Thursday, 16 December 2010

Behavioural law and economics symposium

A very strong article here (by Claire Hill, law professor at University of Minnesota) focusing on two principles: how people see the world, and how they value things. Perhaps I like the article because these two points align closely with my model of beliefs and values. The article is one of a number of contributions to Truth on the Market's behavioural economics symposium, but most of the others are entirely different in character to Hill's. The symposium is dominated by strong skepticism about behavioural economics and particularly its application by governments.

It's interesting to see the strong feelings that this subject arouses. Among the various contributors there's a mix between resistance to regulation in general, dislike of the assumption of irrationality, insistence that regulators are just as irrational as citizens, and the assertion that people know their own preferences better than any well-meaning nanny-state regulator possibly could.

Richard Thaler has written a response and he's a good person to do it, as the subject matter is not mainstream economics but law and regulation. This is a common application of behavioural economics and is very much in Thaler's "Nudge" domain. I am mostly happy to leave them to it, because I prefer to explore economic behaviour, consumer choices and markets rather than regulation. But it's still interesting to read the debate.

To my surprise, Thaler's response actually goes deeper into markets, consumer and company behaviour than most of the symposium contributions themselves. It's a very well-argued article and I'd strongly recommend it. It demonstrates something I'd started to forget (or take for granted): there's a reason Thaler is so famous, which is because he knows what he's talking about and how to make a really good case for it.

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