blog POST

Is behavioral economics depressing?

Yes. Deeply.

Economic conduct is not depressing.

But the discipline of ‘behavioral economics’ is depressing—not, however, because it describes actual economic conduct, but, on the contrary, because it fails to describe it.

People behave ‘irrationally’ relative to artificial yardsticks contrived by actuaries and fund-managers, these being the ones used by behavioral economists, but not relative to the relevant non-artificial yardsticks.

Human rationality consists in being able to behave optimally in a wide and ever-changing class of contexts, not in being able to behave optimally in frozen and one-dimensional contexts, such as managing a retirement plan.

Behavioral economics has proven totally incapable of predicting human conduct or, therefore, of explaining it.

What it has managed to do is provide rationalizations for government policies whose noxious and invasive character would be inexcusable on the assumption that people are rational.

And therein lies the actual reason-for-being of that toxic and failed discipline.

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