The joke goes like this: A physicist, an engineer, and an economist are stranded in the desert. They are hungry and find a can of beans. They want to open it, but how?

The physicist says, let’s start a fire and place the can inside the flames. It will explode and then we will all be able to eat.

Are you crazy says the engineer. The can will explode; all the beans will scatter, and we will have nothing. We should use a metal rod, attach it to a base, push it in and crack the can open.

You are wrong too, says the economist.  Where the hell do we find a rod in the desert? The solution is simple: Assume we have a can opener…..

The joke implies that the economist, like the other two, assumes what should be happening, ignoring reality.

I was reminded of this joke because of the tremendous interest in behavioral economics that claims that economic theory ignores reality. That people are not necessarily logical.

What is going on?

Economics assumes rational behavior on the part of people; how they SHOULD behave.

Behavioral economics, on the other hand, looks at how people actually behave.

I suggest both provide a purist outlook at life as if one perception explains behavior. One explains behavior through the “should” prism.  The other through the “is” or “want” prism.

Who is right?

Neither.

In my theory of perception, the way in which we each look at life provides the reference point for differentiation. According to my view, our behavior and decisions are driven by a composition of the three categories: either by what we want to do, and/ or by what we believe we should do, and/or by what needs to be done, i.e, by what is going on; by reality.

Prof. Kahneman, the founder of behavioral economics, provides purist theory, namely that psychology, not logic, explains behavior. I suggest he is making the same mistake the economists make.  Both are purists who believe that only logic or only wants and/or reality explain behavior.

Our behavior is not totally logical, i.e. driven by the should, nor totally hedonistic, i.e. focused solely on the want, nor are we pure realists driven only by the is.

Life is messy. All three perceptions play a role in decision making, and the result is that we are often confused and conflicted about what to do.

Do we do what we want to do, what we should do, or what the situation dictates us to do?

Theories to be elegant need to be pure. I suggest life is not elegant. It is a mess.

Just thinking.

Ichak Kalderon Adizes