Not that much of a debate: Pete Lunn says it is a big deal, and I agree. (Prospect originally asked me to debate the proposition “Is behavioural economics a revolution?” and then changed the motion after the debate was finished…)
Still, we have plenty about which to disagree. An extract:
PL: Other classic experiments of behavioural economics are challenging the traditional assumptions too. We often overcome selfishness to reach beneficial common solutions, as good managers and motivators understand. As for rationality, behavioural economists have recorded hundreds of instances where our economic instincts run counter to the traditional definition, especially when risk or uncertainty are present. And the assumption that economic agents are independent ignores our strong instincts to seek economic alliances and to be influenced by the opinions of others about what things are worth—those bubbles again….
TH: …your question, “What simplification best describes us?” is the wrong one. You have confused economics with psychology. As I wrote in my first letter, one of the most fertile areas in economics is the modelling of complexity. Three examples: the evolution of firms; the development of national economic clusters such as South Korea’s memory chip industry; and the spread of social norms like honesty, obesity or smoking. These new complexity models are producing brilliant new results despite riding roughshod over psychological insight.
But it’s invidious to pick extracts (especially when I get to do the picking) so do read the whole thing.