What is the meaning of behavioural economics?

Abstract

This article examines the insights into how people actually behave from behavioural economics and how this affects economic explanation and prescription. It argues that implications for explanation are likely always to be contestable (because, as a new source of empirical evidence, behavioural economics encounters familiar problems with empiricism). The implications for prescription, however, are potentially significant, although not in the direction popularised by ‘nudging’. Indeed, the behavioural insights suggest that public policy should be less concerned with forms of preference satisfaction and more concerned with individual autonomy. On many accounts of the philosophy of social science, the tension between these insights into behaviour and the dominant model of rational choice would likely consign behavioural economics to the margins of the discipline. In this context, however, this is not true, and the article concludes with a discussion of this puzzle.