Consider a transitive value ordering of outcomes and lotteries on outcomes, which satisfies substitutivity of equivalents and obeys “continuity for easy cases,” i.e., allows compensating risks of small losses by chances of small improvements. Temkin (2001) has argued that such an ordering must also – rather counter-intuitively – allow chances of small improvements to compensate risks of huge losses. In this paper, we show that Temkin's argument is flawed but that a better proof is possible. However, it is more difficult (...) to determine what conclusions should be drawn from this result. Contrary to what Temkin suggests, substitutivity of equivalents is a notoriously controversial principle. But even in the absence of substitutivity, the counter-intuitive conclusion is derivable from a strengthened version of continuity for easy cases. The best move, therefore, might be to question the latter principle, even in its original simple version: as we argue, continuity for easy cases gives rise to a sorites. (shrink)

Dieser Beitrag diskutiert Oskar Morgensterns These von der Unmöglichkeit von Wirtschaftsprognose. Nach einer kritischen Rekonstruktion Morgensterns Argumente wird diese These in ihrer starken, apriorischen Lesart zurückgewiesen. Demgegenüber gestatten es die Ergebnisse empirischer Prognoseevaluationen, Morgensterns Überlegungen als kontingente Erklärungen des Scheiterns makroökonomischer Vorhersagen umzuinterpretieren. Der Beitrag schließt deshalb mit einer provokanten Konklusion, die bereits Morgenstern zog: der Forderung, Versuche makroökonomischer Vorhersage einzustellen.

Austrian economics - the school of thought associated with Carl Menger, Frederick von Weiser, Eugen von Bohm-Bawerk, and in this century, Ludwig von Mises, Friedrich Hayek, Murray N. Rothbard, and Israel Kirzner - is based on a framework of methodological principles and assumptions much at variance with those of traditional or 'orthodox' economists. Robert Nozick, in his 'On Austrian Methodology', focuses attention on the most fundamental features of this framework, and subjects them to a thoroughgoing and scathing analysis. Singled out (...) for detailed and critical review are: (1) the praxeological concepts of methodological individualism; (2) the claim that economics is an a priori science of human action; (3) the nature of preference and its relation to choice and action; and (4) the assumptions of time-preference theory. Although Nozick does not consider Austrian views on business cycles, market process analysis, the coordinative and informational effects of the price system, competition, and several other fundamental aspects of praxeology, his criticism strikes at the very root of the praxeological school. This paper attempts to refute each criticism made of the praxeological school by Nozick on a point-by-point basis. It thus follows the same pattern as the original paper, and scrutinizes in detail the arguments made by its author. (shrink)

Abstract Economic formalism crowds out the analysis of change and adjustments to change under capitalism. The style of analytical narrative that was practiced by the first generation of neoclassical economists, in contrast, is more productive of genuine economic understanding. Despite Daniel Haus?man's challenging argument to the contrary, I maintain that Joseph Stiglitz's work is formalist at its core. While I agree with Robert Heilbroner's critique of contemporary economics, there is a limited sense in which nonformalist economics can rely on universalistic (...) assumptions. And Thomas Mayer has provided useful guidelines for focusing nonformalist analysis on real?world economic problems. (shrink)

Nancy Cartwright claims that "Causality is a hot topic today both in philosophy and economics." She may be right about philosophers, but not when it comes to economists. Cartwright talks about "economics" but nothing she says about it corresponds to what is taught in economics classes. Today, economics is dominated by model builders—but not all models involve econometrics. While all model builders do respect an endogenous-exogenous distinction between variables, this distinction will not be on the basis of which type of (...) variable "causes" which, but on which variables are "determined" (and hence explained) by the model and those which are not. (shrink)

Psychological game theory encompasses formal theories designed to remedy game-theoretic indeterminacy and to predict strategic interaction more accurately. Its theoretical plurality entails second-order indeterminacy, but this seems unavoidable. Orthodox game theory cannot solve payoff-dominance problems, and remedies based on interval-valued beliefs or payoff transformations are inadequate. Evolutionary game theory applies only to repeated interactions, and behavioral ecology is powerless to explain cooperation between genetically unrelated strangers in isolated interactions. Punishment of defectors elucidates cooperation in social dilemmas but leaves punishing behavior (...) unexplained. Team reasoning solves problems of coordination and cooperation, but aggregation of individual preferences is problematic. (shrink)

