I’m sitting in on Matthew Rabin’s Psychology and Economics course this semester. The class is a theory course in which the standard models are tweaked to incorporate standard psychological facts about human decision making. Much of that theory is motivated by behavior economics findings of bias and “behavioral anomalies“.
I don’t really trust that those results from the laboratory necessarily translate well into our models precisely because the results are from the laboratory. That agents use certain heuristics that lead to biased behaviors in particular situations, doesn’t necessarily mean those heuristics produce bad results in general out in the wild. In other words, that people are biased when choosing their consumption of one good in a heterogeneous goods world, doesn’t mean they’re biased when choosing consumption in a model with homogeneous goods.
I think this is what Robin Hanson is getting at with this post:
As a kid I had a trick nickel from Disneyland’s magic shop – you were supposed to ask someone to look at your nickel, then push the backside to squirt them. Now we might wonder about someone who fell for this trick more than once, but surely it doesn’t make sense to call someone “biased” who fell for it once. Even if you tried the trick nickel on a hundred people, and showed that over ninety percent of them got a wet eye, you wouldn’t have shown people are biased about wet nickels.
Be sure to catch the comments section, too.