The Nobel prize for Economics (technically, the Sveriges
Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) has previously been
awarded to academics working in the field of decision-making, psychology and
economics (Herbert Simon in 1978 and Daniel Kahneman in 2002). But the
announcement last week that the 2017 prize would go to Richard Thaler, was the first which explicitly mentioned the award being for “contributions to behavioural economics."
The citation defines behavioural economics as “a research field in which insights from
psychological research are applied to economic decision-making. A behavioural
perspective incorporates more realistic analysis of how people think and behave
when making economic decisions, providing new opportunities for designing
measures and institutions that increase societal benefit.”
Thaler’s research was praised for incorporating
psychological assumptions into analyses of economic decision-making, his work showing
how the limitations of an individual’s knowledge in the decision-making
process, as well as the consequences of social preferences and a lack of self-control,
can affect people’s decisions as well as market outcomes. The
Royal Swedish Academy of Sciences described Thaler as a pioneer
of behavioural economics, saying that it had progressed in recent years from a
fringe and somewhat controversial field of research into “a mainstream
component of the economics profession.”
Behavioural
economics and me
Ten years ago
media images showed queues of anxious depositors in British high streets as the
crisis at Northern Rock, the first run on a British bank for around a century,
became the clearest sign that all was not well in the financial system. A year
later, the collapse of Lehman Brothers signalled the full blown emergence of
the Global Financial Crisis. These momentous financial events coincided with my
new job as an economics lecturer at Brighton Business School, University of
Brighton. Economics 101, which I was teaching to first year undergraduates, was
hard-pressed to explain the most momentous economic events in living memory. Which
was why I turned to other schools of thought, including behavioural economics, launching
what turned out to be a series of popular modules on the subject.
Rethinking economics and behavioural
economics
Fast forward
a few years, and I was invited by the folks at Rethinking Economics to
contribute a chapter on Behavioural Economics to a forthcoming reader, aimed at
providing an accessible introduction to different approaches to
economics and highlight the diversity of economic thought. The book, which has just been published, introduces
new and diverse ideas into undergraduate economics and places the mainstream of
economic thought side by side with more heterodox schools.
According to the
publishers, Rethinking Economics: An Introduction to Pluralist Economics is
“a great entry-level economics textbook for lecturers looking to introduce
students to a broader range of economic ideas, and is accessible for people outside academia who are
interested in economics and economic theory. Can’t say fairer than that.
The Table of Contents from the Reader is a roll-call of alternative
economics:
· Post-Keynesian Economics
· Marxist Economics
·
Austrian Economics
·
Institutional Economics,
· Feminist Economics
· Complexity Economics
· Co-operative Economics
·
Ecological Economics
·
And my chapter on
Behavioural Economics
According to Richard Thaler’s Nobel Prize citation, behavioural
economics has become “a mainstream
component of the economics profession.” It’s going to be interesting to see if
the rest of the “economics profession” agrees!
