Behavioral Economics: Past, Present, and Future
Richard H. Thaler
American Economic Review · 2016
Abstract
Thaler's AEA presidential address, tracing behavioral economics from a fringe critique to the mainstream and arguing that as economics incorporates more realistic assumptions, 'behavioral economics' will eventually cease to be a distinct field and simply become economics.
Methodology
A conceptual and historical review of the field's development, marshaling evidence on 'supposedly irrelevant factors' (SIFs) that standard theory predicts should not affect behavior but demonstrably do.
Findings
Argues that evidence-based, empirically disciplined economics increasingly finds that SIFs—framing, defaults, mental accounting, fairness—systematically move behavior, and that theory should be judged by predictive accuracy rather than a priori rationality assumptions.
Applied nudge
Take 'supposedly irrelevant' design factors seriously: wording, ordering, and defaults are not noise around a rational core—they are primary levers on behavior.
Citation
Thaler, R. H. (2016). Behavioral economics: Past, present, and future. American Economic Review, 106(7), 1577-1600.
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