Insights from psychology about individual behavior – examples of which include limited rationality, low self-control, or a taste for fairness – predict several important types of observed market outcomes that fully-rational economic models do not.
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© 2025. Kent A. Clark Center for Global Markets.
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Responses weighted by each expert's confidence
© 2025. Kent A. Clark Center for Global Markets.
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Participant |
University |
Vote |
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Bio/Vote History |
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 Daron Acemoglu |
MIT | Bio/Vote History | ||
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But an important caveat: almost all focus has been on individual behavior, and how this affects market behavior is not always clear.
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 Alberto Alesina |
Harvard | Bio/Vote History | ||
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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Is there still a debate on this question? This is the third Nobel in behavioral economics after all (Kahneman, Schiller, & Thaler)!
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 Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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 Abhijit Banerjee |
MIT | Bio/Vote History | ||
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Strictly speaking the claim is that "rational" models cannot explain many facts without going through multiple contortions
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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 Raj Chetty |
Harvard | Bio/Vote History | ||
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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But not all!
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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Abundant empirical evidence, including results of Thaler, Odean, Kahneman, Tversky, and many others.
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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 Liran Einav |
Stanford | Did Not Answer | Bio/Vote History | |
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 Ray Fair |
Yale | Bio/Vote History | ||
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 Amy Finkelstein |
MIT | Bio/Vote History | ||
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 Pinelopi Goldberg |
Yale | Did Not Answer | Bio/Vote History | |
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 Austan Goolsbee |
Chicago | Bio/Vote History | ||
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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 Robert Hall |
Stanford | Bio/Vote History | ||
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This type of behavior is common for isolated decisions, such as taking out a mortgage. People do better with frequently-made decisions.
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 Oliver Hart |
Harvard | Bio/Vote History | ||
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Real-world contracts are not as predicted by mechanism design theory. Employment contracts aren't that efficient. Fairness can explain this
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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 Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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The best example: In 1942, economists at Treasury, including Milton Friedman, used such arguments to justify income tax withholding.
-see background information here |
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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deciding which of these phenomena are consistently and pervasively relevant across settings is much harder, lots of free parameters
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 Pete Klenow |
Stanford | Bio/Vote History | ||
 Jonathan Levin |
Stanford | Bio/Vote History | ||
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 Eric Maskin |
Harvard | Bio/Vote History | ||
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 William Nordhaus |
Yale | Did Not Answer | Bio/Vote History | |
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 Larry Samuelson |
Yale | Bio/Vote History | ||
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Insights from psychology are important, but fully rational models still exhibit an unparalleled mix of parsimony and predictive power.
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 José Scheinkman |
Columbia University | Bio/Vote History | ||
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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 Carl Shapiro |
Berkeley | Bio/Vote History | ||
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 Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Psychology insights are useful for understanding some behaviors. "Important" ones? Perhaps
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 Richard Thaler |
Chicago Booth | Bio/Vote History | ||
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Almost chose "uncertain" just to mess with the organizers.
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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The evidence is strong in many cases. But generalization remains difficult because results vary so much by context.
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