Beyond fads and magic bullets: The promise of behavioral approaches in development economics

Abstract

AbstractThe history of development economics has been portrayed as a succession of fads and magic bullets. This study inquires whether behavioral approaches to economic development are destined to become such a fad or whether they have long‐lasting contributions to offer. I first show that behavioral development economics is not a cohesive field with a consensual definition and propose to distinguish three different views of behavioral development economics: the scarcity view, the non‐optimal behavior view, and the psycho‐social‐cultural view. I provide a systematic review of publications in the field of behavioral development economics from 2000 to 2021, distinguishing these three fields. The nonoptimal view has been, by far, the dominant view, and risk and time preferences stand out as the single‐most studied behavioral mechanisms. Finally, I argue that the sub‐field's ability to advance the understanding of behavior relevant to the persistence or alleviation of poverty depends crucially on the inclusion of the psycho‐social‐cultural view. This view has important contributions to offer in terms of (1) the understanding of seemingly nonrational behavior, (2) the identification and measurement of behavioral mechanisms, and (3) the understanding of conditions of external validity, and should be embraced more enthusiastically.