's another interesting bit from the article: "[In the class mug experiment showing "loss aversion,"] the participants may not have had a clearly defined idea of what the mug was worth to them. If that was the case, there was a range of prices for the mug ($4 to $6) that left the participants disinclined to either buy or sell it, and therefore mug owners and non-owners maintained the status quo out of inertia. Only a relatively high price ($7 and up) offered a meaningful incentive for an owner to bother parting with the mug; correspondingly, only a relatively low price ($3 or below) offered a meaningful incentive for a non-owner to bother acquiring the mug. "In experiments of our own, we were able to tease apart these two alternatives, and we found that the evidence was more consistent with the “inertia” explanation. Dr. Thaler has dismissed our argument as a “minor point about terminology,” since the deviant behaviors attributed to loss aversion occur regardless of the cause. But a different account for why a behavior occurs is not a minor terminological difference; it is a major explanatory difference. Only if we understand why a behavior occurs can we create generalizable knowledge, the goal of science." "The deviant behaviors attributed to loss aversion?" Not only is there nothing deviant about the behavior, it's not in any sense "loss aversion". In fact, it's perfectly rational, given limited rationality resources, not to engage the whole engine in an otherwise minor scenario.
gowld 8y ago
The subtitle is entertaining: "The recent vogue for this academic field is in part a triumph of marketing." and in the article: "It reflects the widespread perception that behavioral economics combines the cleverness and fun of pop psychology with the rigor and relevance of economics." The author is using behavioral economics to argue against behavioral economics.
- sailfast 8y ago
  Agreed - I'm confused by this op-ed. A professor of marketing is upset that marketing is not getting enough credit for the ideas that are also present in behavioral economics ('fame of behavioral econ is a triumph of marketing' har har). The main purpose seems to be to crap on Thaler for dismissing his critique of loss aversion instead of embracing his hypothesis on the buy-side. This neither discredits behavioral economics, nor makes a clear case for how academe related to marketing would better humanity or its understanding.
zebrafish 8y ago
Nitpick here.... There seems to me be to be significant difference between "loss" in terms of something already tangibly owned and "loss" in terms of missing out on an opportunity. Of course marketing schemes for "act now or lose out" won't work. I don't currently experience the opportunity and therefore losing out exerts no power over me. However, losing a mug when I already own the mug would demand a higher price from me. I would agree with Dr. Thaler that the inertia thing is a minor point about terminology. Call it loss aversion or call it inertia. Marketing schemes that include the word "loss" in their pitch are not using the same strategy that behavioral economists are talking about here.
- jonny_eh 8y ago
  Bingo, this criticism of behavioural economics is a straw man.
- gowld 8y ago
  If loss aversion exists but it's not inertia, then you should expect to see "win aversion" as much as "loss aversion". Do you?
  - zebrafish 8y ago
    I'm not saying it isn't inertia. I'm saying that Thaler is right in saying that is a semantics issue. Call it what you want, the actual behavior is real.
deleted 8y ago
[deleted]
motiw 8y ago
Maybe because it has uncharted economic value, especially with access to large number of people via the internet, large number means that taking advantage of small behavior can translate into much value.
- John_KZ 8y ago
  Great point. Javascript behavioral tracking and shadow profiles gave advertisers and various experts (psychologists, sociologists etc) both the incentive and the unprecedented ability to perform experiments on hundreds of thousands of clueless people. All that in real time, in their "natural" environment, with real stakes. Of course we can model this type of economics better than we did 10-20 years ago.
chasedehan 8y ago
Behavioral Economics has only gotten "so popular" in non-academic circles. This is mostly due to the quasi-science of economics where we try to mathematically model the world. These "cute Freakonomics" type studies, while publishable in some outlets, haven't even come close to displacing traditional microeconomic foundations in mainstream economics. I'm an Economics PhD and former professor and most of the research isn't taken very seriously. Everyone acknowledges that people don't behave "rationally", but no one yet has been able to figure out how to build these behavioral assumptions into a working model that is actionable.
- gowld 8y ago
  Aren't "loot boxes" and casinos and the free-to-play game industry a great example of behavioral economics in action?
  - alephnil 8y ago
    That some businesses have figured out how to exploit people's irrationality does not mean that economists have a good model for how actual people behave, and how it differs from rational behaviour.
- zoomablemind 8y ago
  What are the expectations for such actionable economic models? To improve predictability or to better the management of resources in human societies? Indirectly, it's a question about the optimization goal that the mainstream models are trying to achieve.
- your-nanny 8y ago
  No one takes behavioral econo.ics seriously? Well maybe stodgy old school economists who are more mathmetician than social and behavioral scientists. But there are lots of serious scientists using ideas from behavioral economics to study the brain and get published in outlets like Nature and Nature Neuroscience. psh!
mcrad 8y ago
I tend to think this is perfectly correlated with the rise of Big Data. Just as banks scored your likelihood to repay a loan based on your past behavior, marketeers want to score your economic value based on the same and more (transaction history + whatever personal data history assumed to be relevant). I suppose this doesn't follow the real definition of behavioral economics but it sure seems related - like let's hire a data science expert to write economic models on consumer behavior(?) In short, this field is popular because it gives power to the internet Giants.
- gowld 8y ago
  Isn't that regular economics? Big Data marketers don't care about understanding psychology, they just care about what generates conversions. "Big data" means you make decisions automatically from data without forming theories, since you have plenty of signal.
  - mcrad 8y ago
    Micro-economics. I suppose the point is if you aren't applying expertise in psychology then it's not "behavioral"; however, big data is essentially the push to model your behavior to greater level of precision (nano-economics?). I don't see how signal:noise ratio fits in at all.
anon49124 8y ago
I would also ask: why are "useless" majors so popular? Ostentatious elite uselessness?
sonnyblarney 8y ago
It's classic pop psychology (which we've always loved) mixed in with some data points so it's like crack for the 'modern' bourgeois. So it's like 19th/20th century political theory minus the ideology, plus the 'science' ... the ultimate 'educated' parlour room fodder!
deleted 8y ago
[deleted]
nabla9 8y ago
