+2 votes
asked ago in General Economics Questions by (360 points)
Is there still a conflict in the discipline between so-called "behavioral economists" and mainstream economics, or have behavioral elements been incorporated so much into the mainstream that there is no clear difference between them anymore? Does it vary by field in economics?

3 Answers

+4 votes
answered ago by (1.3k points)
Interesting question! Some thoughts:
1. I wouldn't say there is a conflict, but it is clear that not all economists are happy to accept behavioral forces at all or as being equally important. The benchmark of agents behavior is still frictionless optimization of a standard utility function. True, in many settings behavioral forces are not very important, but even when they are clearly at play, other explanations are preferred by most economists. Even if these explanations are more convoluted, as long as they maintain the standard assumptions. I recommend reading Chetty's Ely lecture: http://www.rajchetty.com/chettyfiles/behavioral_ely.pdf
2. It is definitely not incorporated into the mainstream. Most models and empirical tests will not take into account self-control or reference-dependence or any of those.
3. Even within behavioral economics there are several schools of thought -- roughly the biases and heuristics vs bounded rationality -- which of these is "mainstream"? unclear.
4. Some fields are more open - most notably I'd say public, household finance, and development. Others much less so - probably macro and IO are the least accepting.
5. Today I would say that behavioral economics is still a field by itself. By analogy to development economics:
Development has some unique questions it tries to address (e.g. poverty and its effects), but any study on whatever topic in a developing country is also considered development. Likewise behavioral - core questions are what are the right models of economic agents (e.g. limited attention or reference dependence), but any study that incorporates some less-than-perfect decision making can be considered behavioral economics.

The first handbook of behavioral economics is in the press - gives a good idea of what's happening in any of the fields (see link below, but most chapters are available in their authors' webpages):
commented ago by (360 points)
Awesome, thank you!
commented ago by (2k points)
Agreed, awesome comment! I would summarize from the comment and my own experiences that they are no longer in conflict but often still distinct.
–3 votes
answered ago by (140 points)
my definition is answer
Definition for Economics
Economics is a social science discipline dealing with economic activities undertaken by an individual or a group aiming to earn livelihood (means)and satisfy the material ends that eventually leads to short-sighted happiness depending on their consciousness, amidst misery and afflictions. However, the ethical base of economic activities is accepted by the society as the fair means and ends which does not harm to environment and society fabric.
Manjappa D Hosamane
+1 vote
answered ago by (960 points)
As a rough approximation: The more and better the data in a subfield of economics, the more open they are towards behavioral ideas (as if looking at data moved people's beliefs from their prior towards the true state of the world). Which, of course, is a Bayes-rational thing to do -- the less data you have, the more you need to regularize your predictor to avoid overfitting.

That said, for some issues behavioral factors are more important than for others. Behavioral topics are important whenever you have individual, non-expert decision makers who make one-shot decisions. So, for instance, behavioral economics is very important to household finance, and quite unimportant to option pricing.

There's still some people who are dogmatically anti-behavioral, and also some who are dogmatically pro-behavioral. Both stances seem unscientific.