Rational choice theory enjoys unprecedented popularity and influence in the behavioral and social sciences, but it generates intractable problems when applied to socially interactive decisions. In individual decisions, instrumental rationality is defined in terms of expected utility maximization. This becomes problematic in interactive decisions, when individuals have only partial control over the outcomes, because expected utility maximization is undefined in the absence of assumptions about how the other participants will behave. Game theory therefore incorporates not only rationality but also common (...) knowledge assumptions, enabling players to anticipate their co-players' strategies. Under these assumptions, disparate anomalies emerge. Instrumental rationality, conventionally interpreted, fails to explain intuitively obvious features of human interaction, yields predictions starkly at variance with experimental findings, and breaks down completely in certain cases. In particular, focal point selection in pure coordination games is inexplicable, though it is easily achieved in practice; the intuitively compelling payoff-dominance principle lacks rational justification; rationality in social dilemmas is self-defeating; a key solution concept for cooperative coalition games is frequently inapplicable; and rational choice in certain sequential games generates contradictions. In experiments, human players behave more cooperatively and receive higher payoffs than strict rationality would permit. Orthodox conceptions of rationality are evidently internally deficient and inadequate for explaining human interaction. Psychological game theory, based on nonstandard assumptions, is required to solve these problems, and some suggestions along these lines have already been put forward. Key Words: backward induction; Centipede game; common knowledge; cooperation; epistemic reasoning; game theory; payoff dominance; pure coordination game; rational choice theory; social dilemma. (shrink)

The answer in a nutshell is: Yes, five years ago, but nobody has noticed. Nobody noticed because the majority of social scientists subscribe to one of the following views: (1) the ‘anomalous’ behaviour observed in standard prisoner’s dilemma or ultimatum game experiments has refuted standard game theory a long time ago; (2) game theory is flexible enough to accommodate any observed choices by ‘refining’ players’ preferences; or (3) it is just a piece of pure mathematics (a tautology). None of these (...) views is correct. This paper defends the view that GT as commonly understood is not a tautology, that it suffers from important (albeit very recently discovered) empirical anomalies, and that it is not flexible enough to accommodate all the anomalies in its theoretical framework. It also discusses the experiments that finally refuted game theory, and concludes trying to explain why it took so long for experimental game theorists to design experiments that could adequately test the theory. (shrink)

This is a comprehensive anthology of works concerning the nature of economics as a science, including classic texts and essays exploring specific branches and schools of economics. Apart from the classics, most of the selections in the third edition are new, as are the introduction and bibliography. No other anthology spans the whole field and offers a comprehensive introduction to questions about economic methodology.

This is a comprehensive anthology of works concerning the nature of economics as a science, including classic texts and essays exploring specific branches and schools of economics. Apart from the classics, most of the selections in the third edition are new, as are the introduction and bibliography. No other anthology spans the whole field and offers a comprehensive introduction to questions about economic methodology.

John Stuart Mill regards economics as an inexact and separate science which employs a deductive method. This paper analyzes and restates Mill's views and considers whether they help one to understand philosophical peculiarities of contemporary microeconomic theory. The author concludes that it is philosophically enlightening to interpret microeconomics as an inexact and separate science, but that Mill's notion of a deductive method has only a little to contribute.

Out of the Margin is the first book to consider feminist concerns across the whole domain of economics. In recent years there has been a tremendous increase in interest on the relation between gender and economics. Feminists have found much of concern in the way the economics has written women out of its history, built its theories around masculinist values, failed to take proper account of women and their work when measuring the economy and ignored most of the policy issues (...) that press most heavily upon women. This book is a firm rejection of this marginalized position. Including contributions from leading feminist economists from the US and Europe, the book offers a richness of new insights in addressing the absence of women, both as subject and object, in the history of economic thought. Out of the Margin also explores the philosophical roots of rational economic man, power relations and conflicts within the family, the limitations of relying on secondary data, the need for new data and research, the policy implications of neo-classical economic models and the need for fundamental research in policy making. With its range and depth of coverage, this is not only an excellent introduction to the field but also indispensible for anyone looking for an in-depth analysis of gender and economics. (shrink)