Behavioral Economics is applying knowledge of human behaviour to economics. There is need to go to the opposite direction. Economics analysis of applied to human behaviour. Biases are are not always errors. They can be cognitive shortcuts and optimizations that may be reasonable heuristic. There Is More to Behavioral Economics Than Biases and Fallacies http://behavioralscientist.org/there-is-more-to-behavioral-science-than-biases-and-fallacies/ http://behavioralscientist.org/there-is-more-to-behavioral-s... > A widespread misconception is that biases explain or even produce behavior. They don’t—they describe behavior. The endowment effect does not cause people to demand more for a mug they received than a mug-less counterpart is prepared to pay for one. It is not because of the sunk cost fallacy that we hang on to a course of action we’ve invested a lot in already. Biases, fallacies, and so on are no more than labels for a particular type of observed behavior, often in a peculiar context, that contradicts traditional economics’ simplified view of behavior. >The conversation around biases is almost uniformly negative: they screw up our decision making, or undermine our health, wealth, and happiness. However, biases evolved with us, and for good reasons...
- fanzhang 8y ago
  It's widely acknowledged in behavioral economics that biases have their uses. In fact, usually the phrase used to describe them is "Heuristics and Biases"[1]. It's first and foremost a heuristic -- a reasonably good way to generate good behavior. Secondarily, in certain specific situations, it causes non-optimal behavior. [1] ( https://www.amazon.com/Heuristics-Biases-Psychology-Intuitive-Judgment/dp/0521796792 https://www.amazon.com/Heuristics-Biases-Psychology-Intuitiv... )
  - jonny_eh 8y ago
    Exactly, discovering economic biases is like discovering optical illusions. The existence of optical illusions doesn't mean that human sight is always flawed, only flawed in certain edge cases.
    - neuronexmachina 8y ago
      "All models are wrong, but some are useful." -- statistician George E.P. Box
jonbarker 8y ago
Because it's interesting according to this definition: https://www.sfu.ca/~palys/interest.htm https://www.sfu.ca/~palys/interest.htm . Also the article mentions the mug example (selling a mug for more if you have one than you'd be willing to buy it for) as being a classic behavioral example of loss aversion. I actually thought it was an example of the endowment effect according to behavioral economists.
quadrangle 8y ago
Because almost anything that bothers being at all empirical is better than the nonsense we get from classical economics. Now we just need a revolution in economics comparable to the cognitive psychology movement that got that field beyond Skinnerian behaviorism.
tim333 8y ago
The author looks at some rather trivial aspects of behavioural economics or as he puts it >In this respect, behavioural economics can be thought of as endorsing the outsize benefits of psychological “tricks,”... But it also covers bubbles and crashes which have major effects in the billions/trillons financially and with millions having their jobs and housing effected. It would seem sensible to take that stuff seriously.
sien 8y ago
The guy who Tversky and Kahneman really hated, Gerd Gigerenzer had a very good answer to a lot of their work. He pointed out that: A critic of the work of Daniel Kahneman and Amos Tversky, Gigerenzer argues that heuristics should not lead us to conceive of human thinking as riddled with irrational cognitive biases, but rather to conceive rationality as an adaptive tool that is not identical to the rules of formal logic or the probability calculus. He and his collaborators have theoretically and experimentally shown that many so-called cognitive fallacies are better understood as adaptive responses to a world of uncertainty—such as the conjunction fallacy, the base rate fallacy, and overconfidence.[4] https://en.wikipedia.org/wiki/Gerd_Gigerenzer https://en.wikipedia.org/wiki/Gerd_Gigerenzer His books are well worth a read. Nassim Taleb also has a similar criticism in that he says that Kahneman and Tversky essentially said that humans don't act according to theoretical rules but instead have their own heuristics that have been derived from dealing with an uncertain world throughout history: https://twitter.com/nntaleb/status/883689826335281153?lang=en https://twitter.com/nntaleb/status/883689826335281153?lang=e...
- Balgair 8y ago
  Rationality is somewhat of a new concept to humans. It's somewhat surprising that economists took it so literally for that long and put and any real faith in it. The lemma of rationality does make the math a LOT easier, and we're doing better now about the irrationality aspects, but that spurt of faith in rationalism was quite interesting. For the large majority of our history, we've not been rational in the least. HN had a good discussion [0] on the Medieval Mindset [1] earlier in the summer. For ~1000 years in the Medieval period, the main mindsets were not rationality vs. irrationality, right vs. less-wrong vs. wrong, etc. But more Pious vs Impious, Cruel vs Kind, The Ideal vs the Real, etc. The people were no less people, but their heads weren't ours. What economic theories will come next, what new ways of thinking, what new mindsets? We're so focused on the rational, the 'right' answers, these days. But life, as we all know, is VERY stochastic ( a fancy word for random ). Maybe new mindsets about the randomness, bounded and given standards of deviation, will be a new paradigm, not just in economics, but in everything we do. [0] https://news.ycombinator.com/item?id=17058487 https://news.ycombinator.com/item?id=17058487 [1] https://coinsandscrolls.blogspot.com/2017/09/thinking-medieval-seeking-endarkenment.html https://coinsandscrolls.blogspot.com/2017/09/thinking-mediev...
thedudeabides5 8y ago
"Why Is Behavioral Economics So Popular?" Probably because people got sick of a guy with a formulae lecturing them about how human's aught behave as opposed to developing functional models of how humans do behave https://en.wikipedia.org/wiki/Ultimatum_game https://en.wikipedia.org/wiki/Ultimatum_game The Nash Equilibrium of this game is to offer the other person $0...unless you incorporate the idea that humans may care about more than pure monetary payoffs in their mental gymnastics. Kinda like when that friend from undergrad studying business told you that paying anything more your minimum tax bill was 'irrational'
calhoun137 8y ago
Behavioral economics is popular because its a better model. It's clear that any model of human behavior and decision making will necessary be very complicated. It doesn't make any sense to right at the start decide that the only factor that will be considered is financial expected value. Even though any model based on such an assumption will be severely flawed, this is the view of main stream economics, and this explains why behavioral economics is a better model.
benrawk 8y ago
I know this paper well (and the larger point being made in the paper; I have seen Dr. Gal present on it in seminars). I think the point he is trying to make is that what we really need for understanding of human behavior is good psychological theory of how humans operate. In many cases (loss aversion being one of them, per Dr. Gal), behavioral economics describes the data, but does not provide a deeper analysis of why the data are the way they are (that is, why the humans being studied acted as they did). Of course not true of all behavioral economics, but some of it.
- sibmike 8y ago
  I'd like to add that the data comes from experiments, which are simplified versions of real life problems. Oftentimes, "irrational" behavior depends on the way simplification is made and have no chances to generalise outside the laboratory, because in real life signal is more complex and informative. Yet a paper will be published stating "people behave irrationally". (in the lab with given peculiar instructions)
purplezooey 8y ago
We need less behavioral economics and more get off your lazy arse and vote economics. 27% voting rate for those aged 18-34.
simonveith123 8y ago
https://www.digistore24.com/redir/34473/SimonV/ https://www.digistore24.com/redir/34473/SimonV/
Dowwie 8y ago
Why has Economics been so popular? What has Economics' mathematically-validated storytelling gotten wrong and how has that impacted society?

