Comparative analysis of Neoclassical and Behavioral Economics in their policy approach toward poverty alleviation

Poverty has always been considered one of the most important concerns of human societies and due to high importance of the issue, different approaches are chosen to deal with it. However due to the high dominance of neoclassical economics in the theoretical aspect and modelling, most approaches are hinged on neoclassical framework. This study is based on exploratory approach and tries to combine and unify the findings of poverty policy making in the behavioral economics to build a comprehensive explanation of the policies, theories and policy recommendations of the behavioral paradigm in contrast with the neoclassical one. It will help us demonstrate the effect of different insights pertaining to these paradigms on selection of policy approach to tackle poverty. In this research descriptive- analytical method has been utilized, based on secondary systematic analysis on previous studies.Our findings reveal that the different approaches of neoclassic and behavioral approach leads to different functions for them in economic studies. The Axiomatic and Normative approach of Neoclassical economics versus descriptive and explanative nature of the behavioral approach makes the neoclassical approach as ideal type and criterion for the theoretic maturity. However in the explanation of poverty based on the real life facts of the poor, decision making procedure and the preference structure, behavioral approach is considered as a complement to the neoclassical economics and is mostly preferred.On the other hand, findings of Behavioral Economics reveal the Social Nature and dependence of the decisions to a Reference Point. So, the Possibility for the use of Nudges and more synergy from peers instead of an Impartial Observer (in Neoclassical Economics) results in more efficient outcomes in practice. Therefore, Behavioral Economics emerges more efficient in application in contrast with the Neoclassical one.