Economic Growth and the High Wage Economy

2 Introducing x-efficiency theory, rational inefficiency, and the political economy of the Golden Rule

Introduction

A fundamental difference between mainstream or traditional neoclassical theory and the various streams of behavioral economics is that in behavioral economics assumptions are fundamentally important to the construction of economic models (Altman 1999d, 2001e, 2003c; Simon 1987a, 1987b). In addition, behavioral economics explicitly recognizes the importance of institutional parameters in model building since institutions affect the decision-making process. Moreover, the Herbert Simon tradition in behavioral economics maintains that intelligent behavior need not yield the type of optimal or efficient behaviors predicted by traditional ...