Xuhang Fan (Shawn)INFO
I found a post claiming that behavioral economics should be shot to death. I translated the post into English as follows. I would like to have some comments when possible.
Since Daniel Kahneman and Vernon Smith received the Nobel Prize in Economics in 2002, behavioral economics has gained popularity. Economics classrooms and textbooks now allocate a significant portion of their content to behavioral economics, and with constant promotion, it has become an integral part of economics.
However, I stubbornly oppose this trend. It's simple; every science has its specific areas of study, and it shouldn't expand limitlessly without caution. The boundaries of each science are generally determined by its fundamental assumptions or premises and shouldn't be stretched too far.
Economics has more than one assumption, but the concept of the rational individual is fundamental. Economic theory seeks to explain what happens when people act rationally. For example, in producer theory, it is assumed that firms pursue profit maximization, and they determine their output based on the principle that marginal revenue equals marginal cost. If they didn't pursue profit, their actions would be arbitrary, and no theory would guide them. This is similar to mathematical theorems, where conclusions and conditions must correspond one-to-one. This is a fundamental aspect of any science.
Game theory fits within economics because it adheres to the rationality assumption, resulting in the concept of Nash equilibrium.
Behavioral economics, on the other hand, challenges the rationality assumption and introduces a new assumption that people are not always rational, which is, of course, common knowledge – people can be irrational at times. However, conclusions derived from assuming that people are irrational can vary in different directions and are not definitive economic conclusions.
Many years ago, there was an economics professor at Peking University (at the time, an associate professor) who claimed that demand curves could slope upward, shocking the academic community. His point was that demand curves could either slope upward or downward. If this were true, microeconomics could be abolished. However, this professor completely ignored or deliberately disregarded the definition and conditions of demand curves. Demand curves are drawn under the assumption that variables such as consumer income and preferences remain temporarily constant, and they inevitably slope downward. The idea of them sloping upward is a common mistake made by first-year economics students who fail to distinguish between movements along the demand curve and shifts of the entire demand curve.
Behavioral economics is characterized by experiments that attempt to challenge the rationality assumption in economics. Even if we don't discuss the inevitable flaws in these experiments or the reliability of their conclusions, how can we say that they overturn economics? People are not always rational; they can act or perform inauthentically, especially in experimental settings. How does this prove that economics is wrong? It is taking matters beyond the scope of economics, much like saying 1 + 1 doesn't equal 2 in a binary system and then claiming that there's an issue with the decimal system.
More importantly, the assumption that people are rational is derived from human behavior patterns that have developed over millions of years. How can we simply dismiss it based on individual experiments?
Behavioral economics should revert to its original name, which is psychology or new psychology. It shouldn't wear the cloak of experiments and claim to be something other than psychology.
Psychology is a valuable field of study, and many professions require an understanding of it, such as medical and marketing students. The imperialism of psychology is already quite significant, including fields like criminal psychology, so we shouldn't let it expand uncontrollably.
I hope this trend can be stopped.
