By Joe Bast | September 22, 2023

In 2014, Herb Walberg and I wrote a book titled “Rewards: How to use rewards to help children learn — and why teachers don’t use them well.” (Sorry, one-word titles and long subtitles were a thing in 2014.)

One important message in that book was that economics provides a solid foundation for policy recommendations that encourage competition and choice in schooling. To make that case, we criticized the work of some prominent authors (e.g., Alfie Kohn) who deny that rewards work in education or deny that people generally behave rationally, a major claim of so-called “behavioral economics” (e.g., Dan Ariely, Daniel Kahneman).

I thought we made some important and original observations. The book got great “blurbs” from some clear thinkers in the education reform movement, but it didn’t generate many reviews, sales, or push back from any of the authors whose work we criticized. The book disappeared without a ripple. Meanwhile “behavioral economics” spread like a virus through the discipline.

So imagine how happy … vindicated, really … I am just now to have discovered that Gerd Gigerenzer, the truly brilliant German psychologist, author of “Calculated Risks” (2002), a really valuable book about understanding different methods of measuring and reporting risk (and how ignorance of underlying principles leads to false alarms in medicine and environmental sciences), emerged sometime after 2014 as an outspoken critic of “behavioral economics,” echoing many of the same points Herb and I made. Here is the abstract of an article he wrote for Review of Behavioral Economics in 2018:

Behavioral economics began with the intention of eliminating the psychological blind spot in rational choice theory and ended up portraying psychology as the study of irrationality. In its portrayal, people have systematic cognitive biases that are not only as persistent as visual illusions but also costly in real life—meaning that governmental paternalism is called upon to steer people with the help of “nudges.” These biases have since attained the status of truisms. In contrast, I show that such a view of human nature is tainted by a “bias bias,” the tendency to spot biases even when there are none. This may occur by failing to notice when small sample statistics differ from large sample statistics, mistaking people’s random error for systematic error, or confusing intelligent inferences with logical errors. Unknown to most economists, much of psychological research reveals a different portrayal, where people appear to have largely fine-tuned intuitions about chance, frequency, and framing. A systematic review of the literature shows little evidence that the alleged biases are potentially costly in terms of less health, wealth, or happiness. Getting rid of the bias bias is a precondition for psychology to play a positive role in economics.

OMG! This is exactly what Herb and I wrote 4 years earlier, and what I’ve been saying about “behavioral economics” to anyone who will listen ever since!

They say brilliant minds think alike. By that standard, I hereby declare myself to be brilliant. Herb, bless his soul, was pretty smart, too.

The Fallacies of Behavioral Economics
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