Rubinstein on Behavioral Economics

Cite this Article
Joshua D. Wright, Rubinstein on Behavioral Economics, Truth on the Market (January 03, 2007),

Ariel Rubinstein (Tel Aviv/ NYU Econ) has posted a critique of behavioral economics. The critique addressses theoretical behavioral economics and the empirical foundations of BE. On the theory:

“The psychology and economics literature has replaced a dead parrot (ed. — referring to the model of full rationality) with one that is equally dead. If the time-consistent model is wrong, then the Beta, Delta model is equally wrong. It can easily be disproved experimentally (see Rubinstein 2003, 2004a) but the Beta-Delta fans apparently prefer to ignore experimental evidence that does not go their way.”

On the empirical foundations, which Rubinstein describes as consisting of experiments, animal behavior, and neuroeconomics, Rubinstein offers the following:

  • A (mostly) methodological critique of the Gneezy & Rustichini (2000) paper on late fines in Haifa kindergartens.
  • A critique of reliance on animal behavior (“Why is animal behavior relevant? I have no idea. If the behavioral economists are trying to say that the behavior of human beings is rooted in their physical nature, I imagine they are right. Indeed, we are just flesh, blood and neurons. Even if we consider these experimental results relevant, a skeptical approach is recommended here as well.”)
  • On neuroeconomics: “Of course, brain studies are fascinating, probably more so than even… economics. 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. How can serious researchers draw such hasty conclusions from so little data? Well, without the support of fMRI studies, I dare say economists are human beings with ordinary emotions and aspirations. Once I asked a researcher in the field whether he feels comfortable about making conclusions from such a small sample and relying on statistical inferences which are not well understood. He said, “Yes I know, but if I don’t do it someone else will and I will not be the first…â€

Rubinstein’s punchline is that behavioral economics must become more self-critical if it is to live up to its revolutionary aspirations.  As an aside, the same can and probably should be said of legal literature relying on economics as an input. Criticism of work from within the discipline is healthy, and is at least partially responsible for identifying work which does not demonstate sufficient quality.  The “within discipline” component of this screening is probably more important in the legal literature which involves substantially less peer-review.

HT: Kate Litvak for pointing me towards the paper.