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 Originally Posted by Poopadoop
Didn't Tversky and Khaneman basically blow up some economic ideas with research in psychology? I don't remember the details, but I thought it had to do with people not being able to be rational even if they tried (or something like that). Something about them making poor decisions about risk/reward depending on how the question was framed.
I could have that wrong though. It might be someone else or something else.
You are thinking of something that happened. I'd want to look at the exact studies before having an opinion, but I have some knowledge of what you're referring to.
"Blow up" is more or less right. However, I think that came due to using different definitions. Economists like Gary Becker (and me though I am not an economist) describe those "irrational behavior" results as still presenting the subjects acting according to preferences. The issue is that because of type of input, the preferences can change to something funky.
What BananaStand said the other day about how people change driving speed based on time of day and quantity of drivers on the road might be in part an example of this. Economists out of the Chicago school would say those drivers are acting rationally because even though their preferences changed based on input changes, they are still acting along with what they prefer at that point in time. The "irrationalist" framework doesn't really even acknowledge that idea; instead it redefines "rational" as something along the lines of a certain type of preference and "irrational" as a different type of preference.
The irrationalist stuff probably has a lot of value with how it shows how preferences change. But at least according to my professor who was very fair to the irrationalist stuff, it doesn't change the models.
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