In standard economics, individuals are rational actors and economic forces undermine institutions that impose large inefficiencies. The persistence of the caste system is evidence of the need for psychologically more realistic models of decision-making in economics. The caste system divides...

Experiments in the United States have found that pairs of individuals are generally able to form socially efficient conventions in coordination games of common interest in a remarkably short time. This paper shows that this ability is not universal. The paper reports the results of a field...

This paper is an attempt to broaden economic discourse by importing insights into human behavior not just from psychology, but also from sociology and anthropology. Whereas the concept of the decision-maker in standard economics is the rational actor and, in early work in behavioral economics,...

Behavioral economics recognizes that mental models -- intuitive sets of ideas about how things work -- can bias an individual's perceptions of himself and the world. By representing an ascriptive category of people as unworthy, a mental model can foster unjust social exclusion of, for example, a...

One of the most fruitful advances in modern economics has been the introduction of psychological realism into the model of "economic man." The World Development Report 2015 organizes the evidence about how humans actually think and make decisions into a coherent framework useful for designing...

When Russia launched mass privatization, it was widely believed that it would create a powerful constituency for the rule of law. That didn't happen. We present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to...

Economists have traditionally treated preferences as exogenously given. Preferences are assumed to be influenced by neither beliefs nor the constraints people face. As a consequence, changes in behaviour are explained exclusively in terms of changes in the set of feasible alternatives. Here we...