A simple model of posting in economics discussions on EJMR:
Assume that the cost of posting is c=wp, where w is the opportunity cost of time and p is the number of pages to read before posting. Assume in addition that the benefits of reading each page take the form of b=f(w_{-i}) for increasing function f of the average opportunity cost of other posters w_{-i}.
Theorem:
All discussion eventually degenerates to the level of the posters with the lowest opportunity cost of time.
Proof:
Trivial
How many pages of this thread have been focused on this one paper in Ecma by Rabin? And what does this prove or disprove about whether or not "behavioral economics is doomed" or not? Nothing. Not a goddamned thing. I bet that neither JEBO nor ROBE nor any other behavioral econ journal is getting any papers submitted on Rabin's paper in Ecma, not one, but there are certainly plenty of papers being written and submitted to many journals on behavioral econ. It is thriving.
Let L=[x,p; y,1-p] denote the lottery that pays $x with probability p and $y with probability 1-p. Consider the utility function U(L)=min x, y.
This person prefers $x to any gamble that pays $x with probability p and $y with probability p-1. For example, this person prefers a penny to a 99.999999% chance of $1 trillion.
CLAIM: This example shows that Rabin's theorem does not assume a CARA utility function.
Proof that claim is false.
The person described has the following utility function:
f(0)=0
If x>0, then f(x)=k
The marginal utility of money is zero. This person's utility function violates Rabin's assumption that the utility function is monotonically increasing. It violates the assumption that it's concave.
If you were desperate to model the person's preferences within EU theory, you'd say f(x)=1-k^x where k is arbitrarily close to zero. That is, the person's preferences are close to being describable by a CARA utility function.
Conclusion:
The fact that a person with the utility function U(0)=0 and U(x)=k for x>0 would always reject a win G/lose L gamble is completely irrelevant to Rabin's theorem since it violates the assumptions of monotonicity and concavity.
But nice try.
The claim that "Behavioral economics is doomed" is as plausible as the claim that "The internet is a fad." BE has taken over marketing, heavily influenced finance and revolutionized theories of risky choice. It's a good bet that at least 15% of the Nobel prizes in econ in the next 20 years will go to behavioral economists. Loewenstein should win one but probably won't. Thaler shouldn't win one but probably will.
Rabin has shown that CARA utility functions are implausible normatively and descriptively. Unfortunately, no one has told the risk and decision analysts (John Graham at Harvard, Cass Sunstein at Harvard - two of the creepiest academics ever and most detrimental to society. Ugh)
Behavioral gives some nice insights but people that do it are really annoying. Many of them think they are the cream of the crop while they cant handle real theory or serious empirical analysis
What's real theory and what's serious empirical analysis? Sounds like sour grapes.
The claim that "Behavioral economics is doomed" is as plausible as the claim that "The internet is a fad." BE has taken over marketing, heavily influenced finance and revolutionized theories of risky choice. It's a good bet that at least 15% of the Nobel prizes in econ in the next 20 years will go to behavioral economists. Loewenstein should win one but probably won't. Thaler shouldn't win one but probably will.
Prescient
Behavioral gives some nice insights but people that do it are really annoying. Many of them think they are the cream of the crop while they cant handle real theory or serious empirical analysis
This,
From our MRes batch, worse guys with worse coursework marks do behavioral or experimental. They cant even comprehend a simple theory paper or do more than OLS.
And we are top 20 in Repec for Behavioral.
Don't think behavioral is going anywhere useful for economics. All we got is a long list of cognitive biases with cute names (IKEA effect) and a even longer list of terrible economists that have no idea what a model is and does or what actually the definition of rationality is in economics.
BE is good for Ted Talks arousing young unexperienced scholars that are afraid of formalizations.
Because coming up with clever rationalizations for why everything can be explained within the homo oeconomicus model, even though you'd be embarrassed to explain this theory in front of a non-economist.
If you have a clever design, you do not need sophisticated empirical analyses. And if you are testing a certain aspect of a theoretical model, you do not have to be able to create the next big deep mathy theory.
Some bad experimentalists and behavioralists claim more than they find, and some do not understand the basics, but if you have been following closely this literature you'd agree that it is much much more mature nowadays and good stuff is coming out. It has gotten way more difficult to publish this kind of research. There are still remnants from the previous generation here and there but guys come on, these approaches serve a fine purpose and there is enough good work. You should be able to separate good ones from the bad ones.
Behavioral gives some nice insights but people that do it are really annoying. Many of them think they are the cream of the crop while they cant handle real theory or serious empirical analysisThis,
From our MRes batch, worse guys with worse coursework marks do behavioral or experimental. They cant even comprehend a simple theory paper or do more than OLS.
And we are top 20 in Repec for Behavioral.