From a book chapter by Greg Davies and Peter Brooks, Practical Challenges of Implementing Behavioral Finance: Reflections from the Field (quotes taken from a pre-print):
Taken in isolation, the ideas and concepts that comprise the field of behavioral finance are of very little practical use. Indeed, many of the attempts to apply these ideas amount to little more than a trite list of biases and pictures of human brains on PowerPoint slides. Talking a good game in the arena of behavioral finance is easy, which often leads to the misperception that it is superficial. Yet, making behavioral finance work in practice is much more challenging: it requires integrating these ideas with working models, information technology (IT) systems, business processes, and organizational culture.
Substitute the word “behavioural finance” with “behavioural economics” and its kin, and the message reads the same.
On the “bias” bias:
Today, extremely long lists of biases are available, which do little to convey the underlying sophistication, complexity, and thoroughness of more than half a century of highly robust experimental and theoretical work. These lists provide no real framework for potential practitioners to deploy when approaching a tangible problem. And many of these biases appear to overlap or conflict with each other, which can make behavioral finance appear either very superficial or highly confused.
The easily accessible examples that academics have used to illustrate these biases to wide audiences have sometimes led to the impression that behavioral economics is an easy field to master. This misrepresentation leads to inevitable disappointment when categorizing biases proves not to be an easy panacea. A perception of the field as “just anecdotes and parlor games” reduces the willingness of the commercial world to put substantial investments of time and resource into building applications grounded on the underlying ideas. Building behavioral finance ideas into commercial applications requires both depth and breadth of understanding of the theory and, in many cases, large resource commitments.
On whether there is a grand unified theory:
A commonly expressed concern, at least in the mainstream press, is that there exists no grand unified theory of behavioral economics, and that the field is thus merely a chaotic collection of unconnected and often contradictory findings. For the purpose of practical implementation, the notion that this is, or needs to be, a clearly defined field should be eliminated, reducing the desire to erode it with arbitrary labels and definitions. Human behavior operates at multiple levels from the neurological to complex social interactions. Any quest for a grand unified theory to mirror that of physical sciences may well be entirely misguided, together with the notion that such a theory is necessary for the broad field to be useful. Much more effective is an approach of treating the full range of behavioral findings as a rich toolbox that can be applied to, and tested on, a range of practical concerns.
On the superficial application:
The first major challenge is that behavioral finance is not particularly effective if applied superficially. Yet, superficial attempts are commonplace. Some seek to do little more than offer a checklist of biases, hoping that informing people of poor decision-making can solve the problem. Instead, a central theme of decision science is the consistent finding that merely informing people of their adverse behavioral proclivities is very seldom effective in combating them.
Because behavioral finance is both topical and fascinating to many people, it attracts ‘hobbyists’ who can readily recite a number of biases, but who neither have the depth of knowledge of the field overall, nor a solid grasp of the theoretical underpinnings of the more technical aspects of the field. …
This chapter is not an attempt to erect barriers to entry amongst behavioral practitioners and claim that only those with advanced degrees in the field should be taken seriously. On the contrary, the effect of greater academic training can cause its beneficiaries to hold on too closely to narrow and technical interpretations of the field to make them effective practitioners. Indeed, some of the most effective practitioners do not have an extensive academic background in the field. However, they have invested considerable time and effort getting to know and deeply understand the breadth and depth of the field.
And on naive buyers:
Limited study of behavioral finance through reading the popular books on the topic may equip one to sound knowledgeable and appear convincing. However, as a relatively new field, the purchasers of behavioral expertise are seldom equipped to know the difference and may be unable to tell a superficially convincing approach from approaches that embody true understanding. This leaves the field open to consultants peddling ‘behavioral expertise’ but having in their toolkit little more than a list of biases that they apply sequentially and with little variation to each problem encountered. Warning flags should go up whenever the proposal rests heavily on catalogues of behavioral biases or contains a preponderance of pictures of brains.