International audienceNeoclassical economics assumes that individuals have stable and context-independent preferences, and uses preference satisfaction as a normative criterion. By calling this assumption into question, behavioural findings cause fundamental problems for normative economics. A common response to these problems is to treat deviations from conventional rational choice theory as mistakes, and to try to reconstruct the preferences that individuals would have acted on, had they reasoned correctly. We argue that this preference purification approach implicitly uses a dualistic model of the human being, in which an inner rational agent is trapped in an outer psychological shell. This model is psychologically and philosophically problematic

Our paper is a critique of an approach to normative economics -'behavioural welfare economics', or BWE for short -which is advocated by many prominent behavioural economists. Daniel Hausman features in our argument as (in his words) an alleged philosophical fellow-traveller. Having written the paper in the hope of sparking off a debate about how behavioural economics should deal with normative questions, we are pleased that he has responded with a defence of some of the features of BWE that we criticised.If we have read Hausman's comment correctly, he does not disagree with our characterisation of what BWE is, or with our attribution of this approach to behavioural economists. In relation to our critique, the main features of BWE can be summarised as follows: (1) The approach is intended to apply to cases in which individuals' revealed preferences depend on contextual factors that have little or no apparent relevance to those individuals' interests or well-being. (2) The normative criterion is the satisfaction of each individual's latent (or 'purified') preferences, defined as the preferences she would reveal in the absence of any errors that might be caused by limitations of attention, information, cognitive ability or self-control. (3) Latent preferences are interpreted as expressing individuals' subjective judgements about their interests or well-being; they do not necessarily track objective properties of the external world (such as an individual's monetary wealth or health status) or properties of passive experience (such as happiness in the hedonic sense).(4) In the cases to which BWE is to be applied, latent preferences are assumed to be contextindependent.In saying that BWE implicitly uses a model of an inner rational agent, we mean no more than that it has properties (1) to (4). Of course, behavioural economists do not maintain that a human being is really made up of a neoclassically rational entity encased in an errorprone psychological shell. But we think it is both true and illuminating that BWE proceeds as if human beings were like that. BWE invokes a model of rational agency when it assumes that, in the absence of error, an individual's choices would reveal coherent preferences. This

This paper focuses on comparing individual and group decision making, in a stochastic inter-temporal problem in two decision environments, namely risk and ambiguity. Using a consumption/saving laboratory experiment, we investigate behaviour in four treatments: (1) individual choice under risk; (2) group choice under risk; (3) individual choice under ambiguity and (4) group choice under ambiguity. Comparing decisions within and between decision environments, we find an anti-symmetric pattern. While individuals are choosing on average closer to the theoretical optimal predictions, compared to groups in the risk treatments, groups tend to deviate less under ambiguity. Within decision environments, individuals deviate more when they choose under ambiguity, while groups are better planners under ambiguity rather than under risk. We argue that the results might be driven by differences in the levels of ambiguity and risk attitudes between individuals and groups, extending the frequently observed pattern of groups behaving closer to risk and ambiguity neutrality, to its dynamic dimension.

We present the results of an experiment comparing group and individual planning in the domain of lifecycle consumption/saving decisions. Individual decision making is compared to two group treatments, which differ based on the presence of a rematching rule. We find that individuals and groups differ in how they solve the intertemporal consumption problem, but not in how they improve their consumption planning within a sequence. Individuals’ performance improves across sequences, groups without rematching perform approximately the same, while groups with rematching do significantly worse. Our main finding is that while groups perform better than individuals in the first sequence, this difference seems to disappear in the second lifecycle. Results show that in the second sequence groups in the rematching treatment deviate substantially more from optimum than groups that are left stable across sequences

Over the last ten years the literature in experimental economics has seen a growing interest in groups and how they compare to individuals in different settings. This paper contributes to the literature on this topic by investigating the comparison between groups and individuals with respect to intertemporal consumption problems. Empirical evidence has shown how dynamic optimization problems, representing intertemporal consumption decisions, involve computational difficulties that agents are not always equipped to solve optimally. Several econometric estimations on household and aggregate data seem to show that people do not save enough. Similarly, in many experiments, results suggest that people are very different in how they solve this class of problems and in how they react to changes in the decision environment. We present an experiment comparing group and individual planning under risk and uncertainty. Our study is focussed on investigating how groups perform in intertemporal decision making tasks, 1 1 INTRODUCTION in particular observing the significance of group planning compared to individuals when choosing under risk and uncertainty. Results suggest that groups perform better than individuals when planning under risk, while the opposite happens in the case of planning under uncertainty. Interestingly, when comparing the behaviour of our agents in the second lifecycle (denominated "sequence") groups seem to lose all their advantage on individuals (in terms of less deviation from optimum). We interpret this as a "stability effect" caused by the random matching rule adopted during the groups sessions.