Revenge of the Game Theorist
I’m a fan of behavioral economics, but I’ve got to admit that behavior economists can be painfully condescending. “You only disagree with it because you haven’t bothered to read it,” is the subtext, and sometimes it’s out in the open. Thus, Matt Rabin writes:
Because behavioral research is so often assessed in light of such arguments, it is common when presenting psychological findings to discuss broad methodological objections and attempt to rebut them.
I refrain from doing so. It is my strong impression that many of the arguments invoked against the reality or relevance of behavioral research derive from unfamiliarity with the details of this research… And as the aggressive uncuriosity shown in the past toward behavioral research continues to diminish, we can look forward to focusing entirely on its substance. (JEL 36(1): 41)
In my view, this smug attitude confirms that behavioral economists suffer from the same biases they study – most obviously, overconfidence. And someone is finally calling them on it. Legendary game theorist Ariel Rubinstein has gone on the attack against behavioral economists’ rhetorical inflation, and while he’s certainly aggressive, he’s hardly uncurious. Here are some of Rubinstein’s key accusations:
Rabin goes out of his way to beat, if I may use his own phrase, the “dead parrot” of full rationality. Of course there are many facts that are hard to reconcile with full rationality. But the psychology and economics literature has replaced a dead parrot with one that is equally dead. If the “time consistent” model is wrong, then the [alternate model Rabin favors] is equally wrong. It can easily be disproved experimentally (see Rubinstein
(2003,2004)) but… fans apparently prefer to ignore experimental evidence that does not go their way.
It is my impression that intuitive and “sexy” results are gladly accepted by behavioral economists without sufficient criticism.
Let me illustrate the point with the well known paper, Gneezy and Rustichini (2000). Colin describes the paper in the following words: “To discourage parents from picking their children up late, a day-care center instituted a fine for each minute that parents arrived late at the center. The fine had the perverse effect of increasing parental lateness…”
Being a skeptic, I found it difficult to believe that the experiment could have been carried out as described. I know Israel quite well. It is a country where rules are rarely enforced… Therefore, I at least want to know what the procedure was for collecting data.
His detective work revealed that:
There was no attempt to control the accuracy of the RA’s records. Oddly, I was not allowed to talk with the teachers.
Who is to blame? The overly motivated authors; the refereeing process which puts too much trust in authors’ data; myself, since I knew about the faulty procedure and did not bother to write a comment (which would probably have been rejected); and what is most relevant to the current discussion – those behavioral economists who gave the paper wide exposure without critical assessment.
I would not be surprised if brain studies eventually change our view of decision making. However, I have yet to come across a single relevant insight produced by these studies. The popularity of brain studies might have to do with the obsession among many economists of becoming scientists.
I don’t agree with everything Rubinstein says, but his conclusion is dead-on: “For Behavioral Economics to be a revolutionary program of research rather than a passing episode, it must become more open-minded and much more critical of itself.”
The best way for behavioral economists to rebut Rubinstein’s charges would be to respectfully engage him. If they can’t bring themselves to do so, Rubinstein can rest his case.