Behavioral Economics: Old Wine in Irrelevant New Bottles?

Fred S. McChesney

Supreme Court Economic Review, 2013, vol. 21, issue 1, 43 - 76

Abstract: This Article maintains that behavioral economics offers little of importance to economics as more traditionally understood. Though it claims to displace mainstream traditional economics, by stressing economic actors' "bounded rationality," most of the so-called "heuristics" of behavioral economics are just new names for concepts already well understood. Moreover, by focusing its criticisms on the assumptions with which mainstream economists work, behavioral economics ignores the basic role of assumptions in traditional economics. Traditional economics recognizes that its assumptions are sometimes just abstractions from actual conditions. But assumptions, however unreal, are just a means to the true goal of traditional economics: explaining and predicting real-world behavior. Behavioral economics' fascination with a model's assumptions has meant that real-world predictions have mattered little. As long as this tendency persists, it is unlikely that behavioral economics will displace traditional mainstream economic thinking.

Date: 2013
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