The Federal Reserve Bank of Boston's Research Center for Behavioral Economics and Decision-Making recently held a two-day symposium called Implications of Behavioral Economics for Economic Policy:

Behavioral economics is motivated by a range of empirical facts that are at apparent odds with assumptions of standard economic theory. But while behavioral approaches are becoming common in academia, it is unclear how behavioral models should inform economic policymaking in general, and central banking in particular. This conference discussed the implications of behavioral economics for macroeconomic policy, with special attention to the regulatory and monetary policy responsibilities of central banks.

Given the anxiety about the housing market and the amount of hate and vitriole directed at central bankers of late, two papers are of particular interest:

• Behavioral Economics and the Housing Market
  The housing market is of particular interest to both behavioral economists and policymakers. Behavioral models have linked housing prices to loss aversion on the part of sellers as well as speculative mania on the part of buyers. For policymakers, understanding the linkages between the housing market and the wider economy proved critical for forecasting output growth in 2006 and 2007. This session will explore whether policymakers need behavioral tools to understand housing. Can we make sense of this market using standard theories of asset prices and investment? Or does “psychology” come into play?
• Should Central Banks Maximize Happiness?
  The Congressional mandate of the Federal Reserve is to pursue both price stability and full employment. But how should trade-offs between volatility in inflation and unemployment be viewed in the light of recent research on the determinants of individuals’ life satisfaction?