Editing Behavioral economics (section)

== Criticism ==
Taken together, two landmark papers in economic theory which were published before the field of Behavioral Economics emerged, provide a justification for standard neoclassical economic analysis. The first is the paper "[[Uncertainty, Evolution, and Economic Theory]]" by [[Armen Alchian]] from 1950 and the second is the paper "Irrational Behavior and Economic Theory" from 1962 by [[Gary Becker]], both of which were published in the ''[[Journal of Political Economy]]'',.<ref name="Alchian">{{Cite journal |last=Alchian |first=Armen A. |date=1950 |title=Uncertainty, Evolution, and Economic Theory |url=https://www.jstor.org/stable/1827159 |journal=Journal of Political Economy |volume=58 |issue=3 |pages=211–221 |doi=10.1086/256940 |jstor=1827159 |issn=0022-3808}}</ref><ref name="Becker">{{Cite journal |last=Becker |first=Gary S. |date=1962 |title=Irrational Behavior and Economic Theory |url=https://www.jstor.org/stable/1827018 |journal=Journal of Political Economy |volume=70 |issue=1 |pages=1–13 |doi=10.1086/258584 |jstor=1827018 |issn=0022-3808}}</ref> Alchian's 1950 paper uses the logic of natural selection, [[Evolutionary landscape|the Evolutionary Landscape model]], stochastic processes, probability theory, and several other lines of reasoning to justify many of the results derived from standard supply analysis assuming firms which maximizing their profits, are certain about the future, and have accurate foresight without having to assume any of those things. Becker's 1962 paper shows that downward sloping market demand curves (the most important implication of [[Law of demand|the law of demand]]) do not actually require an assumption that the consumers in that market are rational, as is claimed by behavioral economists and they also follow from a wide variety of irrational behavior as well.

The lines of reasoning and argumentation used in these two papers is re-expressed and expanded upon in (at least) one other professional economic publication for each of them. As for Alchian's evolutionary economics via natural selection by way of environmental adoption thesis, it is summarized, followed by an explicit exploration of its theoretical implications for Behavioral Economic theory, then illustrated via examples in several different industries including banking, hospitality, and transportation, in the 2014 paper "Uncertainty, Evolution, and Behavioral Economic Theory," by Manne and Zywicki.<ref>{{Cite journal |last1=Manne |first1=G. |last2=Zywicki |first2=T. |title=Uncertainty, Evolution, and Behavioral Economic Theory |journal=Journal of Law, Economics & Policy |year=2014 |url=https://www.law.gmu.edu/pubs/papers/14_04 |access-date=2023-11-11}}</ref> And the argument made in Becker's 1962 paper, that a 'pure' increase in the (relative) price (or terms of trade) of good X must reduce the amount of X demanded in the market for good X, is explained in greater detail in chapters (or as he calls them, "Lectures" because this textbook is more or less a transcription of his lectures given in his Price Theory course taught to 1st year PhD students several years earlier) 4 (called The Opportunity Set) and 5 (called Substitution Effects) of Gary Becker's graduate level textbook Economic Theory, originally published in 1971.<ref>{{Cite book |last=Becker |first=Gary |title=Economic Theory |year=2008 |publisher=Transaction Publishers |isbn=978-0-202-30980-4}}</ref>

Besides the three critical aforementioned articles, critics of behavioral economics typically stress the [[rationality]] of economic agents.<ref>{{cite journal|url=http://authors.library.caltech.edu/43961/1/exchange%20economies%20and%20loss%20exposure.pdf|title=Exchange Economies and Loss Exposure: Experiments Exploring Prospect Theory and Competitive Equilibria in Market Environments|last1=Myagkov|first1=Mikhail|last2=Plott|first2=Charles R.|date=December 1997|journal=The American Economic Review|volume=87|issue=5|pages=801–828|access-date=October 21, 2015|archive-date=December 22, 2015|archive-url=https://web.archive.org/web/20151222140516/http://authors.library.caltech.edu/43961/1/exchange%20economies%20and%20loss%20exposure.pdf|url-status=dead}}</ref> A fundamental critique is provided by Maialeh (2019) who argues that no behavioral research can establish an economic theory. Examples provided on this account include pillars of behavioral economics such as satisficing behavior or prospect theory, which are confronted from the neoclassical perspective of utility maximization and expected utility theory respectively. The author shows that behavioral findings are hardly generalizable and that they do not disprove typical mainstream axioms related to rational behavior.<ref>{{cite journal|last1=Maialeh|first1=Robin|year=2019|title=Generalization of results and neoclassical rationality: unresolved controversies of behavioural economics methodology|journal=Quality & Quantity|volume=53|issue=4|pages=1743–1761|doi=10.1007/s11135-019-00837-1|s2cid=126703002}}</ref>

