Toward A Behavioral Foundation of Normative Economics

Individual decision-making is not adequately portrayed by focusing on static rationality properties. The static approach can mistake rationality-in-process for bounded rationality or irrationality. We consider a sampling of intellectual frameworks that address decisionmaking rationality as a process, including intrapersonal arbitrage, Wicksteed’s principle of price, dialectical reasoning, and errordriven learning. We conclude that the approach to normative analysis shared by both neoclassical and behavioral economists is not the only possible one and that, in fact, it misses an important aspect of human decision-making. Evaluations based on the static approach are at best incomplete and likely to be misleading.