Discussion Questions on Rabin, "A Perspective on Psychology and Economics"

1. What is Rabin's view of whether the assumptions of economics should be realistic? What does he mean by realism? What argument does he offer for his view? What is his general view of the realism of the assumptions economists standardly make?

2. Many of the assumptions economists make concerning the actual preferences, beliefs, and choices of individuals are also claims about what it is to have rational preferences and beliefs and to choose rationally. How is this fact relevant to the criticisms behavioral economists have made of these assumptions and the responses to those criticisms?

3. In so-called ultimatum games, an experimental subject (the proposer) is can make an offer to divide some amount of money (let's say $10) between the proposer and an anonymous responder. If the offer is accepted, both get what the proposer proposed. Otherwise, they both get nothing. Very unequal offers, such as $9 to the proposer and $ to the responder are almost always rejected. Does this show, as Rabin seems to assume, that people are not self-interested?

4. What do you make of Rabin's "Planet Nonhollywood" analogy? How apt or useful do you think it is? Is it fair?