The paper begins by providing a game-theoretic reconstruction of Gilbert’s (1989) philosophical critique of Lewis (1969) on the role of salience in selecting conventions. Gilbert’s insight is reformulated thus: Nash equilibrium is insufficiently powerful as a solution concept to rationalize conventions for unboundedly rational agents if conventions are solutions to the kinds of games Lewis supposes. Both refinements to NE and appeals to bounded rationality can plug this gap, but lack generality. As Binmore (this issue) argues, evolutive game theory readily (...) explains the origin of conventional behavior, but that is not Lewis’s project. Gilbert’s critique is generalized by reference to Bacharach’s (2006) work on team reasoning in games. The paper then argues that although Lewis’s account of the rationalization of conventions is shown by the reconstruction of Gilbert’s critique to be incomplete, Gilbert is wrong to conclude that classical (‘eductive’) game theory lacks the resources to explain conformity to conventions among people. A game-theoretic account of the dynamics of socialization, based on Ross’s (2005, 2006) idea of ‘game determination’, rationalizes choices of conventional strategies in overlapping generations contexts, provided agents are products of evolutionary selection and know that other players are also such products. (shrink)

Women currently earn 77 cents for every dollar earned by men. Explanations abound for why, exactly, this wage gap exists. One of the more potent justifications attributes this pay differential to the unequal effects of marriage on the sexes: the marital asymmetry hypothesis. However, even when marital status is accounted for, a small but significant residual gap remains. This article argues that this is the result of social factors. Entrenched societal sexism causes all of us to harbor unconscious bias about (...) the capabilities and proper gender roles of women. This bias, in turn, leads us to discount work completed by females, especially in professional environments. Employers are not immune from this effect, and the undervaluation of female ability affects hiring practices, leading to the residual wage gap. (shrink)

I resolve a previously unnoticed anomaly in the analysis of collective action problems. Some political theorists apply game theory to analyze the paradox of anarchy: War is apparently inevitable in anarchy even though all warring parties prefer peace over war. Others apply tipping threshold analysis to resolve the paradox of revolution: Joining a revolution is apparently always irrational even when an overwhelming majority of the population wish to replace their regime. The usual game theoretic analysis of anarchy yields the conclusion (...) that the suboptimal equilibrium of war is inevitable. The usual tipping threshold analysis of revolution yields the conclusion that the optimal equilibrium of successful revolution is possible. Yet structurally the collective action problems of anarchy and potential revolution are much the same. This suggests that tipping threshold analysis and game theory are incompatible methodologies, despite their widespread use in the social sciences. I argue that there is no real tension between game theory and tipping threshold analysis, even though these methodologies have developed largely independently of each other. I propose a Variable Belief Threshold model of collective action that combines elements of game theory and tipping threshold analysis. I show by example that one can use this kind of hybrid model to give compatible explanations of conflict in anarchy and successful revolution. Introduction Two Classic Problems, and Two Popular Analyses 2.1 The paradox of anarchy 2.2 The paradox of revolution Restating the Puzzle Evaluating the Prisoners’ Dilemma and S -Curve Models The Variable Belief Threshold Model Example 5.1. A population of moderates with independent deviations Example 5.2 A heterogeneous population with independent deviations Example 5.3 A heterogeneous population with coordinated deviations Conclusion Appendix: Computer Simulations CiteULike Connotea Del.icio.us What's this? (shrink)

The use of sensitivity analysis is routine in some fields of empirical econometrics, although econometric theorists have generally taken a critical attitude towards it. This paper presents a framework in which arguments for and against such analysis can be evaluated. It appears that sensitivity is not necessarily a bad, nor sturdiness necessarily a good.

Davis argues that Suppe's semantic conception provides a better understanding of the problem of theory?data confrontations. Applying his semantic methodology to the LSE (London School of Economics) approach of econometrics, he concludes that the LSE approach fails to address the issue of bridging the theory?data gap. This paper suggests two other versions of the semantic view of theories in the philosophy of science, due to Suppes and van Fraassen, and argues that the LSE approach can be construed under these two (...) versions of the semantic view in terms of structure and representation. (shrink)

There has been considerable discussion lately of the concept of open systems, which has revealed that different participants are using the terms ?openness? and ?closure? in different ways. The purpose of this paper is to address issues of meaning that arise in this particular discourse, with a view to clarifying both conflicts in usage and the underlying issues involved. We explore the different meanings of openness and closure extant in the literature, as applied at the ontological and epistemological levels, focusing (...) on our own use of the terms in relation to that which prevails in neoclassical economics on the one hand and to the use made of them by Tony Lawson and other critical realists on the other. (shrink)

The philosophy of science literature has played an increasing role in discussion of econometric methodology in recent years, and the Hendry methodology in particular has received much attention. Despite this, the encompassing principle has been overlooked in the methodological literature. This paper addresses this by examining the major methodological implications of the principle.

