Anthropology of an Idea: ‘Behavioral Economics’
Calculating the cost of human foibles.
Economists have suffered a collapse in credibility since the global financial crisis began. Faith in the efficiency of markets and the invisible hand is out; "behavioral economics," which stresses that humans are fundamentally irrational actors, is in. We are blind to risk; we make decisions on a whim; we prefer consuming now over saving for later. Human fallibility seems to be the perfect explanation for an unfathomable crisis. Here’s how -- after years of being considered a quaint subfield -- behavioral economics has finally stolen the limelight.
Economists have suffered a collapse in credibility since the global financial crisis began. Faith in the efficiency of markets and the invisible hand is out; “behavioral economics,” which stresses that humans are fundamentally irrational actors, is in. We are blind to risk; we make decisions on a whim; we prefer consuming now over saving for later. Human fallibility seems to be the perfect explanation for an unfathomable crisis. Here’s how — after years of being considered a quaint subfield — behavioral economics has finally stolen the limelight.
Elizabeth Dickinson is International Crisis Group’s senior analyst for Colombia.
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