Sweet Jesus, who let Alan Wolfe review economics books?

[...] was that he simply doesn’t know enough about the subject to write a competent review. Dan Drezner picks up on a couple of Wolfe’s forehead-slappers. In a nuthsell, Wolfe thinks Milton Friedman and Friedrich Hayek are “marginal and somewhat [...]

The explanation is simple: Wolfe thinks that "behavioral economics" includes "any economist who writes about human behavior."

But Levitt's view that

"I don’t deny that the insights that emerge from behavioral economics can be important, it just seems that most often they are not — especially when subjected to the discipline of the market."

followed by

"Which is why I could not have been more surprised and delighted when I finally got to read a copy of their new book Nudge. Despite my initial misgivings, I’m halfway through it, and this is a book I love.

The main point of the book (paraphrased) is as follows:

Since people don’t think very hard about the choices they make, it is a lot easier to trick them into doing what you want than to try to educate them or incentivize them to change their behavior. There are many ways to trick people, but one of the easiest is simply by giving thought to the way choices are arrayed to them, or what they call “choice architecture.”

This is an important insight, because as an economist my first instinct is always to jump right to incentives. What they show, pretty convincingly, is that there is often an easier way to get what you want."

is pretty much what all behavior economists also believe. Nobody likes behavior or neoclassical economics per se -- people like good economics. Naturally, as anybody coming up for tenure knows, views on what good economics is differ.

Secondly, Levitt is not a neoclassical economist in the sense that he writes down 'structural models' and estimates them, a la Heckman or Pakes, for instance. Since he doesn't rely on structural estimation, Levitt does not need to make strong neoclassical optimization assumptions and this opens his results up to behavior interpretations.

Note well that Hayek was a consistent and deep critic of the rational choice "model" of human rationality, and a consisten and deep critic of the mainstream "neoclassical" model for using mathematical constructs as a direct "explanation" in social science.

Hayek's explanatory strategy identified learning by a limited mind in the context of changing prices and complex environments as the causal element in the explanation of overall economic order.

Wolfe is an idiot who's likely never read a word of first hand Hayek.

Wolfe is certainly also ignorant of this fact: neuroscientists like Joaquin Fuster and Gerald Edelman consider Hayek to be one of the leading minds in the field of global brain theory, a true breakthrough pioneer. Among 20th century economists Hayek was one of the few to actually know something about the mind and its place in nature and science.

Historians of economic thought like Bruce Caldwell point to the fact than many themes developed in economics over the last 60 and 70 years -- like learning, limitations of knowledge, the information role of prices, etc. -- have their roots Hayek, in such famous essays as "The Use of Knowledge in Society" and "Economics and Knowledge", etc.

Again, Wolfe is just a very ignorant man.

Wolfe recently wrote an equally silly thing about John Stuart Mill's place in the philosophy canon.

You can see Brian Leiter's take on it, as well as a link to Wolfe's piece, here:

http://leiterreports.typepad.com/blog/2008/05/alan-wolfe-is-c.html

Apparently this guy writes garbage like this on a regular basis.

Alan Wolfe gets the difference between ordinal and cardinal ranking completely wrong. He writes that measure of price is ordinal because $100 is 100 times more than $1. This is called cardinal ranking: higher number means higher ranking and the difference between the mumbers also counts. On the other hand, one only has to assign a higher number to the preferred outcome and the difference between the numbers do not mean anything.

stefan +1.

Levitt's disclaimer is a hair too fine and not worth splitting.

Stefan and Billy,

You may be right that Leavitt is not a pure neoclassical economist, but Wolfe is completely wrong that he's a behavioral economist.

Stuart gets it right. Wolfe knows very little about economics, and draws two boxes of "neoclassical economists" and "behavioral economists," then puts all the economists he likes in box 2 and all the others in box 1. That may be fine for Wolfe's private taxonomy, but is not great for a book about behavioral economics.

As for the fact that Leavitt appreciates some things about behavioral economics, so what? I assume most neo-classical economists find some things to like as well.

As an example, there is a nice chapter in Capital Markets Rexamined that asks the question: "Which of the behavioral economics insights are market testable - i.e., which insights can make money when applied by securities traders?" It's a great question, but it doesn't make the author a behavorial economist. (Or if it does, everyone is a behavioral economist).

Wolfe's observation that

"Friedrich August von Hayek and Milton Friedman had always seemed to me to be marginal and somewhat bizarre thinkers, especially when compared to such intellectual titans as John Maynard Keynes and Joseph Schumpeter."

makes more sense if viewed as a statement about Wolfe's perspective, as he himself indicates it should be read. It is true that for their impact on the development of economic thought Keynes, Hayek and Friedman are all top tier figures and not at all marginal. Schumpeter, on the other hand is, in my view, now a historical oddity without too much impact on how economists actually think about the world, except for providing a handy short-hand term for certain models of growth and innovation, and in many ways had a bigger impact on political sociology than on economics using methods now more associated with sociology than economics.

What Wolfe is saying is that for sociologists of his generation and to lots of younger sociologists Friedman and Hayek are bizarre marginal figures, while Keynes and Schumpeter are not. Hayek and Friedman fought or ignored the mainstream sociology perspective on the world, while Keynes and Schumpeter were not adversarial to actually existing sociology as a project. Which from Wolfe's perspective determines who is bizarre and marginal and who is an 'intellectual titan.'

And this affects Wolfe's current assessment of economics, since Wolfe doesn't understand the intellectual context in which much economic research takes place, but looks for research projects he can relate to from his background. Wolfe isn't writing about economics, he's writing about what he as a sociologist thinks non-economists can get out of economics.

Also, talking about putting all the economists one likes in box 1 and all the others in box 2, Drezner writes

"Now I’m no economist, but I have read Freakonomics, and I’m pretty sure Levitt is not a behavioralist. The overarching theme of Levitt and Dubner’s book is 'people respond to incentives.' That’s pretty consistent with rational choice approaches."

'People respond to incentives' is also an overarching theme of behavioral economics: it's still economics. The theme of behavioral economics that makes it different from mainstream neoclassical economics is, in part, that most people just aren't perfect at figuring out the optimal response to the incentives in place and that this has specific implications for how the world works.