Thursday, July 15, 2010

The Limits of Behavioral Economics

I thought this was a very good op-ed in the New York Times, though I think the implied causality is way off. In short, behavioral economics is the rationale behind a number of initiatives, such as parts of health reform and some energy initiatives, but it is severely limited in its ability to impact actual behavior. Fair enough that it's limited but where's the evidence that these approaches are substituting for traditional approaches, such as a gas tax? I'm pretty sure behavioral economics is being used as a poor alternative to the more effective approach because we have a huge, crazy lobby of groups opposed to any effective policy. After all, if government ever actually does anything that works the sky will fall and the end times will come. Best to oppose anything sensible to forestall this.

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