David Kreps won the 2018 NEMMERS PRIZE IN ECONOMICS , and
today, at Northwestern, he is giving his
today, at Northwestern, he is giving his
NEMMERS PRIZE LECTURE
"SOME DIMENSIONS OF BEHAVIOR WITH WHICH ECONOMICS SHOULD CONTEND"
Behavioral economics is generally taken to mean economics in which the behavior of individual agents does not conform to the “standard model” of rational behavior. However, under this banner, one finds a very large number of specific “nonstandard” models of behavior. This very large number prompts a standard criticism of behavioral economics: If any behavior is permissible, any conclusion can be reached.
Using a small handful of examples, the lecture illustrates and fleshes out a test for the value of work in behavioral economics. This test is based on three principles:
- Is the behavior in the model systematic, at least in some important contexts?
- Does positing this behavior lead to economically significant phenomena?
- Either via intuition or, preferably, empirical evidence, does the behavior provide "better" explanations of those significant phenomena, where defining the adjective “better” is the crux of the matter.
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