The Evolution and Behavioral Turn of Development Economics and Its Contemporary Implications

By means of investigation into the integration of behavioral economics and development economic theory in the early 21th century, we found the new insights provide some new foundations for the development economics. Reviewing the evolution of development economics, we analyze the limits of existing neoclassical paradigm, including the traditional or mainstream development economics, new institutional development economics, imperfect information economics and behavioral development economics, particularly discuss the mental accounting, default rule and cognitive biases beyond the economic man model. Hence we make use of the insights from behavioral economics to take into account behavioral failure and complement with market failure, and focus on the information processing or imperfect mental models. We found that behavioral biases lead to imperfect market and leading to Pareto inefficiency．These behavioral failures open up economic development challenges for the poor. So it is necessary to small government intervention (nudge) to correct the behavioral biases into a rational way, combining the behavioral and market failures for the current China to fight the poverty and the economic development with high quality in the New Era.