208 points by malshe 8y ago

m_ke 8y ago

I blame freakonomics. It's a great podcast (and book) but it occasionally pushes some shoddy science. Also, TED and TEDx for popularizing pseudo intellectual garbage. https://www.vox.com/science-and-health/2018/9/19/17879102/brian-wansink-cornell-food-brand-lab-retractions-jama https://www.vox.com/science-and-health/2018/9/19/17879102/br... http://nautil.us/blog/impossibly-hungry-judges http://nautil.us/blog/impossibly-hungry-judges

colechristensen 8y ago
.... and basically the idea that telling a good story is more important than representing the truth when talking about science.
- thoughtexplorer 8y ago
  Sadly that extends to everything. Story and emotion trump facts.
  - da_chicken 8y ago
    Over the short term. Over the human term. Over the long term, facts win out because facts tend not to change. People will moan and complain and twist and excuse and blame, but facts just don't give up being facts. Facts don't get tired or change their mind. It might take 10 years or a hundred or a thousand. Truth is patient like that. Unfortunately, that doesn't really solve any problems in the short term before people start dying.
  - wolfgke 8y ago
    > Story and emotion trump facts. Pun intended?
- J-dawg 8y ago
  Freakonomics etc made us fall in love with that particular kind of story where the outcome is kinda counter-intuitive and surprising and clever all at the same time. For example - the legalised abortion and crime effect. I'm sure you can think of plenty more. I think these stories are like crack to "rational" people. They have all the thrill of a good conspiracy theory, feel rebellious and anti-establishment, yet they're backed up by "real science". And you get to sound clever when you tell your friends about them. I know I'm a sucker for them.
  - deleted 8y ago
    [deleted]
  - smogcutter 8y ago
    See also: anything by Malcolm Gladwell
  - ellius 8y ago
    I think "pattern addiction" is definitely a thing. Human beings are constantly searching for order and patterns. Getting other people to buy into your pattern/narrative/whatever is probably as old as the human race, but in the last 100-150 years we've gotten really fucking good at tricking each other on a massive scale. I think this is why people seem to intuitively understand that political media manipulation, advertising, junk science, etc. are related phenomena. They're all about hijacking the pattern recognition capacity of human beings for personal gain. It's essentially a form of parasitism.
  - colechristensen 8y ago
    >feel rebellious and anti-establishment I wonder what this is and why it is so prevalent (and maybe how it made our species/specific cultures successful). You can list a large number of groups that wrap up their identity and value systems around being opposed to or having knowledge that counters their perception of "the majority". It is both incredibly attractive and a way to signal your value by going against the grain in some way or another, in some field or another. Some philosopher/pyschologist/neurologist/evolutionary biologist could probably do a very compelling analysis about the human need to rebel or obey. One of the societal ills of the 21st century is that we're running out of big clear cut things to rebel against but are continuing to rebel with the same intensity while directing it somewhat aimlessly all over the place, and now mostly just at each other's rebellion itself. Political parties in America these days are less anchored in particular issues and more about believing strongly in something your opponent is against and making sure your team wins.
- maym86 8y ago
  Every story is a twist. "This one thing you thought you knew isn't actually true". Great for telling friends in the pub but misleading through selection bias as they don't tell all the stories where things aren't different to what was expected.
platz 8y ago
TED and TEDx had great content in the first few years, when profs were able to present their lifetime's work. Once they burned through those folks, they turned to cranks/homeopaths/etc
- thoughtexplorer 8y ago
  It sucks what happened with them. TED/TEDx talks were awesome and I used to be able to recommended people watch any and all of them. Until I started seeing stuff like this https://www.youtube.com/watch?v=w8J5BWL8oJY https://www.youtube.com/watch?v=w8J5BWL8oJY
  - platz 8y ago
    lol i skipped to the end and instantly felt bad for the audience even with my audio off
    - chasedehan 8y ago
      my god, that is terrible! I generally think there is good content in the TED talks, but I now won't even look at the TEDx talks because regionally they do have to turn to the cranks.
  - ww520 8y ago
    OMG. That's garbage.
  - Finch2192 8y ago