Others, such as the essayist and former trader [[Nassim Taleb]] note that cognitive theories, such as [[prospect theory]], are models of [[decision-making]], not generalized economic behavior, and are only applicable to the sort of once-off decision problems presented to experiment participants or survey respondents.<ref>{{Cite web|url=https://www.econtalk.org/nassim-nicholas-taleb-on-rationality-risk-and-skin-in-the-game/|title=EconTalk: Nassim Nicholas Taleb on Rationality, Risk, and Skin in the Game|last1=Roberts|first1=Russ|last2=Taleb|first2=Nassim|date=March 2018}}</ref> It is noteworthy that in the episode of [[EconTalk]] in which Taleb said this, he and the host, [[Russ Roberts]] discuss the significance of Gary Becker's 1962 paper cited in the first paragraph in this section as an argument against any implications which can be drawn from one shot psychological experiments on market level outcomes outside of laboratory settings, i.e. in the real world. Others argue that decision-making models, such as the [[Endowment effect|endowment effect theory]], that have been widely accepted by behavioral economists may be erroneously established as a consequence of poor experimental design practices that do not adequately control subject misconceptions.<ref name=":0" /><ref>{{Cite journal|last1=Klass|first1=Greg|last2=Zeiler|first2=Kathryn|author2-link=Kathryn Zeiler|date=2013-01-01|title=Against Endowment Theory: Experimental Economics and Legal Scholarship|url=https://scholarship.law.bu.edu/faculty_scholarship/199|journal=UCLA Law Review|volume=61|issue=1|pages=2}}</ref><ref>{{Cite journal|last=Zeiler|first=Kathryn|date=2011-01-01|title=The Willingness to Pay-Willingness to Accept Gap, the 'Endowment Effect,' Subject Misconceptions, and Experimental Procedures for Eliciting Valuations: Reply|url=https://scholarship.law.bu.edu/faculty_scholarship/521|journal=American Economic Review|volume=101|issue=2|pages=1012–1028|doi=10.1257/aer.101.2.1012}}</ref><ref>{{Cite journal|last=Zeiler|first=Kathryn|date=2005-01-01|title=The Willingness to Pay-Willingness to Accept Gap, the 'Endowment Effect,' Subject Misconceptions, and Experimental Procedures for Eliciting Valuations|url=https://scholarship.law.bu.edu/faculty_scholarship/781|journal=American Economic Review|volume=95|issue=3|pages=530–545|doi=10.1257/0002828054201387}}</ref>

Despite a great deal of rhetoric, no unified behavioral theory has yet been espoused: behavioral economists have proposed no alternative unified theory of their own to replace neoclassical economics with.

[[David Gal]] has argued that many of these issues stem from behavioral economics being too concerned with understanding ''how'' behavior deviates from standard economic models rather than with understanding ''why'' people behave the way they do. Understanding why behavior occurs is necessary for the creation of generalizable knowledge, the goal of [[science]]. He has referred to behavioral economics as a "triumph of marketing" and particularly cited the example of loss aversion.<ref>{{Cite news|title=Why Is Behavioral Economics So Popular?|work=The New York Times |date=October 6, 2018 |language=en|url=https://www.nytimes.com/2018/10/06/opinion/sunday/behavioral-economics.html|access-date=2018-11-16|type=Opinion|last1=Gal |first1=David }}</ref>

Traditional economists are skeptical of the experimental and survey-based techniques that behavioral economics uses extensively. Economists typically stress [[revealed preference]]s over stated preferences (from surveys) in the determination of [[economic value]]. Experiments and surveys are at risk of [[systemic bias]]es, strategic behavior and lack of incentive compatibility. Some researchers point out that participants of experiments conducted by behavioral economists are not representative enough and drawing broad conclusions on the basis of such experiments is not possible. An acronym [[WEIRD]] has been coined in order to describe the studies participants—as those who come from Western, Educated, Industrialized, Rich, and Democratic societies.<ref>{{cite journal | last1=Henrich | first1=Joseph | last2=Heine | first2=Steven J. | last3=Norenzayan | first3=Ara | title=The weirdest people in the world? | journal=Behavioral and Brain Sciences | publisher=Cambridge University Press (CUP) | volume=33 | issue=2–3 | year=2010 | issn=0140-525X | doi=10.1017/s0140525x0999152x | pages=61–83| pmid=20550733 | s2cid=219338876 | url=https://www2.psych.ubc.ca/~henrich/pdfs/WeirdPeople.pdf }}</ref>

=== Responses ===

[[Matthew Rabin]]{{sfn|Rabin|1998|pp=11–46}} dismisses these criticisms, countering that consistent results typically are obtained in multiple situations and geographies and can produce good theoretical insight. Behavioral economists, however, responded to these criticisms by focusing on field studies rather than lab experiments. Some economists see a fundamental schism between [[experimental economics]] and behavioral economics, but prominent behavioral and experimental economists tend to share techniques and approaches in answering common questions. For example, behavioral economists are investigating [[neuroeconomics]], which is entirely experimental and has not been verified in the field.{{citation needed|date=May 2010}}

The epistemological, ontological, and methodological components of behavioral economics are increasingly debated, in particular by historians of economics and economic methodologists.<ref>{{Cite news|last1=Kersting|first1=Felix|last2=Obst|first2=Daniel|date=10 April 2016|title=Behavioral Economics|language=en|website=Exploring Economics|url=https://www.exploring-economics.org/en/orientation/behavioral-economics/}}</ref>

According to some researchers,<ref name="Sarapultsev, A. 2014">{{cite journal|last1=Sarapultsev|first1=A.|last2=Sarapultsev|first2=P.|year=2014|title=Novelty, Stress, and Biological Roots in Human Market Behavior|journal=Behavioral Sciences|volume=4|issue=1|pages=53–69|doi=10.3390/bs4010053|pmc=4219248|pmid=25379268|doi-access=free}}</ref> when studying the mechanisms that form the basis of decision-making, especially financial decision-making, it is necessary to recognize that most decisions are made under stress<ref>{{cite book|last=Zhukov|first=D.A.|title=Biologija Povedenija, Gumoral'nye Mehanizmy [Biology of Behavior. Humoral Mechanisms]|publisher=Rech|year=2007|location=St. Petersburg, Russia}}</ref> because, "Stress is the nonspecific body response to any demands presented to it."<ref name="Selye2013">{{cite book|last=Selye|first=Hans|url={{google books |plainurl=y |id=wrfYBAAAQBAJ}}|title=Stress in Health and Disease|publisher=Elsevier Science|year=2013|isbn=978-1-4831-9221-5}}</ref>