What is behavioral economics? This chapter explores a mismatch between what is included in the field of behavioral economics and some of the most visible Austrian critiques of…
Abstract
What is behavioral economics? This chapter explores a mismatch between what is included in the field of behavioral economics and some of the most visible Austrian critiques of behavioral economics. While paternalism, nudging, and a focus on irrationalities and biases are a big part of modern behavioral economics, the portrayal of the field of behavioral economics as being focused predominately upon those areas leaves a swath of low-hanging fruit that would be beneficial for Austrian scholars to consume and use in their own work.
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The Austrian School of Economics, pioneered in the late nineteenth century by Menger and developed in the twentieth century by Mises and Hayek, is poised to make significant…
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The Austrian School of Economics, pioneered in the late nineteenth century by Menger and developed in the twentieth century by Mises and Hayek, is poised to make significant contributions to the methodology, analytics, and social philosophy of economics and political economy in the twenty-first century. But it can only do so if its practitioners accept responsibility to pursue the approach to its logical conclusions with confidence and absence of fear, and with an attitude of open inquiry, acceptance of their own fallibility, and a desire to track truth and offer social understanding. The reason the Austrian school is so well positioned to do this is because (1) it embraces its role as a human science, (2) it does not shy away from public engagement, (3) it takes a humble stance, (4) it seeks to be practical, and (5) there remains so much evolutionary potential to the ideas at the methodological, analytical, and social philosophical level that would challenge the conventional wisdom in economics, political science, sociology, history, law, business, and philosophy. The author explores these five tenants of Austrian economics as a response to the comments on his lead chapter “What Is Still Wrong with the Austrian School of Economics?”
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Laboratory studies of social interaction have revealed a wide range of phenomena that are difficult to explain using standard economic models. For example, people will often…
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Laboratory studies of social interaction have revealed a wide range of phenomena that are difficult to explain using standard economic models. For example, people will often sacrifice their own earnings in order to be generous, cooperative, punitive, and retributive in interactions with anonymous strangers. “Behavioral” models that redefine agents’ preferences attempt to provide an account of these phenomena as reflecting a “taste for fairness” or altruism, aversion to inequality, concern about others’ beliefs, and so on. Such models either fail to account for the rich sensitivity of actions to context or in allowing for rich context-dependence, these models ultimately substitute description for explanation. Hayek’s work provides a foundation for thinking about how to explain these phenomena, by conceiving of people as both purpose-seeking (as in economic models) and rule-following. Decisions are shaped both by material interests and by a normative framework that is evoked by context and helps people decide what one ought to do in a particular situation. The implication of this approach is that rather than trying to understand heterogeneity across individuals in terms of preferences, experimenters should instead try to understand heterogeneity across contexts in terms of the rules and norms that operate in the background and guide or constrain people’s purpose-seeking tendencies. What economics needs, then, is a theory of how and why these rules and norms vary with context as they do.