Is Brain Science Economics Liberal? – CNBC

Is Brain Science Economics Liberal? – CNBC.

Many of the practitioners of a relatively new school of economics assume their discoveries of irrationality support calls for additional regulation of markets.

Those studying “behavioral economics” often focus on ways in which consumers act in irrational ways due to cognitive biases. They choose credit cards with lower interest rates initially and higher late penalties, even though they are often tardy with their payments, for instance.

But the discovery that people are prone to predictable cognitive errors does not really support increased regulation. In fact, the assumption that behavioral economics supports regulations is itself example of several cognitive biases at work. The findings of behavioral economics actually support deregulation and free markets…

 

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