The visible hand in economics

Evidence-based economics

Posted on: September 3, 2007

Charles Lambdin doesn’t think this book is right to reject evidence-based medicine. Lambdin thinks the best way to approach medicine is to treat it as a science and apply scientific methods. Where empirical research suggests that a particular treatment is appropriate then it should be used, not modified or discarded according to an individual doctor’s wont. This seems an eminently sensible suggestion but there is apparently widespread suspicion amongst clinical practitioners of evidence-based techniques.

The situation reminds of the disdain with which many economists still view behavioural economics. Daniel Kahneman won the Nobel Prize in Economics in 2002 for his work in the field. Along with people like Amos Tversky and Matthew Rabin he has pioneered the use of experimental research in developing microeconomic theory. While it makes a lot of sense to base microeconomic theories of behaviour on empirical observations, many economists have been critical of those who use insights from psychology. In 2003, Kahneman wrote (JSTOR only):

My first exposure to … economics was in a report … in the early 1970’s. Its first or second sentence stated that the agent of economic theory is rational and selfish, and that his tastes do not change. I found this list quite startling, because I had been professionally trained as a psychologist not to believe a word of it. The gap between the assumptions of our disciplines appeared very large indeed. Has the gap been narrowed in the intervening 30 years? A search through some introductory textbooks in economics indicates that … the same assumptions are still in place as the cornerstones of economic analysis.

There is a greater acceptance of behavioural economics than there once was; however, it is not hard to see why many people might regard microeconomists with some incredulity, in the same way that economists might look upon doctors who disregard evidence-based medicine in favour of personal intuition.

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