Calculating the cost of human foibles. Economists have suffered a collapse in credibility since the global financial crisis began. Faith in the efficiency of markets and the invisible hand is out; “behavioral economics,” which stresses that humans are fundamentally irrational actors, is in. We are blind to risk; we make decisions on a whim; we prefer consuming now over saving for later. Human fallibility seems to be the perfect explanation for an unfathomable crisis. Here’s how—after years of being considered a quaint subfield—behavioral economics has finally stolen the limelight.  Photos: brain, iStockphoto.com; Kahneman, Getty Images; piggy bank, iStockPhoto Elizabeth Dickinson is an assistant editor at Foreign Policy. |
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Monday, April 27, 2009
Foreign Policy: Epiphanies: Amartya Sen
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