    another egregious example: https://www.youtube.com/watch?v=FMJgZ4s2E3w https://www.youtube.com/watch?v=FMJgZ4s2E3w
  - realusername 8y ago
    Haha, that's even worse than the TED rocks parody...
- escherplex 8y ago
  Recommend buddying-up with some friends and subscribe to Great Courses on ROKU if you want some additional intellectual stimulation. Runs around US$180/annum but app channel can be shared among (I believe) 5 other remote sites. I subscribe, use it on three separate ROKU boxes, and allowed registration from online acct to a relative living a couple of miles away and a retired neighbor who was pining for some mental stimulation - also got her away from the damned news channels :)
airstrike 8y ago
TED and TEDx aren't the same thing
- kisstheblade 8y ago
  Oh my, how can anybody think that they are in any way affiliated!? /s That's just a cop out. Both are equally dubious, sugarcoated garbage.
fhbdukfrh 8y ago
Malcom Gladwell is also very good a pushing interesting, well-told stories with spurious scientific basis.
- seventhtiger 8y ago
  I agree. Although Freakonomics feels like an exploration of the weird and unexpected, while Gladwell feels like he is handpicking studies to push the bigger narrative of a book.
your-nanny 8y ago
you blame them for what exactly?
paulcole 8y ago
Gladwell’s whole schtick is shooting an arrow and then drawing the bullseye around where it lands.

tw1010 8y ago

Why wouldn't it? It's a more accurate model than what came before it, the rational actor model.

gota 8y ago
It helps that when you read Dan Ariely's stuff it confirms every kind of thought you had on the back of your head about how people 'work'. I'm aware that doesn't mean it's correct per se, in a hard-science sense, but it does help popularizing the field when every person who reads Predictably Irrational recommends it to other people
mc32 8y ago
Perhaps it’s facile to say it’s to economics understading what placebo is to medicine.
nybble41 8y ago
To support a claim that an economic actor is not rational you would first need to assert that you are more familiar than they are with their personal preferences and their understanding of the available options, which seems to me the height of arrogance. Which do you suppose is more likely: that people deliberately choose to act in ways that they know are not in their own best interest, as they define it, or that they are acting rationally but their idea of what is in their best interest differs from your own? A key element of the rational actor model is that there is no way to know anyone else's preferences aside from observing the choices they make. Even asking them directly is not considered an authoritative source, since preferences can change at any time and people don't always know just what they would choose until they're actually confronted with the choice.

40acres 8y ago

There's a lot of pop science and good marketing around behavioral science but at it's core I think it helps complete the picture of what economic research tries to deliver. Prior to being introduced to behavioral economics my exposure to economics was very quantitative, while this model is necessary it's incomplete. A lot of economics seems to assume that the actors are equally rational beings but in the real world that's just not the case. Behavioral economics seems to bring actual human experience into economics.

chimeracoder 8y ago
> A lot of economics seems to assume that the actors are equally rational beings but in the real world that's just not the case. Behavioral economics seems to bring actual human experience into economics. This is a huge misconception. Economics doesn't assume that actors are perfectly rational actors, any more than physics assumes that interactions always take place inside a frictionless vacuum. It's just one model that's used as a starting point to understand mechanical interactions.
- EmbarrassedFuel 8y ago
  Oxford? Sounds about right for the average PPE student...
- improbable22 8y ago
  It's even stronger than that: the model you derive by assuming a room full of perfectly rational agents may well be accurate, even though in reality the agents are not rational. Or at least, it may do an excellent job of describing the aggregate behaviour, even if it does terribly at describing individual's behaviour. Physics does this all the time, too. You can, indeed must, be wrong about all the microscopic details... but despite that, you can often get the correct macroscopic model.
  - soVeryTired 8y ago
    This is something like Milton Friedman's 'pool player analogy'. It doesn't matter if a pool player isn't calculating all the angles and frictions when he pots a ball, because it's as if he was. So as long as your model has predictive power, unrealistic assumptions don't matter. The unfortunate part is that most models in economics have lousy predictive power.

