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Behavioural economics: is it such a big deal?

Behavioural economics is becoming increasingly fashionable. Does it represent a revolution in economic thinking? Or does it merely provide a few handy insights into the more irrational behaviours of individuals

By Pete Lunn   September 2008

Click here to discuss this piece at First Drafts, Prospect’s blog YES Pete Lunn

NO Tim Harford

Dear Tim 12th August 2008

These are exciting times to be an economist. The whirligig of international finance has come crunching to a halt. The British housing market inflated until we could hardly bear to watch, then popped in a destructive, sticky instant. The prices of food and oil are yo-yoing on speculative strings. And the textbooks still tell us that markets populated by rational, selfish, independent agents allocate resources efficiently.

Meanwhile, a revolution is under way in economic thought. Behavioural…

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