How little people know

Behavioural economics – a critique of its policy conclusions

Behavioural economics is not a challenge to neo-classical ways of thinking. It sits firmly within the neo-classical framework. It simply gives us a new way of analysing how markets might deviate from some textbook perfect-market, welfare-maximising equilibrium. That is not to understate its importance. It leads to a new set of what people like to call ‘market failures’ and a new set of tools for resolving the problems – tools, by the way, that many of the original authors in this field (such as Richard Thaler) believe should reduce rather than increase the burden of regulatory interventions. ….[READ]