Reasonable disagreement: Austrian responses to behavioral economics

This chapter reviews recent work by economists in the Austrian tradition in response to the rising influence of behavioral economics in the profession. Austrian scholars have taken issues with every aspect of the behavioral literature, from their approach to theoretical matters to their empirical methods, from their interpretation of their findings to their policy recommendations. In particular, this chapter focuses on how Austrian economists and behavioral economists differ in their understanding of human rationality, their interpretation of real human beings’ failure to behave according to the naïve neoclassical economic model, and the preferability of various behaviorally informed policy interventions to address such failure. However, while Austrian authors have taken a mostly negative attitude towards their behaviorist counterparts, some have suggested ways for the two fields to incorporate each other’s insights to produce a more robust alternative to the neoclassical economic paradigm.