dopamean 8y ago

When I was in college (2004) the school I went to had an interdisciplinary major called Philosophy, Politics, and Economics (PPE). It has a "thematic concentration" called "Choices and Behavior" that was very popular. Many, many students majored in PPE so I don't mean to comment on literally all of the people who chose it, however, amongst my circle of friends the ones who chose "Choices and Behavior" chose it because in their minds there was something cool about the idea of using psychology to manipulate people. I don't think they had anything nefarious in mind but they were definitely attracted to the magical language used to describe the practical applications of the things they would learn. It actually felt somewhat similar to the way my software developer friends talk about machine learning today.

bko 8y ago

Much of behavioral economics is based on a very shaky foundation of psychology. For instance, the priming experiments cannot be reproduced. > This result confirms Kahneman’s prediction that priming research is a train wreck and readers of his book “Thinking Fast and Slow” should not consider the presented studies as scientific evidence that subtle cues in their environment can have strong effects on their behavior outside their awareness. https://replicationindex.wordpress.com/2017/02/02/reconstruction-of-a-train-wreck-how-priming-research-went-of-the-rails/ https://replicationindex.wordpress.com/2017/02/02/reconstruc...

40acres 8y ago
I know that psychology is particularly devasted by the replication crises but aren't branches of research affected as well?
- EnFinlay 8y ago
  Absolutely, and we should have a lot of skepticism to conclusions from those branches of research as well.
- TangoTrotFox 8y ago
  I think one of the problems "we" have is that bias confirmation is a hell of a drug. By "we" I mean individuals, researchers, companies, corporations, governments, everybody. When we see something that intuitively makes sense to us, especially one that confirms our biases - we tend to want to believe it, because we all believe what we think is true and so things that support what we believe must therefore be true, according to what we believe. Some word salad there, but I think that's reasonably clear. Like you mention the replication crisis should be really leaving most of all psychology results, not only past but also present, in serious doubt -- let alone anything contingent on those past results. But again the problem is that when new research comes out that confirms our biases, we don't expend the energy to challenge it. And it seems that many in science are more concerned with themselves than their science - something that the replication crisis provides a great deal of evidence for. People aren't putting out trash science by accident. They need to publish, and trash science is what gets published. And the replication crisis hasn't changed this. There seems to have been, at best, token efforts to try to more fully ensure the truthfulness of what's being published. So we continue to believe what we want to believe, with science increasingly falling victim to the act of starting at a conclusion and working your way backwards.

chuckgreenman 8y ago

Merlin Mann coined, or at least heavily uses the phrase "turns out journalism" which I really like. We like to have something that subverts our expectations. At some level we want to be told that the advice we don't like isn't actually useful.

gowld 8y ago
This very website was built on a foundation of "turns out", one of Paul Graham's favorite rhetorical crutches. http://jsomers.net/blog/it-turns-out http://jsomers.net/blog/it-turns-out

tabtab 8y ago

Because when you can't win by building a better mouse-trap, you try to win by tricking the mice.

AstralStorm 8y ago
If your "trick" does not actually work, you're wasting time and resources. Most of behavioral economy is not seriously tested, because the endpoint is not "tricking the mouse" but positioning yourself as a trickster educator, a place that cannot be blamed. One of classic cons.
- tabtab 8y ago
  Ideally you try different tricks in different areas as an experiment, and merge and adjust the best performers. "It's not random marketing BS, it's a genetic algorithm."
- lucas_membrane 8y ago
  > If your "trick" does not actually work, you're wasting time and resources. Many of the popularly-cited experiments both in behavioral economics and in psychology involve misleading or deceiving the experimental subjects, and many more simply conceal their objectives. The assumption that the suckers never caught on and the results should be interpreted accordingly is seldom questioned. In some cases, the assumption is verified by asking the subjects about their motivations post-mortem, ignoring the long-standing axiom of applied behavioral economics (business) that there are two reasons anyone does anything, the one they will tell you and the real one. The null hypotheses in these experiments ought to be (1) the subjects know or can figure out what the experimenters are looking for, and (2) the subjects are there because they want to help the experimenters. Consider the subject who is paid a small sum to participate and interacts with a either a researcher who must publish or perish or one who will put another batch of subjects through a similar rigmarole next year if they cannot get their dissertation accepted this year. What does motivational psychology say about the behavior of such a subject? Is such a search for truth better than a congressional committee?

rossdavidh 8y ago

I think it's mostly the weakness of the pre-behavioral economics. The status quo was economics that, almost on principle, ignored the way actual humans behave. Any amount of consideration of how actual humans behave, however limited or flawed, will look like an improvement. It's much like the way behaviorism in psychology, which seems lacking nowadays, actually looked good compared to the Freudian school of psychology it was displacing.

conanbatt 8y ago
> The status quo was economics that, almost on principle, ignored the way actual humans behave Why do people say this. This was never true. The Wealth of Nations is basically a compendium on human behavior, and that was 200 years ago.
- rossdavidh 8y ago
  The Wealth of Nations was not the status quo, though. The neoclassical model of economics was much more committed to a model in which the individual maximizes some utility function. The neoclassical model certainly built on Adam Smith, but by no means the same as, and one of the differences was that neoclassical economics tried to find ways to ignore or abstract away anything to do with human psychology.

kolbe 8y ago

It's easy to understand and relate to. To even comprehend contemporary research in most scientific disciplines, you need a seriously strong understanding of math or chemistry--a level so high that it cannot be 'popular'. Behavioral Economics only require remedial algebra, statistics and literacy, and the topics they address are usually familiar to everyday people's lives.