Analytic induction (AI) is an interpretation of scientific method that emerged in early twentieth-century sociology and still has some influence today. Among the studies often cited as examples are Becker’s articles on marijuana use. While these have been given less attention than the work of Lindesmith on opiate addiction and Cressey on financial trust violation, Becker’s work has distinctive features. Furthermore, it raises some important and interesting issues that relate not only to AI but to social scientific explanation more generally. (...) These concern, for example, the presence and nature of causal systems in the social world, the relationship between historical and generalizing approaches, the character and role of social scientific theories, and how they are generated. In this article Becker’s research is examined in detail, and these issues explored through comparisons with the work of Lindesmith and Cressey. (shrink)

Economists disagree about whether they should aim to provide explanations, about what they should aim to explain, and about how they should go about explaining. This essay will address all three of these controversies. I shall argue (1) that explanation is a central task in economics, (2) that one should adopt an explicitly causal model of explanation, (3) that economists cannot avoid explaining individual choices and they should attempt to explain the paths that take the economy from one equilibrium to (...) another, and (4) that explanations in economics cite reasons as well as causes. Most of these points apply across different schools of economics, but “economics” in this paper should thus be read as “mainstream economics.”. (shrink)

The frequency of historical materialist explanations in evolutionary social sciences is very low even though historical materialism and evolutionism have great many shared aims towards explaining the long term social change. David Laibman in his Deep History (2007) picks up some of the standard questions of evolutionary social theory and aims at advancing the conception of historical materialism so as to develop a Marxist theory of history from an evolutionary point of view. The contribution of Laibman’s work is to show (...) that historical and materialist explanations are present both in Marxian and evolutionary interpretations of history, and moreover, the traditional borders of historical materialism can be enlarged so as to embrace evolutionary methodology in explaining social change. The unbalanced research methodology of Laibman’s work, however, reduces the evolutionary depth of his contribution. The two main shortcomings of Laibman’s work are discussed under the titles of “The Audience Problem” and “The Evolutionary Problem”. (shrink)

The New Institutional Economics (NIE) occupies an important space in the rapidly expanding theory of organization. Traditional testing techniques have only been applied to less complex parts of the NIE. A rich body of evidence generated by the experiences of firms and other organizations lies fallow. The limited domain of traditional testing will persist because of the nature of the central concepts of the NIE, the difficulty posed for integrating transaction cost into an optimizing framework by self-reference, and the particularly (...) wicked manifestations of the Duhem-Quine problem. Experimental economics may add credibility to some components of the NIE but is unlikely to fill the current void. The catchy title, the telling anecdote, and the creative 'fact' have played a disproportionate role in determining the composition of the canonical literature in the NIE. Catalytic steps for developing professional norms governing the marshalling of data generated by different organizations and institutions are discussed in the concluding section. (shrink)

More than 25 years after the discovery that the equilibrium point of a general equilibrium model is not necessarily either unique or stable, there is still a need for an intuitively comprehensible explanation of the reasons for this discovery. Recent accounts identify two causes of the finding of instability: the inherent difficulties of aggregation, and the individualistic model of consumer behaviour. The mathematical dead end reached by general equilibrium analysis is not due to obscure or esoteric aspects of the model, (...) but rather arises from intentional design features, present in neoclassical theory since its beginnings. Modification of economic theory to overcome these underlying problems will require a new model of consumer choice, nonlinear analyses of social interactions, and recognition of the central role of institutional and social constraints. (shrink)

