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Under Uncertainty, Over Time and Regarding Other People: Rationality in 3D

Dorian Jullien ()

No 2016-20, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis

Abstract: This paper scrutinizes behavioral economics' challenges to the standard accounts of economic behaviors within and across three dimensions: under uncertainty, over time and regarding other people. ‘Within' dimensions means that decision problems are of the form, e.g., ‘a consequence for sure vs. a bigger consequence with uncertainty' or ‘a consequence now vs. a bigger consequence later', by contrast with decision problems that cut ‘across' dimensions as in, e.g., ‘a consequence for sure but later vs. another consequence now but with uncertainty'. The proposed distinction between challenges within and across dimensions is more than conceptual, it also delimits a historical rupture between two periods that are nontrivial regarding the debates between behavioral and standard economics. The classical challenges posed by Kahneman, Tversky, Thaler and others focused on interactions within dimensions, posing problems to standard models. The more recent challenges from interactions across dimensions are posing problems to to both standard and behavioral economists' models. This paper proposes a systematic contrasts between the three dimensions, in both the challenges within and across the three dimensions, i.e., it proposes to ‘see rationality in 3D', in order to further our understanding of the contemporary theoretical, empirical and methodological stakes underlying these debates. Three methodological issues are discussed throughout: one that is not discussed elsewhere in the reflexive literature, namely the role of language in economic rationality, which we try to connect with the two classical ones around behavioral economics, namely, the issue of interdisciplinary between economics and psychology and the positive/normative issue within models of individual behaviors. With respect to the latter, we suggest that there is a slow historical shift from a primacy of risk over time over social preferences in the making of economists' value judgments of rationality and irrationality, to a competing primacy of time over risk over social preferences.

Keywords: behavioral economics; economic rationality; expected utility; prospect theory; exponential discounting; hyperbolic discounting; self-interest; other-regarding behaviors; economic methodology; history of economics (search for similar items in EconPapers)
JEL-codes: A12 B21 B41 D01 D03 D81 D90 D64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-cdm, nep-hme and nep-upt
Date: 2016-06
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Handle: RePEc:gre:wpaper:2016-20