elvinyung 8y ago

Interestingly, if Scott Alexander is right, behavioral economics stopped being en vogue a few years ago. From Slate Star Codex's review of The Black Swan [1]: > All of them continue to do great object-level work in their respective fields, but it seems like the “moment” for books about rationality came and passed around 2010. Maybe it’s because the relevant science has slowed down – who is doing Kahneman-level work anymore? Maybe it’s because people spent about eight years seeing if knowing about cognitive biases made them more successful at anything, noticed it didn’t, and stopped caring. [1] http://slatestarcodex.com/2018/09/19/book-review-the-black-swan/ http://slatestarcodex.com/2018/09/19/book-review-the-black-s...

resters 8y ago

Insightful essay. The nudges he describes were elaborated in great detail in the book called Nudge by Richard Thaler. In the book, Thaler describes nudges such as placing the fresh fruit in the school lunch line in a more easily reachable location than the junk food. The idea is that kids will be more inclined to choose a piece of fresh fruit if it's in easy reach but the chocolate bar requires bending down, etc. While such nudges may sometimes be measurably effective, we must also realize that the idea of socially beneficial nudges evokes a sort of utopian paternalism. The idea behind Nudge paints the picture that there is a light-weight, unobtrusive version of central planning (or central nudging) that can achieve some of the utopian outcomes that planners wish for, but which is less encroaching upon individual freedom. At what point do situational nudges start to feel like social nudges? What if the chubby kid who wants the chocolate has to humiliate himself by reaching far overhead and fishing around blindly in an out-of-reach bin to find the chocolate while everyone else waits impatiently? When does spending hours to opt out of helpful services become an inappropriate encumberment? Google just launched sentence completion in gmail. Combine this with nudges and fuck you won't be corrected to duck you, the typist will see an autocompleted hey I'm feeling really frustrated about what you said right now ready to accept with the tap of a single button. Nudges are meant as a mechanism of social control. Gal points out wisely that if we rush to judgment about the why of behaviors, then our behavioral economic remedies (nudges, etc.) might be terribly wrongheaded.

tcopeland 8y ago
"Nudge" is on the Center for Homeland Defense and Security reading list: https://www.chds.us/c/hsbooks https://www.chds.us/c/hsbooks

mcguire 8y ago

"In order to appeal to other economists, behavioral economists are too often concerned with describing how human behavior deviates from the assumptions of standard economic models, rather than with understanding why people behave the way they do." That is...actually, a good point, and exactly describes something I'd noticed. One of the problems with economics is the assumption of the "perfectly rational actor", which sometimes leads to economic's descriptive vs. prescriptive issue: someone will create a massively complicated scheme that maximizes some positive value under a certain set of assumptions and then assume that people actually behave like that. Some of what I've read, including by Richard Thaler, who I otherwise rather like, buys into that scenario, saying "no, this is what they do; they behave irrationally". Sure, people aren't by any means perfectly rational, but it's not irrational to not perform a complicated maneuver that's only useful in a specific, odd, circumstance. There's another interesting bit from the article: "[In the class mug experiment showing "loss aversion,"] the participants may not have had a clearly defined idea of what the mug was worth to them. If that was the case, there was a range of prices for the mug ($4 to $6) that left the participants disinclined to either buy or sell it, and therefore mug owners and non-owners maintained the status quo out of inertia. Only a relatively high price ($7 and up) offered a meaningful incentive for an owner to bother parting with the mug; correspondingly, only a relatively low price ($3 or below) offered a meaningful incentive for a non-owner to bother acquiring the mug. "In experiments of our own, we were able to tease apart these two alternatives, and we found that the evidence was more consistent with the “inertia” explanation. Dr. Thaler has dismissed our argument as a “minor point about terminology,” since the deviant behaviors attributed to loss aversion occur regardless of the cause. But a different account for why a behavior occurs is not a minor terminological difference; it is a major explanatory difference. Only if we understand why a behavior occurs can we create generalizable knowledge, the goal of science." "The deviant behaviors attributed to loss aversion?" Not only is there nothing deviant about the behavior, it's not in any sense "loss aversion". In fact, it's perfectly rational, given limited rationality resources, not to engage the whole engine in an otherwise minor scenario.

gowld 8y ago

The subtitle is entertaining: "The recent vogue for this academic field is in part a triumph of marketing." and in the article: "It reflects the widespread perception that behavioral economics combines the cleverness and fun of pop psychology with the rigor and relevance of economics." The author is using behavioral economics to argue against behavioral economics.

sailfast 8y ago
Agreed - I'm confused by this op-ed. A professor of marketing is upset that marketing is not getting enough credit for the ideas that are also present in behavioral economics ('fame of behavioral econ is a triumph of marketing' har har). The main purpose seems to be to crap on Thaler for dismissing his critique of loss aversion instead of embracing his hypothesis on the buy-side. This neither discredits behavioral economics, nor makes a clear case for how academe related to marketing would better humanity or its understanding.

zebrafish 8y ago

Nitpick here.... There seems to me be to be significant difference between "loss" in terms of something already tangibly owned and "loss" in terms of missing out on an opportunity. Of course marketing schemes for "act now or lose out" won't work. I don't currently experience the opportunity and therefore losing out exerts no power over me. However, losing a mug when I already own the mug would demand a higher price from me. I would agree with Dr. Thaler that the inertia thing is a minor point about terminology. Call it loss aversion or call it inertia. Marketing schemes that include the word "loss" in their pitch are not using the same strategy that behavioral economists are talking about here.

jonny_eh 8y ago
Bingo, this criticism of behavioural economics is a straw man.
gowld 8y ago
If loss aversion exists but it's not inertia, then you should expect to see "win aversion" as much as "loss aversion". Do you?
- zebrafish 8y ago
  I'm not saying it isn't inertia. I'm saying that Thaler is right in saying that is a semantics issue. Call it what you want, the actual behavior is real.

deleted 8y ago

[deleted]

motiw 8y ago

Maybe because it has uncharted economic value, especially with access to large number of people via the internet, large number means that taking advantage of small behavior can translate into much value.

