Behavioral economics has two ‘souls’: Do they both depart from economic rationality?

In this paper, I argue that behavioral economics, far from being a monolithic theory, consists of two different ‘souls’ and that a fundamental asymmetry exists between them, with regard to the nature of the departures from the economics’ ‘canonical model’ they focus on. While a first class of departures deals with the major cognitive limitations and systematic biases in decision-making affecting economic behavior, a second research area investigates deviations from the classic assumption that economic agents are systematically driven by the pursuit of material self-interest. Even though on methodological grounds the two research areas share a broadly inductive approach – as they both aim at incorporating the major results obtained through several empirical methods (in particular, via experimental work) into formal economic analysis –, I claim that rather different methodological conclusions and regulatory and policy implications can be drawn, depending on the cognitive or social nature of the departures from the standard economic model under study.