It is customarily assumed that welfare-state thinking can only appear as a product of the sharpening conflict between revolutionary socialists and the defenders of the status quo; the case of Tom Paine proves otherwise. Although he defended private enterprise (to the exclusion of large landed property), he developed a forgotten early version of a comprehensive system of public welfare in the second part of his The Rights of Man and in his Agrarian Justice, where he argued that the new revolutionary (...) democratic government based on representation and universal suffrage has the duty and the means not only of relieving poverty but of preventing it by a system of universal allowances for marriage, childbirth, the raising of children, basic education, old age pensions and temporary housing and employment for the unemployed of the metropolis. This, he said, should be financed by a progressive inheritance tax levied especially on landed estates. (shrink)

It has long been an interest of researchers in economics, sociology, organization studies, and economic geography to understand how firms innovate. Most recently, this interest has begun to examine the micro-processes of work and organization that sustain social creativity, emphasizing the learning and knowing through action when social actors and technologies come together in 'communities of practice'; everyday interactions of common purpose and mutual obligation. These communities are said to spark both incremental and radical innovation. -/- In the book, leading (...) international scholars critically examine the concept of communities of practice and its applications in different spatial, organizational, and creative settings. Chapters examine the development of the concept, the link between situated practice and different types of creative outcome, the interface between spatial and relational proximity, and the organizational demands of learning and knowing through communities of practice. More widely, the chapters examine the compatibility between markets, knowledge capitalism, and community; seemingly in conflict with each other, but discursively not. -/- Exploring the frontiers of current understanding of situated knowing and learning, this book is for all those interested in the economic sociology of organizational creativity and knowledge capitalism in general. (shrink)

(2013). Herding, social influence and expert opinion. Journal of Economic Methodology: Vol. 20, Methodology, Systemic Risk, and the Economics Profession, pp. 35-44. doi: 10.1080/1350178X.2013.774845.

This article addresses several issues raised by Nichols, Gintis, and Skyrms and Zollman in their comments on my book, The Grammar of Society: The Nature and Dynamics of Social Norms . In particular, I explore the relation between social and personal norms, what an adequate game-theoretic representation of norms should be, and what models of norms emergence should tell us about the formation of normative expectations.

Previous literature has demonstrated the important role that trust plays in developing and maintaining well-functioning societies. However, if we are to learn how to increase levels of trust in society, we must first understand why people choose to trust others. One potential answer to this is that people view trust as normative: there is a social norm for trusting that imposes punishment for noncompliance. To test this, we report data from a survey with salient rewards to elicit people’s attitudes regarding (...) the punishment of distrusting behavior in a trust game. Our results show that people do not behave as though trust is a norm. Our participants expected that most people would not punish untrusting investors, regardless of whether the potential trustee was a stranger or a friend. In contrast, our participants behaved as though being trustworthy is a norm. Most participants believed that most people would punish someone who failed to reciprocate a stranger’s or a friend’s trust. We conclude that, while we were able to reproduce previous results establishing that there is a norm of reciprocity, we found no evidence for a corresponding norm of trust, even among friends. (shrink)

University of Pennsylvania, USA, el322{at}nyu.edu ' + u + '@' + d + ' '//--> One of the most consistent findings in experimental studies of social dilemmas is the positive influence of face-to-face communication on cooperation. The face-to-face `communication effect' has been recently explained in terms of a `focus theory of norms': successful communication focuses agents on pro-social norms, and induces preferences and expectations conducive to cooperation. 1 Many of the studies that point to a communication effect, however, do not (...) further explore whether and to what extent the communication medium affects cooperative behavior. In this article, we ask if pro-social behavior can emerge and survive in computer-mediated environments. We show that, like face-to-face communication, computer-mediated communication also positively affects cooperation in social dilemmas, but cooperation is more difficult to establish and maintain. We argue that the discrepancy between the computer-mediated and the face-to-face communication effects is a consequence of the distinct capabilities of different media to focus agents on pro-social norms and to allow them to develop mutual expectations about future behavior. Key Words: social dilemmas • laboratory experiments • communication • social norms • cooperation • computer-mediated communication. (shrink)

Economic institutions governing such activities as food sharing among non-kin, the accumulation and inheritance of wealth, and the division of labor and its rewards are human-constructed environments capable of imparting distinctive direction and pace to the process of biological evolution and cultural change. Where differing structures of these institutions take the form of distinct conventions sustained by (near) mutual adherence, small initial differences may support divergent evolutionary trajectories even in the absence of conformist behaviors.

