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Samenvatting - Behavioral Economics (ECB3BE)
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Summary of required tutorial papers week 1-7.
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PapersWeek 1
Berg and Gigerenzer's "As-If Behavioral Economics: Neoclassical Economics in Disguise?"
BG❎：as-if doctrine, add psychological parameters to economic models, just
statistical fit
✅：ecological rationality (context dependent), decision-making process
Normative Models
1. **What is a normative model? What is a descriptive (or positive) model?**
Normative model** prescribes how individuals *ought* to make decisions according to a set of
rationality principles, such as neoclassical economics' focus on optimization.
What should be
Descriptive model**, on the other hand, seeks to explain how people actually make decisions,
often noting deviations from the normative standard
Positive what actually is
2. **What do the authors mean by “ecological rationality”?**
- "Ecological rationality" refers to decision-making processes that are well-adapted to
the structure of the environment in which they are used. It implies that rationality is
context-dependent, and what might be considered irrational in one environment could be
highly rational in another
3. **What is “Friedman’s as-if doctrine”?**
- The “as-if doctrine” by Friedman suggests that economic models do not need to
accurately describe the underlying decision-making process; they only need to predict
outcomes accurately. Behavioral models, although adding new parameters to improve fit,
follow the same as-if logic without necessarily offering a better description of real decision-
making processes
4. **What is the main message of the paper?**
- The paper argues that behavioral economics has not broken away from neoclassical
models as much as it claims. It critiques the reliance on neoclassical normative
benchmarks and emphasizes the need for a deeper understanding of decision-making
processes, rather than just adding parameters to improve model fit
5. **Do you think the neoclassical model is normatively appropriate? Or should we use
ecological rationality as a normative standard?**
- The paper suggests that neoclassical models may be too rigid and context-insensitive
to serve as universal normative standards. It proposes that ecological rationality, which
adapts decision rules to specific environments, might be a better normative framework for
evaluating behavior
### Behavioral Economics
, 6. **How do behavioral economists operate according to BG? What is the problem with that in
their view?**
- Behavioral economists add psychological parameters to neoclassical models to improve
their fit with observed data, but this often leads to more complex optimization problems. The
authors argue that this method still adheres too closely to the "as-if" doctrine, focusing on
outcomes rather than offering a better understanding of actual decision-making
processes
Neoclassical models+psychological parameters=complex optimization problems
7. **What do BG mean by “The goal of the repair program appeared, in some ways, to be
more statistical than intellectual”?**
- This refers to the tendency in behavioral economics to modify models by adding
parameters in order to increase statistical fit, rather than seeking a better intellectual
understanding of the underlying decision processes. The focus is on producing models that
fit the data, not on accurately capturing the cognitive processes behind decision-making
8. **How would Gul and Pesendorfer (GP) respond to that criticism?**
- Gul and Pesendorfer would likely defend the focus on outcomes, arguing that the goal of
economics is to predict behavior, not necessarily to describe the cognitive processes behind
it. They would likely align with the "as-if" doctrine that models need only predict choices
correctly, even if the decision process they assume is unrealistic
### Criticism of economics:
GP✅: (perhaps) as-if doctrine, distinction between economics and other fields
❎: neuroeconomists, psychological factors, true utility, (limited scope)
1. Deal with mental processes underlying decision-making.
2. Analyze the causes of preferences, only their revealed consequences.
3. Take a stance（立场） on what individuals should choose (therapeutic
intervention).
4. Use non-choice data to calibrate（标定） models—economic data come solely
from observed choices
**9. What are the claims of neuroeconomists according to GP?**
Neuroeconomists believe that recent advances in neuroscience will lead to a unification of
economics and brain science. They claim that by studying brain processes, such as neural
activity during economic decision-making, they can replace traditional economic models with
ones grounded in neural processes. For instance, they argue that brain scans showing which
areas of the brain are active during economic decisions (such as gambling) can provide a more
accurate depiction than current mathematical models
**10. Why can psychological and physiological evidence neither confirm nor reject
economic theories according to GP?**
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