Is Behavioral Economics Doomed? The Ordinary versus the Extraordinary

Abstract

Behavioral economics is an effort to bring psychological and emotional aspects of human behavior into economic theory. Critics of existing theory, including many psychologists and behavioral economists, poorly understand modern equilibrium and learning theory. That theory explains most phenomena of interest to economists. In some cases, however, it lacks predictive power. If there is a role for behavioral economics it is not in supplanting the existing theory, but in strengthening it to give it greater predictive power.