Behavioral Economics: Explaining the Rationale of Irrationality by Prof. Shagata Mukherjee

A graduate of Presidency College, Kolkata, and JNU, Delhi, Prof. Mukherjee has completed his PhD at Georgia State University’s Andrew Young School of Policy Studies in Atlanta, USA. Prof. Mukherjee’s research interests are in the fields of development economics, behavioral and experimental economics and public policy. Besides his primary position at the Academy, he is also a Fellow at the University of Mumbai and an Affiliated faculty at the Centre for Experimental Social Sciences, Nuffield College (University of Oxford) – FLAME University.

Prof. Mukherjee has presented his work at the University of Chicago, George Mason University, International Food Policy Research Institute (IFPRI) in Washington D.C, Economic Science Association Meetings in Dallas, Western Economic Association International Conference in Tokyo and San Diego, Gender and Economics workshop in Glasgow, Scotland, Symposium on Economic Experiments in Developing Countries in Norwich, UK and Spanish Economic Association Meetings in Bilbao, among others.

Prof. Shagata conducted guest lectures in colleges at Delhi in September 2019. The topics covered by him included

  1. Behavioral Economics: Explaining the Rationale of Irrationality.
  2. Policy Valuation
  3. Microfinance

The Key Takeaways from his lectures were as follows:

1) Behavioral Economics: Explaining the Rationale of Irrationality

Do economic agents satisfice or maximize? Is rationality more logical or psychological? What is the rationale behind irrational economic behavior? These are some of the fundamental questions that Prof. Mukherjee explored in this lecture.

The Classical school of economic thought excludes cognitive, psychological and social factors while analyzing economic behavior.

The lecture explained the rationale behind irrationality, thereby introducing the Behavioral Economics school of thought. It first went on to explore observed key departures from Classical economic theories, thereby substantiating the need for Behavioral Economics, while tracing the historical development of the field.

It then went on to record founding principles of this school of thought and documents works of key pioneers in the establishment of this field, such as Daniel Kahneman, Amos Tversky and Richard Thaler.

Finally, it touched on the applicability of Behavioral Economics as a ‘nudge’, both, explaining and influencing, decision making, with the aid of examples.

2) How to evaluate Public Policy?

In this lecture, Prof. Mukherjee spoke about what is policy evaluation? What are the core challenges of it and how those challenges can be overcome. He explained the fundamental difference between correlation and causation in public policy evaluation.  Finally, he described the various methods of conducting policy evaluation with special focus on the method of randomized control trials (RCTs). 

3) Are Women Really Better Borrowers in Microfinance?

The universal policy of gender targeting in microfinance stems from the conventional wisdom that women are better credit risks than men. In this talk, Prof. Mukherjee evaluated this conventional wisdom and discussed the underlying reasons for it.

Are women wired naturally and fundamentally different than men to be better at repaying loans or is it the social context in which men and women operate that motivate their behavior?

Prof. Mukherjee addressed this question by presenting results from microfinance field experiments that he had conducted in three states of India. He also discussed how the findings from his field experiments can be used to make policy recommendations.

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