economic theory is deduced logically instead of relying on empirical findings in the world. All empirical findings in human behavior must be interpreted according to some framework, and because Austrians build their framework separately from their empirical work, they do not risk making ad hoc inferences that are circular in logic. So while the Austrians agree with the behavioral economics on the shortcomings of Neo-Classical assumptions, they do not try to fix them with more empirical work, as the behavioral economists do. The behavioral economists try to test and measure why humans make decisions and how they form preferences, instead of accepting preferences as they find them and explaining how their actions give rise to regularities in the Austrians would consider this an interesting inquiry, but one that is properly classified as psychology instead of economics because it focuses on the mental processes and psychological motives of humans. Perhaps this is not surprising, as the behavioral economics field has relied so heavily on the work of psychologists in the first place. Austrians are also not put off by the behavioral economists’ insight that preferences are not (Rizzo, 2009b). Although Neo-Classical models rely on stable preferences, “stable” Austrians allow that preferences are dynamic and constantly prone to change, and thus can only be revealed and demonstrated through an action. Furthermore, many of the behavioral economics’ insights are interesting and illuminating, but often unoriginal. As Peter Klein (2010b) has noted, the empirical findings reveal nothing groundbreaking, but only seem groundbreaking in response to Neo-Classical theory. For example, the regarding the pitfalls of emotion in investing were long ago addressed “breakthroughs” by Benjamin Graham (1949).
economic theory is deduced logically instead of relying on empirical findings in the world. All empirical findings in human behavior must be interpreted according to some framework, and because Austrians build their framework separately from their empirical work, they do not risk making ad hoc inferences that are circular in logic. So while the Austrians agree with the behavioral economics on the shortcomings of Neo-Classical assumptions, they do not try to fix them with more empirical work, as the behavioral economists do. The behavioral economists try to test and measure why humans make decisions and how they form preferences, instead of accepting preferences as they find them and explaining how their actions give rise to regularities in the Austrians would consider this an interesting inquiry, but one that is properly classified as psychology instead of economics because it focuses on the mental processes and psychological motives of humans. Perhaps this is not surprising, as the behavioral economics field has relied so heavily on the work of psychologists in the first place. Austrians are also not put off by the behavioral economists’ insight that preferences are not “stable” (Rizzo, 2009b). Although Neo-Classical models rely on stable preferences, Austrians allow that preferences are dynamic and constantly prone to change, and thus can only be revealed and demonstrated through an action. Furthermore, many of the behavioral economics’ insights are interesting and illuminating, but often unoriginal. As Peter Klein (2010b) has noted, the empirical findings reveal nothing groundbreaking, but only seem groundbreaking in response to Neo-Classical theory. For example, the “breakthroughs” regarding the pitfalls of emotion in investing were long ago addressed by Benjamin Graham (1949).