Here’s a letter to an e-mail correspondent. I use his real name with his kind permission.
Jeremy Harris, M.D.
Dear Dr. Harris:
Thanks for e-mailing in response to my recent review of Cass Sunstein’s book Simpler. While I disagree with the thrust of your argument, I appreciate its civility and thoughtfulness.
The heart of your criticism is your claim that I “ultimately deny the significance” of behavioral economics.
No and yes. I don’t deny the worth of learning more about human behavior. I don’t deny that some economists forget that homo economicus is an analytical tool and not a description of, or a prescription for, real people. I don’t deny that behavioral economics gives us a richer and worthwhile picture of the reality of human action.
But I do deny two things. First, I deny that the best of economics is done in ways that make it, at its core, vulnerable to the findings of behavioral economics. Not only is homo economicus an appropriate analytical tool on many occasions, but also, a great many ‘non-behavioral’ economists (and nearly all Austrian economists) often model human decision-making with more richness and realism than behavioral economists think. Read, for example, Adam Smith, F.A. Hayek, Ronald Coase, James Buchanan, Thomas Sowell, and Deirdre McCloskey.
Second, I deny that behavioral economics strengthens the case for government regulation. Indeed, I believe that it weakens that case. Because the regulators have the same psychological foibles as the regulatees – yet face far less direct feedback on their decisions than do those whom they regulate – turning more decision-making power over to government increases the frequency of human error and amplifies its ill-effects. Markets keep those errors less numerous and their effects more confined.
Human beings are not laboratory rats to be controlled and conditioned by some elite of their number who, somehow and without explanation, manage to become higher-order creatures simply by working for government and professing deep concern for the welfare of their lab animals.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030