Re: [OPE] Behavioural economics: a revolution in science?

Hi,
maybe the behaviuoural economics will be the
main-streams way out of the *static* equilibrium
straight jacket - especially since it does not
mean that you have to say to heterodox critics:
"You were right" and do not have openly to take
on board the mostly left wing implications of rejecting static models.

The totally unrealistic character of static
equilibrium theory was not wanted, it is just
necessary if you want the political, neo-liberal
"results" (no role for government, unions etc.
etc.). That the neo-classical economists are
unable to prove mathematically convergence to
such an equilibrium even in the most perfect
models undermines the whole project too.

But what behavioural economics (and "information
economics", "institutional economics") introduces
is precisely *dynamics", i.e. learning,
path-dependency etc. etc. Akerlof and "The market
for lemons" has kicked in this (for heterodox
economists) open door already. But that was when
the "cold war" still was going on. The elites has
all the time had the choice between static theory
being ideologically strong but empirically
useless, and dynamic theory (institutional,
behavioural, Schumpeterian) much more realistic,
but less ideologically dominant.

These guys are indeed going to be "soft" and
"reformist", here is their evaluation of main stream economics:

"Orthodox economic models are not wrong as such,
but rather sloppy, biased approximations of how
our economy works. They present a cartoon
characterisation of economic life, greatly
exaggerating one side of our nature at the
expense of others. Behavioural economics has
started to paint a more realistic picture."

"... not wrong as such ..." - rather feeble start of a revolution!

Regards
Anders

At 19:14 27.09.2008, you wrote:
>... a revolution is under way in economic
>thought. Behavioural economics is no bell or
>whistle on the contraption of traditional
>economics; it is a big departure which will
>deliver a revolutionary new way of understanding
>the world. The founding assumptions of orthodox,
>neoclassical economics—that people can be
>thought of as rational, selfish and
>independent—are collapsing under the weight of
>empirical refutations. Here is one example: the
>“ultimatum game,” which typifies the story of
>behavioural economics with a curious yet simple
>experiment. As you know, in this two-player
>game, the “proposer” is given a sum (say £10) on
>condition that he or she offers a proportion to
>the “responder.” If the responder accepts the
>offer, each player gets the amounts agreed. If
>he or she rejects it, both get nothing. Orthodox
>economics says players are selfish, and so
>predicts that the proposer will offer just a
>penny and the responder, preferring a penny to
>nothing, will accept. But this is not what
>happens. The most common offer is half the total
>sum, and offers of less than 30 per cent are
>almost always rejected. If the proposer’s offer
>is seen as unfair, the responder will decline
>free money.
><http://www.prospect-magazine.co.uk/article_details.php?id=10359>http://www.prospect-magazine.co.uk/article_details.php?id=10359
>
>
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Received on Sun Sep 28 04:33:02 2008