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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/br...
.... and basically the idea that telling a good story is more important than representing the truth when talking about science.
Malcom Gladwell is also very good a pushing interesting, well-told stories with spurious scientific basis.
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
TED and TEDx aren't the same thing
Gladwell’s whole schtick is shooting an arrow and then drawing the bullseye around where it lands.
you blame them for what exactly?
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-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...
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-Intuitiv... )
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
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=e...
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
[1] https://coinsandscrolls.blogspot.com/2017/09/thinking-mediev...
I parsed Taleb differently to you, I think part of his point is most behavioural economics is only looking at whether behaviour is rational or not and the individual level, but they are missing the fact that we're a herd species and behaviour has meaning as well in aggregate - there's second order effects. His point about nudges etc is that it is dangerous, as we focus on first order effects but ignore second order effects. This is what creates large risks, for example, defaulting everyone into one type of pension plan which is itself defaulted into one style of index investing, most of the indexes use the same tracking algorithm creates second order risks that we don't understand where there were none previously.
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.
> 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.
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/reconstruc...
I was thinking about this with Edward Bernays recently. He is considered the 'father of Public Relations', and comes up in a lot of pseudo-sciency conversations, like Adam Curtis's documentary, "The Century of the Self." *
Bernays comes up a lot in counter-cultural circles, but it's always bugged me that I've never seen any validating evidence that his techniques were actually effective, beyond "he came up with the idea of 'freedom torches' and smoking went up among women."
His techniques sound interesting, and they feel like they'd be effective, but I had trouble finding any solid research that validated the idea that his techniques were effective at anything other than making himself famous.
(* Don't get me wrong – I love Curtis's films, as art. But it bugs me how they usually present a flood of information presented as fact, with little to know citation or corroboration. If they were just art, it wouldn't bug me, but a lot of people seem to swallow the films' conclusions wholesale.)
While reading "Thinking, Fast and Slow" I was astonished by the priming effects, and the confidence with which Kahneman presented information about priming. I became obsessed with the priming concept and began doing further research, only to find countless articles discounting priming's legitimacy. I haven't been able to pick up the book since, because of the way in which the information was presented as sure fact, when in reality the research was early and inconclusive.
I know that psychology is particularly devasted by the replication crises but aren't branches of research affected as well?
On teh other hand, priming is a real effect.
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.
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.
If loss aversion exists but it's not inertia, then you should expect to see "win aversion" as much as "loss aversion". Do you?
Bingo, this criticism of behavioural economics is a straw man.
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.
Go back to the 1980s or so and a lot of economists may have recognized that their assumptions didn't really hold in a some cases but the orthodoxy was still that underlying theory was fundamentally economically rational [in the sense of assuming, for example, that people maximize expected value] in nature. What behavioral economics has done is started to provide intellectual foundations for observed behavior that isn't explained by traditional economic models.
Richard Thaler's Misbehaving is a good read on how this developed. I had Thaler as a professor for a couple of classes in the early 80s and I found some of the insights from early-on behavioral economics some of the more useful things I learned in my MBA.
"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
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'
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.
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.
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.
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!
Because it's interesting according to this definition: 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.
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.
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.
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.
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.
Because when you can't win by building a better mouse-trap, you try to win by tricking the mice.
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.
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.
"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.
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.
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.
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-s...
Why has Economics been so popular? What has Economics' mathematically-validated storytelling gotten wrong and how has that impacted society?
We need less behavioral economics and more get off your lazy arse and vote economics. 27% voting rate for those aged 18-34.
Why wouldn't it? It's a more accurate model than what came before it, the rational actor model.
I would also ask: why are "useless" majors so popular? Ostentatious elite uselessness?