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Saturday, April 20, 2013

The Perils of Economic Thinking about Human Behavior | School Finance 101

The Perils of Economic Thinking about Human Behavior | School Finance 101:


The Perils of Economic Thinking about Human Behavior

Behavioral economics is an interesting and potentially useful field of academic inquiry. I don’t doubt that. But, I’m increasingly concerned with what I see as the simple-minded projection of economic thinking onto everyone and anyone else, leading to ridiculous policy recommendations – that amazingly – get taken seriously – at least by the media and punditocracy.
See, for example, Roland Fryer’s experiment on loss aversion as a strategy for incenting teachers to make sure that their students gain a few extra test score points in limited content areas. Indeed, if we pay you up front, and threaten to take your salary away if you don’t get those test score points out those kids, the data suggest  a greater likelihood of squeezing the kids for a few more points. Whether that tells us anything about the motivation and morals of teachers, or of the economists framing this argument is an entirely different question. This tells us nothing of the appropriate policy response. Thankfully, the policy implications of this paper were sufficiently absurd that they gained little traction.
Let’s assume behavioral economic principles really hold steadfast and can be grossly simplified to an anything