John Papola on Behavioral Economics
By David Henderson
Here is the most succinct criticism I have heard of many of the public-policy views of those who embrace behavioral economics:
Why in the world do behavioral economists who study our flaws and irrational quirks advocate centralized power in the hands of a small group of flawed overlords? If people are irrational, so are government regulators, only they have corrupting monopoly power.
It’s from John Papola on Facebook. (Yes, he gave me permission to use it.)
We need to separate behavioral economics into two components: (1) their analysis of humans and the limits of rationality, much of which I agree with, and (2) their conclusion, on the basis of (1), that because humans aren’t totally rational, other not-totally-rational humans who will not bear the consequences of their mistakes should be given power over people’s lives. It’s this second part that’s so absurd and that John Papola puts his finger on. What it shows is the utter failure of the behavioral economists to grapple with public choice, or even to be consistent in the way they model the behavior of humans.