The Economists’ New Clothes?

Reading this review, I wondered if behavioural economists need their own Sokal act. In response, Olle wrote:

Allow me to disagree. A Sokal-type hoax is an
aggression which should only be carried out when
absolutely necessary, i.e. when a discipline is
so desperately out of touch with reality that some
brutality is needed in waking it up. This was the
case with the postmodernist sociology of science school
at the time of Sokal's hoax, but I see nothing remotely
like that in today's behavioral economics.

He continued:

Understanding human nature is a deep, difficult and truly
important project - so much so that we need many different
disciplines to attempt it from different points of view.

I agree completely with this last sentiment, but I wonder: what does Behavioural Economics do for this?

In the technical literature, one can already find many complaints about the experimental practices and standards of rigour of behavioural economists, see for example Ariel Rubinstein’s discussion of behavioural economics and the references therein.

But, more generally, let us consider a typical behavioural economics experiment and the inferences drawn from it. One of the more provocative ones from Ariely’s book is asking people to make investment decisions normally, and when masturbating. The conclusion: we are more risky in the state of mind during or after masturbating …

Volumes of economics journals are being filled these days with such experiments (perhaps not always so dramatic) to infer the so-called “insights” of behavioural economics:

• We are not always fully rational in our actions (this goes under the fancy slogan “bounded rationality”)
• We do not always act to maximize selfish utility.
• We often cooperate when we have confidence that the other person will also ..

Wow! What a revelation!

The only possible group I can think of for whom such experiments and “insights” are news is the mainstream neo-classical economists who lay ritual tributes at the altar of maximizing self interest i.e. the group that made up the totally fanciful assumptions in the first place!

If we give them the benefit of doubt, and treat behavioural economics as an essential correction or criticism of the standard model, then it is a very weak one. Much better are the solidly grounded empirical studies of Ha-Joon Chang reviewed here in a previous post that utterly expose the vacuity and falsity of the model.

A last thought that crosses my mind is this: could it be that behavioural economics to neo-liberal economics what “intelligent design” is to creationism?