Irrationally Rational – From Adam Smith and Amos Tversky to the New-Wave of Nudges

Nudge, nudge, wink wink.  In this Dead Economists Society Salon Bronwyn Williams and Peter Isztin discuss all things behavioural economics,  and “libertarian” paternalism.

“Smith is often remembered for the concept of an “invisible hand” that guides an overall economy to prosperity if each individual makes their own self-interested decisions—a key concept in classical and neoclassical economics. But he also recognized that people are often overconfident in their own abilities, more afraid of losing than they are eager to win and more likely to pursue short-term than long-term benefits. These ideas (overconfidence, loss aversion and self-control) are foundational concepts in behavioral economics today.”
~ Chicago News

Or, as Amos Tversky put it, he  “merely studied in a systematic way things about behaviour that were already known to advertisers and used-car salesmen”. 

In this salon, we unpack the origins, present reality and future possibilities and limitations of behavioural economics, libertarian paternalism and all things nudging and ergodcity.

We will discuss:

• Is there really anything irrational about our natural irrationality?
• Is behavioural economics economics at all?
• Are homo sapiens and homo economicus that different after all?
• Is libertarian paternalism an oxymoron?
• What is the difference between a nudge and an offer?
• How do nudges affect freedom of choice – and competition?
• The difference (if any) between economics, politics and psychology – where do the lines cross, bleed and cut?
• Are our biases and heuristics bugs or features?
• Where does ergodicity, skin in the game and ruinous risk fit in?

And whatever else comes up in our conversation.

Recommended reading:

How Adam Smith got there first :
https://news.uchicago.edu/explainer/what-is-behavioral-economics

Evolving beyond “economic man” :
https://hbr.org/2015/05/from-economic-man-to-behavioral-economics

Libertarian paternalism is not an oxymoron (or is it?) :
https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=5228&context=uclrev

Ergodicity: What behavioural economics gets wrong :
https://www.nature.com/articles/s41567-019-0732-0

(And a summary):
https://www.psychologytoday.com/us/blog/persuasion-bias-and-choice/202012/is-everything-we-know-about-behavioral-economics-wrong )

The bias bias in behavioural economics :
https://www.nowpublishers.com/article/OpenAccessDownload/RBE-0092

Nudge with caution :
https://foragerfunds.com/news/bristlemouthnudge-caution-most-biases-exist-reason/

Is “nudgeability” contrary to standard economic theory?
https://www.youtube.com/watch?v=Tuz3qEZRv74&list=PLp2AOdiHSxGdb2yrmRw6afJZbx_TRZL-N&index=2

Principles of behavioral economics :
https://dash.harvard.edu/bitstream/handle/1/30805504/95919624.pdf

Ed Glaeser on paternalism :
https://www.cato.org/sites/cato.org/files/serials/files/regulation/2006/7/v29n1-6.pdf

Gary Becker on (the limits of) rational choice :
https://ejpe.org/journal/article/view/101/98

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