'Behavioral economics is very congenial to top-down approaches to social problems. It is viewed by deep skepticism with people like me who believe that the knowledge problem; emergence and the law of unintended consequences; and the deforming effects and perverse incentives of power (to name just three things) make top down solutions disastrous in most cases.'<blockquote>'But what really distinguishes behavioral economics is its avowedly normative thrust. People are irrational, and would be better off in objectively measurable ways if these behavioral biases were corrected. Furthermore, many behavioral economists, and Thaler specifically, are quite confident in their ability to identify and correct these biases–and make people better off–through “nudges”.
I have two major objections to this. The first is the fallacy of composition problem mentioned earlier. Nudged agents interact in markets, organizations, and institutions. Individual behavioral changes will lead to changes in prices and market outcomes. It does not follow that “better” individual behavior will result in “better” market outcomes–that’s the fallacy of composition in action. Economies are emergent orders, and small changes in individual behavior can lead to very different emergent outcomes. The law of unintended consequences is ruthless in its operation in emergent settings.
My second objection is more straightforward. Behavioral economics of the nudge variety is relentlessly progressive, in the political sense. There are the elite nudgers, and the irrational hoi polloi who can be improved by the beneficent interventions of the nudgers. Moreover, the elite are apparently not just benevolent, but also devoid of their own behavioral biases.
To which I reply: one of the major biases identified by behavioral economists is the overconfidence bias. Mightn’t the nudgers be particularly prone to that bias? The likely commission of the fallacy of composition suggests that they are. As does the dreary experience of social and behavioral engineering efforts large and small, where technocratic elites in their overweening confidence wreaked great havoc around the world.
Ironically, I would assert that behavioral economics actually feeds the overconfidence bias among its practitioners. A seemingly powerful intellectual tool has the tendency to do that. In economics, I would proffer Keynesianism as an example.
Shall we consider other biases as well? Given that there are many of them, we could be here for a while. Suffice it to say that once you admit the nudgers are themselves imperfect decision makers, the case for nudging becomes very weak indeed. When you add the fact that even Spock-like nudgers operate with seriously limited information (about outcomes of emergent social processes in particular), the case becomes weaker still.
Behavioral economics therefore is just what a would-be technocratic elite ordered. It provides a justification for their existence, and also for an existence that should be independent of check by popular institutions. For it would be irrational, wouldn’t it, to subject rational, bias-free technocrats to the whims of irrational individuals crippled by various behavioral biases? Decision making elites unconstrained by popular forces is the essence of progressivism (and in its extreme form, totalitarianism).
..
Behavioral economics is very congenial to top-down approaches to social problems. It is viewed by deep skepticism with people like me who believe that the knowledge problem; emergence and the law of unintended consequences; and the deforming effects and perverse incentives of power (to name just three things) make top down solutions disastrous in most cases.
So the Thaler Nobel is accurately reflective of the influence of behavioral economics on the profession, and on the profession’s contribution to policy debates. And that is a disturbing reality.'
- Streetwise Professor,
The Thaler Nobel: A Nudge to Progressivism in a Populist Age, October 9, 2017</blockquote>
Context<blockquote>
(Haptopraxeology) - '..the near entirety of the social science community betrayed humanity .. failed .. to fulfill their vital scientific duty..'(Haptopraxeology) - '..We have lost three centuries as a result of ignoring our scholars!''..subjective knowledge treats knowledge as being tacit, private, subjective, and decentralized..'</blockquote>