Friday, February 18, 2011

Ethology is Microeconomics

Ethology is the study of animal behaviour. Animals are interested above all in survival and reproduction, so have to make choices about how to optimally expend their efforts. Rational choice in the presence of resource scarcity is, of course, the business of microeconomics and many examples of animal behaviour (for example foraging strategies, mate selection) are in fact applications of marginal economics.

However, animals (including humans) are not the pure rational actors of axiomatic economic theory. The new field of Behavioural Economics looks at the consequences of factoring in human attributes such as overestimation of one's own abilities and a preference for short-term gratification over long-term self-interest. Interesting and enlightening stuff.

Here's a topical application of the theory to the problem of welfare reform (hat tip: Nick Shulz).