A common criticism of behavioral economics is that it has not shown that the psychological biases of individual investors lead to aggregate long-run effects on both asset prices and macroeconomic quantities. Our objective is to address this criticism by providing a simple example of a production...

This paper studies present bias in a life-cycle model with heterogeneous preferences. Previous research outlining the role of behavioral biases in the macroeconomy largely falls into one of three categories: (1) partial equilibrium, (2) infinite horizon, or (3) homogeneous preferences. We...

Rich behavioural biases, mistakes, and limits on rational decision-making are often thought to make equilibrium analysis much more intractable. We establish that this is not the case in the context of one-sector growth models such as Ramsey-Cass-Koopmans or Bewley-Aiyagari models. We break down...