Optimally Irrational

'What is behavioural economics and how has it affected the way economic research is conducted, used and perceived? Is behavioural economics defined by the questions it poses, the methods it employs, or by something else? How are economics' questions and methods affected by behavioural economics? Almost a century after the official divorce of economics from psychology, and some three decades into the behavioural revolution, Lionel Page offers a lucid and intelligent assessment of the state of the science. With a strong and enlightening focus on historical and philosophical perspectives, Optimally Irrational suggests evolutionary psychology as a guiding principle for organizing our knowledge, striking a balance between observation and theory, and helping us to tell apart insightful analysis from fanciful idealisation, as well as robust findings from anecdotal evidence.' Itzhak Gilboa, Professor of Economics and Decision Sciences, HEC Paris

'Rationality, central in economics and empirically abandoned in the 'behavioural revolution', is, unfortunately, rarely discussed because of its slippery nature. This monograph captures its essence, as well as that of behavioural economics. Nuanced and in-depth, it thus serves two methodological purposes - a fortunate combination because one cannot be understood well without the other.' Peter Wakker, Erasmus School of Economics, Erasmus University, Rotterdam

'The time has gone by when behavioural economists had to struggle to make any headway against the neoclassical orthodoxy that once held sway.Now the question is whether neoclassical economics can survive its replacement bybehavioural economics as the new orthodoxy. But books have begun to be written which deny that any rivalry is necessary. They seek to meld the two approaches using the theory of evolution as a unifying tool. Neoclassical ideas are seen as being needed to study evolutionary processes in the style pioneered by evolutionary biologists. Behavioural economics is seen as being needed to study the outcomes of such processes in the style pioneered by evolutionary psychologists. Lionel Page's book is the best I know at expounding how this cross-fertilization of disciplines works - meaty in its choice of examples without going overboard on technical details. Future research will doubtless undermine some of the claims made from both sides of the fence, but one could not find a better source for studying the current state of play.' Ken Binmore, Emeritus ProfessorofEconomics, University College London

'This book is an antidote to the generally pessimistic view that the field of behavioural economics has conveyed about human cognition and behaviour. Lionel Page builds a much richer understanding of the plethora of cognitive deficiencies and human misbehaviours reported in the literature. He approaches them with the mindset of someone who wonders whether they cannot be better understood as good solutions to the actual problems tha...

Lionel Page is a Professor of Economics and the Director of the Behavioural and Economic Science Cluster at the University of Queensland. He has worked on a wide range of topics in behavioural economics, such as risk preferences, social preferences and strategic behaviour.

Part I. Setting the Scene: 1. The homo economius model; 2. The psychology of biases in human behaviour; 3. The logic of a scientific revolution in economics; 4. Evolution and the logic of optimism; Part II. Individual Decisions: 5. Rules of thumb and gut feelings; 6. Reference points and aversion to losses; 7. Sensitivity to probability; 8. The randomness of choices; 9. Impatience; Part III. Social interactions; 10. Kindness and reciprocity; 11. Emotions and commitment; 12. Social identity; 13. Impression management; 14. Selection of delusion; Part IV. Epilogue; 15. Rationality?