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Events

In light of the current public health COVID-19 situation, all of our public events have been cancelled, postponed or moved online.

Durham Research in Economic Analysis and Mechanisms (DREAM) Seminar Professor Robert Sugden University of East Anglia

Wednesday, 6 February 2019
15:15 to 17:00
Professor Robert Sugden University of East Anglia
Durham University Business School, MHL 223

Title: The community of advantage: a behavioural economist's defence of the market

Abstract:

For decades, economists have been known for their commitment to theories that treat ordinary consumers and workers as highly rational decision-makers. Until recently, the idea that psychological ideas and research methods could be useful in economics was not taken seriously. This psychological approach, now called ‘behavioural economics’, was initiated by a few groups of wayward economists in the 1980s. But it is now one of the fastest-growing and most fashionable fields of economics. The winner of the 2017 economics Nobel Prize, Richard Thaler, is a behavioural economist who goes out of his way to distance himself from traditional economics. In their book Nudge, Thaler and Cass Sunstein propose an approach to public policy-making that has been taken up by many behavioural economists. The central idea is that people are prone to make mistakes in their economic behaviour, and that it is the job of governments to anticipate these mistakes and to guide (or ‘nudge’) citizens towards choices that are in accord with their ‘true’ preferences. This way of thinking runs counter to a long-standing tradition of liberal, anti-paternalistic ideas in economics in which the market has been seen as a mechanism that upholds the ‘sovereignty’ of consumers by supplying them with the goods and services that, given their income, they want to buy. There is a growing tendency for behavioural economics to be presented as challenging, not merely the assumption that behaviour is ‘rational’, but this whole tradition of liberal economics.

I have been a behavioural economist since the pioneering days of the 1980s. But, for even longer than that, I have been an opponent of paternalism in economics. Over the last decade, I have written a series of academic papers arguing for a different understanding of the implications of behavioural economics. I have brought these arguments together in the book The Community of Advantage: A Behavioural Economist’s Defence of the Market.

I argue that the idea that individuals have true preferences, distinct from the psychological processes that explain their actual behaviour, is misguided – a hangover from the theories of rational choice that behavioural economics has disconfirmed. I offer a defence of the market which does not use any concept of preference. Unlike most behavioural economists, I do not address my work to an (imagined) government or ‘social planner’ that is benevolently trying to give people what is good for them. My starting point is to ask what, in the domain of economic policy, citizens can agree they want the government to do for them. I argue that, whether or not people act on ‘rational’ preferences, it is normally in each citizen’s self-judged interest that opportunities for voluntary interaction with other citizens are not restricted. Cases in which individuals think that they themselves are deficient in self-control are much rarer than most behavioural economists suppose. In the words of the great Victorian economist John Stuart Mill, a properly regulated market economy is a ‘community of advantage’ – an institution within which individuals cooperate for mutual benefit.

Durham Research in Economic Analysis and Mechanisms (DREAM) Seminar Professor Robert Sugden University of East Anglia

Wednesday, 6 February 2019
15:15 to 17:00
Professor Robert Sugden University of East Anglia
Durham University Business School, MHL 223

Title: The community of advantage: a behavioural economist's defence of the market

Abstract:

For decades, economists have been known for their commitment to theories that treat ordinary consumers and workers as highly rational decision-makers. Until recently, the idea that psychological ideas and research methods could be useful in economics was not taken seriously. This psychological approach, now called ‘behavioural economics’, was initiated by a few groups of wayward economists in the 1980s. But it is now one of the fastest-growing and most fashionable fields of economics. The winner of the 2017 economics Nobel Prize, Richard Thaler, is a behavioural economist who goes out of his way to distance himself from traditional economics. In their book Nudge, Thaler and Cass Sunstein propose an approach to public policy-making that has been taken up by many behavioural economists. The central idea is that people are prone to make mistakes in their economic behaviour, and that it is the job of governments to anticipate these mistakes and to guide (or ‘nudge’) citizens towards choices that are in accord with their ‘true’ preferences. This way of thinking runs counter to a long-standing tradition of liberal, anti-paternalistic ideas in economics in which the market has been seen as a mechanism that upholds the ‘sovereignty’ of consumers by supplying them with the goods and services that, given their income, they want to buy. There is a growing tendency for behavioural economics to be presented as challenging, not merely the assumption that behaviour is ‘rational’, but this whole tradition of liberal economics.

