This course is the continuation of the 219A class in Psychology and Economics – Theory, taught by Mathew Rabin. As in 219A, we will keep emphasizing the psychological evidence as the basis for sound economic analysis. We will also insist on the importance of neoclassical theory as a successful benchmark that you are required to know. Finally, several topics of this course are designed to be the empirical counterpart of the theory covered in 219A. This is in particular true for the first two Sections of the course, on Non-standard Preferences and on Non-standard Beliefs. There are two main differences between 219A and 219B. First, this class has largely an empirical orientation, as opposed to the theoretical orientation of 219B. The emphasis on data reflects the empirical status of economics. In particular, the success of the Psychology and Economics approach will depend largely on the empirical explanatory power of its theories. Can this approach explain evidence that the neoclassical model struggles with? Can it do so using parsimonious models? In 219B I will present empirical papers drawn from a variety of fields to try to address these questions. We will study papers in the fields of asset pricing, consumption, development economics, environmental economics, industrial organization, labor economics
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