John_KZ 8y ago
Great point. Javascript behavioral tracking and shadow profiles gave advertisers and various experts (psychologists, sociologists etc) both the incentive and the unprecedented ability to perform experiments on hundreds of thousands of clueless people. All that in real time, in their "natural" environment, with real stakes. Of course we can model this type of economics better than we did 10-20 years ago.

chasedehan 8y ago

Behavioral Economics has only gotten "so popular" in non-academic circles. This is mostly due to the quasi-science of economics where we try to mathematically model the world. These "cute Freakonomics" type studies, while publishable in some outlets, haven't even come close to displacing traditional microeconomic foundations in mainstream economics. I'm an Economics PhD and former professor and most of the research isn't taken very seriously. Everyone acknowledges that people don't behave "rationally", but no one yet has been able to figure out how to build these behavioral assumptions into a working model that is actionable.

gowld 8y ago
Aren't "loot boxes" and casinos and the free-to-play game industry a great example of behavioral economics in action?
- alephnil 8y ago
  That some businesses have figured out how to exploit people's irrationality does not mean that economists have a good model for how actual people behave, and how it differs from rational behaviour.
zoomablemind 8y ago
What are the expectations for such actionable economic models? To improve predictability or to better the management of resources in human societies? Indirectly, it's a question about the optimization goal that the mainstream models are trying to achieve.
your-nanny 8y ago
No one takes behavioral econo.ics seriously? Well maybe stodgy old school economists who are more mathmetician than social and behavioral scientists. But there are lots of serious scientists using ideas from behavioral economics to study the brain and get published in outlets like Nature and Nature Neuroscience. psh!

mcrad 8y ago

I tend to think this is perfectly correlated with the rise of Big Data. Just as banks scored your likelihood to repay a loan based on your past behavior, marketeers want to score your economic value based on the same and more (transaction history + whatever personal data history assumed to be relevant). I suppose this doesn't follow the real definition of behavioral economics but it sure seems related - like let's hire a data science expert to write economic models on consumer behavior(?) In short, this field is popular because it gives power to the internet Giants.

gowld 8y ago
Isn't that regular economics? Big Data marketers don't care about understanding psychology, they just care about what generates conversions. "Big data" means you make decisions automatically from data without forming theories, since you have plenty of signal.
- mcrad 8y ago
  Micro-economics. I suppose the point is if you aren't applying expertise in psychology then it's not "behavioral"; however, big data is essentially the push to model your behavior to greater level of precision (nano-economics?). I don't see how signal:noise ratio fits in at all.

anon49124 8y ago

I would also ask: why are "useless" majors so popular? Ostentatious elite uselessness?

sonnyblarney 8y ago

It's classic pop psychology (which we've always loved) mixed in with some data points so it's like crack for the 'modern' bourgeois. So it's like 19th/20th century political theory minus the ideology, plus the 'science' ... the ultimate 'educated' parlour room fodder!

deleted 8y ago

[deleted]

nabla9 8y ago

Behavioral Economics is applying knowledge of human behaviour to economics. There is need to go to the opposite direction. Economics analysis of applied to human behaviour. Biases are are not always errors. They can be cognitive shortcuts and optimizations that may be reasonable heuristic. There Is More to Behavioral Economics Than Biases and Fallacies http://behavioralscientist.org/there-is-more-to-behavioral-science-than-biases-and-fallacies/ http://behavioralscientist.org/there-is-more-to-behavioral-s... > A widespread misconception is that biases explain or even produce behavior. They don’t—they describe behavior. The endowment effect does not cause people to demand more for a mug they received than a mug-less counterpart is prepared to pay for one. It is not because of the sunk cost fallacy that we hang on to a course of action we’ve invested a lot in already. Biases, fallacies, and so on are no more than labels for a particular type of observed behavior, often in a peculiar context, that contradicts traditional economics’ simplified view of behavior. >The conversation around biases is almost uniformly negative: they screw up our decision making, or undermine our health, wealth, and happiness. However, biases evolved with us, and for good reasons...

fanzhang 8y ago
It's widely acknowledged in behavioral economics that biases have their uses. In fact, usually the phrase used to describe them is "Heuristics and Biases"[1]. It's first and foremost a heuristic -- a reasonably good way to generate good behavior. Secondarily, in certain specific situations, it causes non-optimal behavior. [1] ( https://www.amazon.com/Heuristics-Biases-Psychology-Intuitive-Judgment/dp/0521796792 https://www.amazon.com/Heuristics-Biases-Psychology-Intuitiv... )
- jonny_eh 8y ago
  Exactly, discovering economic biases is like discovering optical illusions. The existence of optical illusions doesn't mean that human sight is always flawed, only flawed in certain edge cases.
  - neuronexmachina 8y ago
    "All models are wrong, but some are useful." -- statistician George E.P. Box

jonbarker 8y ago

Because it's interesting according to this definition: https://www.sfu.ca/~palys/interest.htm https://www.sfu.ca/~palys/interest.htm . Also the article mentions the mug example (selling a mug for more if you have one than you'd be willing to buy it for) as being a classic behavioral example of loss aversion. I actually thought it was an example of the endowment effect according to behavioral economists.

