Economic behaviorism isn’t dead. It’s just resting. Or pining for the fjords.

Seriously, I think that behaviorism is a reaction against two propositions. One is that we need to examine whether people really optimize. The other is that we need to observe people’s utility functions.

The doctrine of revealed preference, which I associate with Samuelson, says that we do not need to observe utility functions. Instead, we can infer relative marginal utility indirectly by observing choices.

A short way of putting this form of behaviorism is “watch what people do, not what they say.” For example, so-called “happiness research” will come up with results that say that people get little or no incremental happiness beyond $20,000 of income. Yet their behavior contradicts that, since many people could easily cut back on work and still have $20,000 a year. I believe the behavior, not the surveys.

My co-blogger wants to bury behavioralism. I am not ready to see it interred.