A generation of social theorists have argued that if free-rider considerations show that certain collective action predicaments are unresolvable under individual, rational choice – unresolvable under an arrangement where each is free to pursue their own relative advantage – then those considerations will equally show that the predicaments cannot be resolved by recourse to norms (Buchanan, 1975, p. 132; Heath, 1976, p. 30; Sober and Wilson, 1998, 156ff; Taylor, 1987, p. 144). If free-rider considerations explain why people do not spontaneously (...) keep the streets clean, though they would each prefer unlittered streets, then those considerations will also explain why there is no effective norm against littering the streets. (shrink)

By assembling authors with a wide range of different disciplinary backgrounds, from philosophy, literature, political science, sociology to medical anthropology ...

This paper critiques the critical realist conception of social relations as ?deep? structures separate from ?surface? social activities. The alternative conception offered by ?systematic dialectics? is advocated. Systematic dialectics takes a system?wide perspective on the contemporary economic system. From this perspective, predominant social relations are inseparable from predominant social activities contra critical realism. For example, the predominance of commodity exchange relations across the economic system necessarily implies the predominance of the activities of commodity exchange. Likewise the predominance of monetary relations (...) across the economic system necessarily implies the predominance of the activities of monetary exchange. Maintaining this system?wide perspective on the capitalist economy, systematic dialectics furthermore offers alternative analyses to critical realism of event regularities (?closures?), of ?depth?, and of ?tendencies? (shrink)

This paper reviews three distinct strategies in recent economics for using the concept of social identity in the explanation of individual behavior: Akerlof and Kranton's neoclassical approach, Sen's commitment approach and Kirman et al.'s complexity approach. The primary focus is the multiple selves problem and the difficulties associated with failing to explain social identity and personal identity together. The argument of the paper is that too narrow a scope for reflexivity in individual decision?making renders the problem intractable, but that enlarging (...) this scope makes it possible to explain personal and social identity together in connection with an individual behavior termed comparative value?objective evaluation. The paper concludes with recommendations for treating the individual objective function as a production function. JEL classification: D01, D63, Z13. (shrink)

Reflexivity has been argued to be self?defeating and potentially devastating for the sociology of scientific knowledge. We first survey various meanings associated with the concept of reflexivity and then provide an interpretation of Velázquez's Las Meñinas to generate a three?part taxonomy of reflexivity, distinguishing between ?immanent?, ?epistemic? and ?transcendent? reflexivity. This provides the basis for engaging with reflexivity as a problem in the economic methodology literature, focusing on recent contributions to the topic by Hands, Sent, Mäki and Mirowski. Employment of (...) our taxonomy clarifies the similarities and differences between the various forms of reflexivity that can be identified or are addressed in these contributions. Our main argument is that a successful response to the malign aspects of reflexivity requires a simultaneous consideration of various levels of reflexivity and relies on social?historical perspectives. (shrink)

Economics is a typical resource for social epistemology and the division of labour is a common theme for economics. As such it should come as no surprise that the present paper turns to economics to formulate a view on the dynamics of scientific communities, with precursors such as Kitcher (1990), Goldman and Shaked (1991) and Hull (1988). But although the approach is similar to theirs, the view defended is different. Mäki (2005) points out that the lessons philosophers draw from economics (...) can go either way depending on the model chosen. Thus, the aims of this paper are (1) to illustrate this flexibility by proposing an alternative model which assumes increasing returns to adoption in science rather than the decreasing returns present in the aforementioned contributions; and (2) to outline the implications of this view for scientific pluralism and institutional design. (shrink)

According to John Searle's theory of human ontology, intentional mental states such as beliefs and wants rely on non-intentional, Background, dispositions to produce rational behaviour. The distinction between intentional and non-intentional states is used as the basis on which to understand the various conceptions of human agency to be found in behavioural finance. The agent of behavioural finance is characterized in terms of three sets of psychological traits: prospect theory, heuristics and mental accounting. These are examined from a Searlean perspective (...) and shown to rely on the interplay between various reflected upon and non-reflected upon elements, in keeping with the Searlean human ontology previously considered. A number of implications are drawn from these findings. (shrink)

