ABSTRACT
Apparently, among politicians and the public at large, the belief persists that economists are also practitioners of a sort of black art, which enables them not only to rank economic alternatives, but also to calculate the actual magnitude of gains or losses arising from any proposed economic change. The economist should, of course, be ready to inform policy makers about the distributional consequences of introducing specified economic measures. Behavioural economists associate this behaviour with an innate sense of fairness, so that people would rather have no money than accept a disproportionately tiny share. Professor Richard Thaler’s work has augmented classical or ‘rational’ economics, not overhauled it. In the wake of the behavioural revolution, economists have studied how to incorporate behavioural effects into existing economic models. Non-market goods, such as fairness and transaction (inconvenience) costs mentioned earlier, and others like national pride and aesthetics can be valued and included in the Cost-benefit analysis as well.