I have been a behavioural economist since the pioneering days of the 1980s. But, for even longer than that, I have been an opponent of paternalism in economics. Over the last decade, I have written a series of academic papers arguing for a different understanding of the implications of behavioural economics. I have brought these arguments together in the book The Community of Advantage: A Behavioural Economist’s Defence of the Market.

I argue that the idea that individuals have true preferences, distinct from the psychological processes that explain their actual behaviour, is misguided – a hangover from the theories of rational choice that behavioural economics has disconfirmed. I offer a defence of the market which does not use any concept of preference. Unlike most behavioural economists, I do not address my work to an (imagined) government or ‘social planner’ that is benevolently trying to give people what is good for them. My starting point is to ask what, in the domain of economic policy, citizens can agree they want the government to do for them. I argue that, whether or not people act on ‘rational’ preferences, it is normally in each citizen’s self-judged interest that opportunities for voluntary interaction with other citizens are not restricted. Cases in which individuals think that they themselves are deficient in self-control are much rarer than most behavioural economists suppose. In the words of the great Victorian economist John Stuart Mill, a properly regulated market economy is a ‘community of advantage’ – an institution within which individuals cooperate for mutual benefit.

Durham Research in Economic Analysis and Mechanisms (DREAM) Seminar Professor Robert Sugden University of East Anglia

Wednesday, 6 February 2019
15:15 to 17:00
Professor Robert Sugden University of East Anglia
Durham University Business School, MHL 223

Title: The community of advantage: a behavioural economist's defence of the market

Abstract:

For decades, economists have been known for their commitment to theories that treat ordinary consumers and workers as highly rational decision-makers. Until recently, the idea that psychological ideas and research methods could be useful in economics was not taken seriously. This psychological approach, now called ‘behavioural economics’, was initiated by a few groups of wayward economists in the 1980s. But it is now one of the fastest-growing and most fashionable fields of economics. The winner of the 2017 economics Nobel Prize, Richard Thaler, is a behavioural economist who goes out of his way to distance himself from traditional economics. In their book Nudge, Thaler and Cass Sunstein propose an approach to public policy-making that has been taken up by many behavioural economists. The central idea is that people are prone to make mistakes in their economic behaviour, and that it is the job of governments to anticipate these mistakes and to guide (or ‘nudge’) citizens towards choices that are in accord with their ‘true’ preferences. This way of thinking runs counter to a long-standing tradition of liberal, anti-paternalistic ideas in economics in which the market has been seen as a mechanism that upholds the ‘sovereignty’ of consumers by supplying them with the goods and services that, given their income, they want to buy. There is a growing tendency for behavioural economics to be presented as challenging, not merely the assumption that behaviour is ‘rational’, but this whole tradition of liberal economics.

I have been a behavioural economist since the pioneering days of the 1980s. But, for even longer than that, I have been an opponent of paternalism in economics. Over the last decade, I have written a series of academic papers arguing for a different understanding of the implications of behavioural economics. I have brought these arguments together in the book The Community of Advantage: A Behavioural Economist’s Defence of the Market.

I argue that the idea that individuals have true preferences, distinct from the psychological processes that explain their actual behaviour, is misguided – a hangover from the theories of rational choice that behavioural economics has disconfirmed. I offer a defence of the market which does not use any concept of preference. Unlike most behavioural economists, I do not address my work to an (imagined) government or ‘social planner’ that is benevolently trying to give people what is good for them. My starting point is to ask what, in the domain of economic policy, citizens can agree they want the government to do for them. I argue that, whether or not people act on ‘rational’ preferences, it is normally in each citizen’s self-judged interest that opportunities for voluntary interaction with other citizens are not restricted. Cases in which individuals think that they themselves are deficient in self-control are much rarer than most behavioural economists suppose. In the words of the great Victorian economist John Stuart Mill, a properly regulated market economy is a ‘community of advantage’ – an institution within which individuals cooperate for mutual benefit.