Why Behavioral Economics Needs Behavioral Biology: Avoiding Arms Races

Yves here. As this post explains, Darwin’s ideas were much less….Darwinian…than they’ve been made out to be. Laypeople and behavioral economists often glorify competition when Darwin’s ideas were more nuanced.

Even though I imagine most will agree with the main point about arms races, I suspect some will dispute the examples. Does buying a more expensive suit really improve one’s chances in an interview, beyond meeting a certain minimum standard of attire? I’m also not sure the $100 ticket versus free ticket is a great example of sunk cost fallacy. Someone who paid $100 for a ticket is presumably a serious fan and is very much looking forward to the contest. Someone who got a free ticket is less likely to be devoted and therefore unlikely  to enjoy going as much.

By Robert H. Frank, the Henrietta Johnson Louis Professor of Management and Professor of Economics at Cornell’s Johnson Graduate School of Management and a Distinguished Senior Fellow at Demos. Twitter: @econnaturalis. Originally published at This View of Life

Following my first sabbatical—a two-year stint as a federal bureaucrat in Washington, DC—I resumed my teaching duties in Cornell’s department of economics in the fall of 1980. Shortly thereafter, I met Richard Thaler, who had started teaching economics in the university’s business school while I‘d been away. Over the next several years, he and I spent long hours in conversation about how our own observations of people’s behavior were often strikingly at odds with the predictions of standard economic theory.

Thaler had spent his own recent first sabbatical working with

Keep reading this article on Naked Capitalism (Yves Smith) - Blog.

Leave a Reply