Randy’s Reviews > Free Market Madness: Why Human Nature is at Odds with Economics--and Why it Matters > Status Update

I always thought that the main idea of behavioral Economics is the fact that people do not act rationally in the real world,and this feature indicates a high degree of Inefficiency on many fronts from free market policy.

Yet most who preach the study of behavioral Economics seem to be VERY reluctant to be branded as pro-Government activists by suggesting plans that would result in robust public action to deal with the behavioral problems their entire school exists to study.

It's nice to see someone who's coming from that angle who appears to be honnest about supporting the policy direction that his discipline logically should be moving in (vs the squishy Libertarian Paternalism endorsed by Thaler).

Well stated, Aaron! I read a few books on behavioral economics, and I enjoyed them in general. But something was nagging me, and I was not sure about the source. Recently I read Ha-Joon Chang's Economics: the User's Manual talked about the main schools of economic theories, the book led me to think more along the line you just mentioned. Given some time, I probably would reach the same conclusion. Thanks again for your insight!

Maybe the neoliberal orthodoxy has been too dominant for most economists to directly confront it.

Randy wrote: "Well stated, Aaron! I read a few books on behavioral economics, and I enjoyed them in general. But something was nagging me, and I was not sure about the source. Recently I read Ha-Joon Chang's Eco..."

From reading Thalers last book, my guess is simply the fact that most Economics, Business, and Finance departments do not reward academics who's published articles and ideas explicitly call for more stronger state action.

It's not that they will be fired or anything,but their lives are made more difficult. Its harder to advance your career when you hold such opinions..... And it's additionally hard to comand the respect of your peers when you so heavily disagree with them on such an important issue.

To be sure there are exceptions to this, largely based on individual University's. Thaler's University is the Chicago Booth school if business, so it's fair to say his situation does explain his reluctance to actually endorse stronger actions to deal with the kind of problems he studies (his last book spends a great deal of time going into this and his reasoning for endorsing the use of nudges to change people's actions vs actually setting hard rules to change people's actions).

Of course, things change. Much like the courts, conservative interest groups have long led a campaign to take over University's economics departments, and most of those said departments are fairly resistant to change....... But a lot of the criticisms against their preferred ideas are getting heard more than ever. I'd not want to be overly optimistic, but I feel that Neoliberal Orthodoxy cannot hold forever in the Economics profession unchanged, and that at some point a change in generally accepted theory has to occur.

Or I at least I hope that is the case.