Ballet, van Gogh and behavioral economics
At the recent Netspar Pension Workshop I’ve been talking to Susann Rohwedder from the RAND Corporation. We talked about van Gogh and how he spent his youth in Brabant, not far away from Tilburg. The way he was painting at that time can be described as relatively dark and gloomy and not nearly as amazing as what he produced later in his life in the south of France, with the exception of the potato eaters, probably. Here, what dominates, arguably, is good craftsmanship. What I find remarkable is that he learned painting from scratch before moving on and developing something new.
Likewise, also Picasso first learned painting from scratch, producing paintings that were well done, but way more realistic that what he is known for now. Susann remarked that also for modern dancing people often say that one should first learn ballet dancing, in order to get a good grip on technical skills, before moving on. Interesting.
This discussion made me realize that there is a strong communality with my thinking about behavioral economics. There are many people who do research in behavioral economics without ever learning classical economics from scratch, and I always wondered why they do that. Standard economic theory is the simplest possible model we can think of, and it works just fine for many questions we may want to answer. There is of course lots to be gained by studying behavioral aspects of individual decision making, as recently demonstrated once more by Raj Chetty in his Ely lecture. But I think the best way to get there is to first fully understand classical economic theory and only then build on that. In passing, another thing that Chetty pointed out very nicely was that the best way to go about doing behavioral economics is probably not to point out where the classical theory is wrong—any model is wrong, because it abstracts from some aspects of economic behavior in order to focus on others—but to ask the question how we can use the insights from behavioral economics for policy making.