Advanced Studies Program

Behavioral Economics

06 Nov 2017

The neoclassical framework in economics provides a coherent and internally consistent body of theory that offers rigorous, parsimonious, and falsifiable models of human behavior. Augmented with auxiliary assumptions, it is flexible enough to analyze a wide range of phenomena and its qualitative predictions often accord with one's gut feeling about many phenomena. In actual practice, the neoclassical framework includes, but is not restricted exclusively to, consistent preferences, subjective expected utility, Bayes' rule to update probabilities, self-regarding preferences, emotionless deliberation, exponential discounting, unlimited cognitive abilities, unlimited attention, unlimited willpower, and frame and context independence of preferences. Neoclassical economics is also typically underpinned by optimization based solution methods and an equilibrium approach.

Institut für Weltwirtschaft