This paper rejects the idea that rationality can be defined as optimization, on theoretic, empirical and methodological grounds. It proposes instead a more general theory of rational action in the context of individual growth, change and development over time, in an uncertain world of social interaction, in which choices are part of a learning process. Such a theory of economic behavior is empirically testable, which is not true of either optimization or satisficing, involves conflict and tension rather than harmony, and (...) leads to possible government action rather than laissez-faire. It also broadens economic theory to include relationships among individual behavior, institutions and values. (shrink)

This paper develops a taxonomy of reflexive development practice, suggesting an examination of external values and norms; an assessment of the importance of local context; a recognition that policies can worsen the problems that they try to solve; and the idea that theory and policy should be revised as circumstances change. The taxonomy is developed as a way of addressing the difficulties encountered by the modernist Washington Consensus on the one hand and postmodernism on the other. The discussion draws on (...) the sociologist Pierre Bourdieu, who tries to move the debate further using the concept of reflexivity, combining the objectivism of the outsider with the attention to context of the locally embedded researcher. JEL Classifications: O10, B41. (shrink)

The first part of this paper provides a general theory of moral climates, which incorporates the following three elements: first, the values and limitations of that picture of moral behaviour focused on rules, rule-following and rationality; second, that picture of moral behaviour focused on institutionally-embedded activity; and third, that picture of moral behaviour that urges us to come face to face with our own limitations, i.e., our own ways of orienting ourselves to objects of value, such that we do not (...) neglect the vigilance required in order to see and recognise the great variety and depth of suffering and vulnerability. The moral climate of any particular social environment can be evaluated from the perspective of these three elements. The second part of the paper applies this general theory of moral climates to that of international economic institutions. It is argued that, despite their importance, both human rights discourse and institutional features designed to increase participation from developing countries in decision- and policy-making, are of limited use, partly because of their inherent limitations, and partly because of the emergence of international economic institutions in the context of an already heavily de-politicised and autonomous economic sphere. The necessary transformation of international economic institutions ought not to neglect the continuing domination of the orientation of those institutions towards the value of efficiency, to which all other values tend to be made subordinate. The paper proposes not only vigilance about the limitations of current and proposed normative languages and institutional features, but also urges the consideration of a Community Forum scheme, which is designed to bring to light and thereafter communicate, via the participation of international experts and artists, some of the particularities of suffering and vulnerability within specific communities. Finally, the paper illustrates the need for greater awareness of the particularities of suffering and vulnerability by considering the continuing problem of access to public goods and services amongst the poor in Nigeria. (shrink)

The paper maps out an alternative to a behavioural (economic) approach to business ethics. Special attention is paid to the fundamental philosophical principle that any moral ‘ought’ implies a practical ‘can’, which the paper interprets with regard to the economic viability of moral agency of the firm under the conditions of the market economy, in particular competition. The paper details an economic understanding of business ethics with regard to classical and neo-classical views, on the one hand, and institutional, libertarian thought, (...) on the other hand. Implications are derived regarding unintentional and passive intentional moral agency of the firm. The paper moves on to suggest that moral agency can be economically viable in competitive ‘market’ interactions, which is conventionally disputed by classical/neo-classical and institutional, libertarian economics. The paper here conceptualises active moral agency of the firm as the utilisation of ethical capital in firm--stakeholder interactions. This yields a reinterpretation of instrumental stakeholder theory. (shrink)

Questions such as ‘What if such small companies as Hewletts and the Varians had not been established in Santa Clara County in California?’ or ‘What if Q-type keyboards had not been invented?’ are well known among economists. The questions point at a phenomenon called path dependence: ‘small events’, the argument goes, may cause the evolution of institutions to lock in to specific paths that may produce undesirable consequences. How about applying such skeptical views in economics to human ideas and thought (...) in general? That is to say, what if we ask such questions as: what if Greek philosophy had not been interested in ‘essences’ and ‘foundations’? What if Kant had not invented the ‘thing-in-itself?’ Nature and society, according to such Platonic philosophers, can be known only if it can be shown that events are governed, regulated and characterised by ‘forms’, which are immutable, complete, and perfect in their nature. But is there an ‘essence’ that makes a man 100 per cent male? Was there really a ‘foundation’ in history that caused a proletarian revolution in Russia? What if we had pushed aside the rhetoric of utopian ideality? What if we had a worldview different than the one depicted by Thomas More in his Utopia? The essay points at the possibility of such skepticism in human ideas and thought. (shrink)

This paper argues that by focusing on simple problems that can be resolved by the use of simple economic logic, usually involving the assumption that agents are rational, the economics-as-fun literature inevitably distracts from more difficult problems that are harder to solve and which may need to be tackled in different ways and may create a bias towards solutions that rely on the market.

