PSYCHOLOGY
Good News: We’re Not So Irrational After All!
Cracks in the foundation of behavioral economics?
For well over a decade, we’ve heard we’re “predictably irrational.”
We disproportionately avoid loss rather than seeking gain; we’re easily primed for (someone else’s) desired responses; we grab apples rather than potato chips if they’re closer at hand.
But it turns out humanity may not be so silly. Granted, we’re still not cold, hard utility-maximizing machines—that’s for the better!—but our preferences aren’t willow trees swaying in the breeze of our environment, either.
In fact, we seem to be witnessing what behavioral scientist Jason Hreha provocatively calls “[t]he death of behavioral economics.”
Hreha cites two factors, one academic and one pragmatic:
1. Core behavioral economics findings have been failing to replicate for several years, and *the* core finding of behavioral economics, loss aversion, is on ever more shaky ground.
2. Its interventions are surprisingly weak in practice.
But does it really matter if they don’t replicate and don’t accomplish much in reality?
Oh, yes it does. In a big way.
I’m not a behavioral scientist, economist, or academic of any other stripe. I have no horse in this race. But it’s not every day that we see such an influential paradigm wax and wane within one professional generation.
You might be aware of the much broader replication crisis afflicting many disciplines, but especially the social and behavioral ones. (Fittingly enough, later researchers have even struggled to replicate the seminal replication-crisis paper.)
You might also have heard about incidents of fraudulent data—like this particularly recent and high-profile example—that invalidate some influential findings.
This doesn’t impugn the scientific method, but it does suggest researchers are navigating unrealistic expectations and twisted incentives. And some, being human, may fall into methodological compromises on the way.
The overarching lesson is perhaps disappointingly simple: be exceedingly wary of any claims about general human nature that come from the lab.
Insofar as behavioral economics is falling out of favor, it’s hardly the first case of a vastly influential paradigm fading amid revelations of methodological shortcomings.
But this goes deeper than the controversies around “p-hacking” (i.e., designing or rummaging around for something statistically significant to report).
For one thing, our working definition of “rationality”—the standard against which behavioral economics compares our choices—may be too narrow. Perhaps we rationally seek to maximize utility on many fronts at once: checking accounts, breadth of future options, peace of mind, closeness with others, aesthetic preferences, and so forth. Some are quantitative, some have vaguely measurable proxies, and some simply defy computation.
More generally, perhaps we’re collectively guilty of demanding unrealistic scientific precision around human behavior in the first place. After all, it’s easy to see the appeal: if tests and experiments could uncover the method to our madness—the patterns of our irrationality—then what broader ills couldn’t be incentivized or manipulated away?
There’s no question that experimental evidence can shed light on our decision-making processes, help challenge longstanding assumptions, and reveal systematic shortcomings in our perception.
The problem arises when we yield to the temptation to stretch that exciting but limited domain into an epistemic fantasy wherein the right experimental conditions definitively reveal the features and bugs of our psychic algorithms.
Unfortunately, I’m not about to reveal a grand hypothesis that unifies the (remaining) valid points of behavioral economics with classical paradigms, etc. But for the moment, it’s nice to know I may not be so irrational after all.
