Behavioural axiom in microeconomics explain a lots regarding why some countries lead and why some lag when it comes to growth and development? Please specify me the meaning of behavioural axiom here and what things I have to use to answer this question. Theories or analysis?

  • $\begingroup$ Can you define the behavioural axiom that you are talking about? What does it state? $\endgroup$ – Fitzroy Hogsflesh Nov 10 '16 at 18:16
  • $\begingroup$ i didn't know that's why i ask. $\endgroup$ – kimmi Nov 10 '16 at 18:39

This is a very patchy answer due to the patchy nature of the question. To me it seems that it is being tried to link behavioural economics to the million dollar question of why some countries are rich and others not.

First of all let's put forward what behavioural economics actually tries to do: it aims to explain divergences of economic decision making from what standard neo-classical theory would predict.

Now to the part of why some countries "lead" and others don't: we still don't know nearly everything concerning that question, but usually two major factors are being put forward: culture & institutions (and very recently there is a strand of literature that tries to make the point that (random) historical events had quite an impact as well - this would correspond to the "luck" point in e.g. Acemoglu's textbook). There is still a debate ongoing whether it was culture or institutions between people like Acemoglu, Rodrik, Sachs, Shleifer... Recently there was one between Joel Mokyr and Deirdre McCloskey on institutions which later was published in the Journal of Institutional Economics.

The only thing where behaviour could potentially play in is the culture part. This term is not well-defineable of course, but loosely speaking we mean everything which relates to social- and societal-norms. One important of this cultural component is trust. Trust in government but most importantly mutual trust. The powerful implication for development would be that if people do not trust each other (nor the government), sound businessmaking is rather impossible. When people don't trust each other they don't engage in all kinds of things that usually tend increase a countrys productivity etc... These parameters have been tried to measure through individual surveys like the World Value Survey (WVS). Economists then found empirical evidence later on for the things I described above. Which brings me to the last part: "Theories or analysis?". I think you rather meant to say theory or empirics. Usually those questions are tackled through empirical investigations.

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