Working Paper: CEPR ID: DP11786
Authors: Ran Spiegler
Abstract: Behavioral economics is perceived by many to be part of a general shift in the culture of economics toward a less theoretical style. I present a critical discussion of certain manifestations of this trend: a preference for an anecdotal style of exposition (illustrated by Akerlof and Shiller's Phishing for Phools), reduced-form modeling (illustrated by Campbell's Ely Lecture), and the method of capturing psychological forces using parametric modifications of conventional functional forms. I argue that the subject of "psychology and economics" is intrinsically foundational, and that a pure-theory component is essential for it to realize its transformative potential.
Keywords: Behavioral Economics; Atheoretical Style
JEL Codes: D03
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| anecdotal presentation of economic concepts (D12) | diluted understanding of market dynamics (D43) |
| presentation style (Y20) | effectiveness of communication in economics (A11) |
| reduced-form modeling (C51) | misrepresentation of consumer behavior in financial markets (G41) |
| modeling style (C52) | accuracy of economic predictions (E37) |
| choice of modeling approach (C52) | quality of economic analysis (O22) |
| absence of a strong theoretical framework in BE (B00) | flatter discourse (Y60) |