Today, behavioral economists
challenge the fundamental economic theory that assumes humans are rational beings.
Half of all Americans have money in the stock market, yet economists can't agree on whether investors and markets are rational and efficient, as modern financial theory assumes, or irrational and inefficient, as behavioral economists
Second, more important, while economists, especially behavioral economists
, base their theory on systematic experimental or actual observations, they cannot economically explain or understand their findings by merely reporting them.
, for example, often agree with Verburg that market activity is often not characterized by a rational pursuit of wealth.
This aligns with what behavioral economists
call "present bias," the idea that people often make choices that benefit them in the short term and overlook future consequences.
To justify their hypothesis, Gennaioli and Shleifer draw on the cognitive biases established by behavioral economists
. The notion of "representativeness"--when subjects systematically overestimate the probability of unlikely events that are made more probable by recent information--features prominently in their models.
For example, behavioral economists
have urged policymakers to intervene in markets and restructure choice environments, the way that a decision is presented, without restraining people's freedom of choice.
How did Tullock respond to the claims made by behavioral economists
that individuals are observed to act irrationally?
Let me explain those audacious claims by returning to the conventional case for open markets and then by briefly laying out a few of behavioral economists
' major findings on pervasive flaws in human decision making, captured--supposedly--in an array of identified mental "biases."
Thus, the report states that governments should convene marketing experts and behavioral economists
to develop public health campaigns designed to educate different populations on how best to prevent and mitigate the risk factors and harms of NCDs.
Many political scientists and behavioral economists
establish the strong link between voting for a candidate and the economic value that the candidate represents.
What behavioral economists
call the 'status quo bias' may not be all that bad.