Title: What is behavioural economics: a reality-based approach to economic analysis

Authors: Morris Altman

Addresses: School of Business, University of Dundee, Dundee, Scotland; Canadian Centre for the Study of Cooperatives, University of Saskatchewan, Canada

Abstract: This article critically explores and interrogates the different core perspectives of behavioural economics. Behavioural economics is often framed by the heuristics-and-biases narrative, which views deviations from neoclassical norms as evidence of inherent irrationality. This perspective assumes individuals are intrinsically biased and error prone. In contrast, the bounded rationality approach rejects neoclassical norms as the gold standard and emphasises a more nuanced, multidisciplinary understanding of real-world decision-making. It assumes individuals are generally rational, using contextually appropriate strategies that may diverge from neoclassical expectations. Key determinants of behaviour include the decision environment, individual capabilities, and socio-economic constraints - not internal flaws. Viewing biases as hardwired misleads analysis and policy, promoting paternalistic nudges over systemic change in environments, mental models, and power structures.

Keywords: behavioural economics; bounded rationality; heuristics and biases; price theory; power; institutions; capabilities; rationality; nudging; learning; institutional change; mental models.

DOI: 10.1504/IJPEE.2026.152997

International Journal of Pluralism and Economics Education, 2026 Vol.16 No.1, pp.12 - 70

Received: 19 Jul 2025
Accepted: 20 Sep 2025
Published online: 17 Apr 2026 *

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