WDR 2015 has deviated from a pure hegemony of economics and economists. It presents something more than just economics and self-interested materialism.
I think it can be a broadening of economic science.
Off course! It's obvious! Since the firs chapter, WDR 2015 is a shoot in the floating line of the mainstream economics. It just collect the multiple evidences in the earlier economic thought against the homo oeconomicus dogma, dogma that that is in the roof of the neoclasical paradigm.
Thank you, Mohammad, for giving me the chance to read World Development Report of this year. I have downloaded Chapter 1 "Thinking automatically" and Chapter 7 "Productivity." I will make a comment on them in one or two days.
We have two similar and related questions. One is this question page that Mohammad Israr Khan has made. The other is the question that Alxander Dill posed: How biased is the World Bank Development Report 2015? I have been confused that I have answered Mohammad's question while I have answered in Alexander's question page.
Here is what I have written in Alexander's question page. The focus of the two questions are different and answers must be different. I will write another answer that will complement this answer.
Thank you, Dill, for raising this question. I had the opportunity to read some parts of WDR 2015.
It is true that WDR 2015 is highly biased, because they focus too much on psychology of people. However, is it right to judge a report such as WDR on the bases that it is biased? Any recommendation by a specialist is biased. The report is an item of a big public library. It is not wise to expect a magical solution in a book. It is necessary for us to possess a framework by which to put the Report on a right shelf.
I have read Chapter 7 on productivity. The writers give various examples how they or others could succeed in promoting productivity by stimulating workers incentives. Their examples may be useful in some particular situations. If you are a manager of a firm and worrying decreasing motivation of your workers, the Report may be worth reading. It may include one or two hints to improve the moral situation in your firm.
The main problem with WDR 2015 is that writers claim that their findings (three models of decision making) are of "first-order importance for development policy, poverty alleviation and the policy design process itself" (p.25).
It may be of first-order importance for correcting psychological misunderstandings which spread widely in management, policy making and implementation. I understand those writers. They only wanted to emphasize the importance of their findings and knowledge. Even though, it could not be said that their finding are of "first order importance for development policy”, because development necessarily includes many other aspects. What they have discovered is only one fact among many facts that we must know when we want to work in relation to developing the economy of a country.
Economic development is too complex a phenomenon that we can solve all the problems by a piece of magical knowledge. It requires a concerted effort of thousands of good practice, knowledge, tool and methods. It must cover working place practice, trading customs, financial system, property rights, work efforts, human relations, transportation, tax system, social security, education, rules of law and others. (A simple question of productivity contains as much complexity as above. See, for example, questions and answers
To reduce this immense dimension of the problem to a cognitive dimension of decision makings is a grave error. However, let us be tolerant for them. Although the report is a work of narrow-viewed specialists who do not deeply know the development problem, it may contribute to enrich our arsenal for the systematic science of development processes. More important and urgent problem than to criticize the Report is to make this science itself. This must be the main target of development economics.
To answer Mohammad's question, it is necessary to define what the mainstream economics is. In a wider notion of mainstream economics, the behavioral economics is a part of it. There are two reasons to claim this.
Firstly, behavioral economics is now in the vogue in United States. See for example "Behavioral economics" of the Wikipedia. The number of scholarly papers is increasing in United States. See also the figure attached in this answer. I borrowed it from Le Concurrentialiste: http://leconcurrentialiste.com/2014/04/23/behavioral-economics-in-u-s-antitrust-scholarly-papers/
Secondly, Daniel Kahneman, one of the two major prompters of behavioral economics, was awarded 2001 Nobel prize in economics (another promoter Tversky had been dead at that time). We may say that behavioral economics has been recognized as an essential part of economics.
Of course, there is some conflicts between behavioral economics and traditional mainstream economics. The latter poses as a starting postulate the rationality of human behavior. Two of major rationality assumptions are (1) maximization of the utility function for individuals or households and (2) maximization of profits for firms.
The essential framework of mainstream economics is based on these two principles. One is this maximization principle. This is behavioral principle for all economic agents: individuals or organizations. Another principle is equilibrium. Economic state is supposed to be in equilibrium. Ordinarily, mainstream economists suppose that there are demand and supply functions with prices as major arguments.
Behavioral economics denies that human agents are behaving after a maximization principle. They always search a better solution but it is seldom that they can arrive to find and realize the substantive rationality (if I use the term of H. A. Simon). Human agents have only a bounded rationality and when the environment exceeds limits of rationality, they will satisfy themselves by discovering a pattern of behavior. Behavioral economics can be situated among the wider new science of complexity, although the researchers in behavioral economics are not well aware of this fact. See my papers with this respect:
(1) Economic theory and the complexity of capitalism
Behavioral economics is based on a ordinarily scientific method of experiments. Mainstream economics cannot deny the results obtained in behavioral economics. However, mainstream economics has no clear research plan to incorporate that new knowledge that behavioral economics discovered. In this respect, the (old) mainstream economics (usually called neoclassical economics) is in disarray. The impact of behavioral economics may have a chance to change mainstream economics.
The trouble with behavioral economics is that the researchers are confined in the narrow field of economic behaviors and have no idea to compose or integrate all those individual behaviors into a whole economic process. Present-day economy is a gigantic network of huge number of economic agents. How this network functions and how it behaves? This is the real question of economics and my (maybe too) hasty judgment is that behavioral economics had no such prospect. My major criticism on behavioral economics lies in this point.
If we come to development economics, in which Mohammad must be more interested, new knowledge of behavioral economics can open a new insight. Many economists argued the irrational behaviors, sticky habits, evil practices, and bad customs and institutions that we want to replace with more plausible ones. In a cognitive side, it can show how to find a new solution in those problems that were considered mainly as natural and thus not human ones.
The WDR 2015 may mark a starting point for a new thinking in economics. As Mohammad put it, it can be a broadening of economic science. The WDR 2015 has given a new light on the problems of increasing productivity of firms, but I must say their scope is too narrow as to be accepted without precautions. What we should be aware of is that behavioral economics is only a special branch of whole economics. Excluding other (more traditional or new) aspects of development economics may lead us to a disaster which was sometimes caused by a simple translation of mainstream economics into development economics.
Conference Paper Economic Behaviours in a Complex System (Complex Systems wit...
Chapter Economic theory and the complexity of capitalism