Poverty, Development, and Behavioral Economics : Comprises Findings of UNU-WIDER Project New Approaches to Measuring Poverty and Vulnerability

In the last two decades, questioning of the textbook model of individual choice behavior has accelerated. 'Imperfections' of individual choice behavior are increasingly accepted by the profession as viable empirical phenomena to be explained and incorporated. Non-standard objectives and decision making — procrastination; overweighting low probability outcomes; focus on changes from current wealth as a reference point; choice between two alternatives depending on which is presented as the default option; willingness to sacrifice return for fairness of process or outcome, etc — have been investigated theoretically, empirically, and experimentally. The award of Nobel Prizes to Daniel Kahneman and Vernon Smith (2002), of the Clark Medal to Matthew Rabin (2001), Esther Duflo (2010), and Raj Chetty (2013), and of the MacArthur Award to Michael Kremer (1997), Sendhil Mullainathan (2002), Esther Duflo (2009), and Raj Chetty (2012), have confirmed the recognition of behavioral economics as an important new departure in economics