quadrangle 8y ago

Because almost anything that bothers being at all empirical is better than the nonsense we get from classical economics. Now we just need a revolution in economics comparable to the cognitive psychology movement that got that field beyond Skinnerian behaviorism.

tim333 8y ago

The author looks at some rather trivial aspects of behavioural economics or as he puts it >In this respect, behavioural economics can be thought of as endorsing the outsize benefits of psychological “tricks,”... But it also covers bubbles and crashes which have major effects in the billions/trillons financially and with millions having their jobs and housing effected. It would seem sensible to take that stuff seriously.

sien 8y ago

The guy who Tversky and Kahneman really hated, Gerd Gigerenzer had a very good answer to a lot of their work. He pointed out that: A critic of the work of Daniel Kahneman and Amos Tversky, Gigerenzer argues that heuristics should not lead us to conceive of human thinking as riddled with irrational cognitive biases, but rather to conceive rationality as an adaptive tool that is not identical to the rules of formal logic or the probability calculus. He and his collaborators have theoretically and experimentally shown that many so-called cognitive fallacies are better understood as adaptive responses to a world of uncertainty—such as the conjunction fallacy, the base rate fallacy, and overconfidence.[4] https://en.wikipedia.org/wiki/Gerd_Gigerenzer https://en.wikipedia.org/wiki/Gerd_Gigerenzer His books are well worth a read. Nassim Taleb also has a similar criticism in that he says that Kahneman and Tversky essentially said that humans don't act according to theoretical rules but instead have their own heuristics that have been derived from dealing with an uncertain world throughout history: https://twitter.com/nntaleb/status/883689826335281153?lang=en https://twitter.com/nntaleb/status/883689826335281153?lang=e...

Balgair 8y ago
Rationality is somewhat of a new concept to humans. It's somewhat surprising that economists took it so literally for that long and put and any real faith in it. The lemma of rationality does make the math a LOT easier, and we're doing better now about the irrationality aspects, but that spurt of faith in rationalism was quite interesting. For the large majority of our history, we've not been rational in the least. HN had a good discussion [0] on the Medieval Mindset [1] earlier in the summer. For ~1000 years in the Medieval period, the main mindsets were not rationality vs. irrationality, right vs. less-wrong vs. wrong, etc. But more Pious vs Impious, Cruel vs Kind, The Ideal vs the Real, etc. The people were no less people, but their heads weren't ours. What economic theories will come next, what new ways of thinking, what new mindsets? We're so focused on the rational, the 'right' answers, these days. But life, as we all know, is VERY stochastic ( a fancy word for random ). Maybe new mindsets about the randomness, bounded and given standards of deviation, will be a new paradigm, not just in economics, but in everything we do. [0] https://news.ycombinator.com/item?id=17058487 https://news.ycombinator.com/item?id=17058487 [1] https://coinsandscrolls.blogspot.com/2017/09/thinking-medieval-seeking-endarkenment.html https://coinsandscrolls.blogspot.com/2017/09/thinking-mediev...

thedudeabides5 8y ago

"Why Is Behavioral Economics So Popular?" Probably because people got sick of a guy with a formulae lecturing them about how human's aught behave as opposed to developing functional models of how humans do behave https://en.wikipedia.org/wiki/Ultimatum_game https://en.wikipedia.org/wiki/Ultimatum_game The Nash Equilibrium of this game is to offer the other person $0...unless you incorporate the idea that humans may care about more than pure monetary payoffs in their mental gymnastics. Kinda like when that friend from undergrad studying business told you that paying anything more your minimum tax bill was 'irrational'

calhoun137 8y ago

Behavioral economics is popular because its a better model. It's clear that any model of human behavior and decision making will necessary be very complicated. It doesn't make any sense to right at the start decide that the only factor that will be considered is financial expected value. Even though any model based on such an assumption will be severely flawed, this is the view of main stream economics, and this explains why behavioral economics is a better model.

benrawk 8y ago

I know this paper well (and the larger point being made in the paper; I have seen Dr. Gal present on it in seminars). I think the point he is trying to make is that what we really need for understanding of human behavior is good psychological theory of how humans operate. In many cases (loss aversion being one of them, per Dr. Gal), behavioral economics describes the data, but does not provide a deeper analysis of why the data are the way they are (that is, why the humans being studied acted as they did). Of course not true of all behavioral economics, but some of it.

sibmike 8y ago
I'd like to add that the data comes from experiments, which are simplified versions of real life problems. Oftentimes, "irrational" behavior depends on the way simplification is made and have no chances to generalise outside the laboratory, because in real life signal is more complex and informative. Yet a paper will be published stating "people behave irrationally". (in the lab with given peculiar instructions)

purplezooey 8y ago

We need less behavioral economics and more get off your lazy arse and vote economics. 27% voting rate for those aged 18-34.

simonveith123 8y ago

https://www.digistore24.com/redir/34473/SimonV/ https://www.digistore24.com/redir/34473/SimonV/

Dowwie 8y ago

Why has Economics been so popular? What has Economics' mathematically-validated storytelling gotten wrong and how has that impacted society?