Exhausting Modernity is a bold and exciting new work on the exhaustion of our resources, both natural and human. Brennan marshalls the insights of Marx and Freud to provide a compelling analysis of the pervading modern capitalism: environmental collapse, rising poverty levels, and the increased global economic disparity. Linking the consumption of environmental resources to our own depleted psychic life, she shows that modernity must be rethought if we are to find a sustainable future for both the environment and our (...) own psychic life. (shrink)

This bookis about the roots of managerial rationality. A theoretical base, founded on the concept of 'memetics' is developed in order to explain human thinking and human reason as products of cultural evolution. Cultural change and development are explained by simple, value-driven memetic mechanisms like 'ritualization' and 'extremization'.

Political science and economic science . . . make use of the same language, the same mode of abstraction, the same instruments of thought and the same method of reasoning. (Black 1998, 354) Proponents as well as opponents of economics imperialism agree that imperialism is a matter of unification; providing a unified framework for social scientific analysis. Uskali Mäki distinguishes between derivational and ontological unification and argues that the latter should serve as a constraint for the former. We explore whether, (...) in the case of rational-choice political science, self-interested behavior can be seen as a common causal element and solution concepts as the common derivational element, and whether the former constraints the use of the latter. We find that this is not the case. Instead, what is common to economics and rational-choice political science is a set of research heuristics and a focus on institutions with similar structures and forms of organization. (shrink)

In a series of insightful publications, Philip Pettit and Frank Jackson have argued for an explanatory ecumenism that is designed to justify a variety of types of social scientific explanation of different “grains”, including structural and rational choice explanations. Their arguments are put in terms of different kinds of explanatory information; the distinction between causal efficacy, causal relevance and explanatory relevance within their program model of explanation; and virtual reality and resilience explanation. The arguments are here assessed from the point (...) of view of the illumination they are able to cast on the issue of economics imperialism, the project of privileging rational choice as a unifying basis for explanations. While the Jackson–Pettit arguments turn out to be helpful in specifying some of the ontological and pragmatic constraints on economics imperialism, they are also shown to conflate distinct dimensions in the purported explanantia (such as small grain and particular grain, and the macro and the existentially quantified) and thereby to miss an important class of individualist causal process explanations of social phenomena. (shrink)

According to John Searle's theory of human ontology, intentional mental states such as beliefs and wants rely on non-intentional, Background, dispositions to produce rational behaviour. The distinction between intentional and non-intentional states is used as the basis on which to understand the various conceptions of human agency to be found in behavioural finance. The agent of behavioural finance is characterized in terms of three sets of psychological traits: prospect theory, heuristics and mental accounting. These are examined from a Searlean perspective (...) and shown to rely on the interplay between various reflected upon and non-reflected upon elements, in keeping with the Searlean human ontology previously considered. A number of implications are drawn from these findings. (shrink)

In the recent literature at the interface between economics, biology and neuroscience, several authors argue that by adopting an interdisciplinary approach to the analysis of decision making, economists will be able to construct predictively and explanatorily superior models. However, most economists remain quite reluctant to import biological or neural insights into their account of choice behaviour. In this paper, I reconstruct and critique one of the main arguments by means of which economists attempt to vindicate their conservative position. Furthermore, I (...) develop an alternative defense of the thesis that economists justifiably rely on a methodologically distinctive approach to the modelling of choice behaviour. (shrink)

The recent advancements at the interface between economics and neuroscience have encouraged neuroeconomists to raise several criticisms concerning the economic theory of choice. At present, however, there is little agreement with regard to the theoretical presuppositions and the explanatory aims of neuroeconomics. In this paper, I assess the scope and the significance of neuroeconomists' divergences, casting doubt on their attempts to provide a unified theoretical framework for analysing human choice behaviour. Moreover, I highlight some respects in which methodologically informed considerations (...) can promote the consolidation of the neuroeconomic enterprise. (shrink)

Abstract A number of empirical literatures in economics display the following pattern of results. First, evidence accumulates to support an empirical result. As time passes, however, contrary results emerge that challenge that initial result. This phenomenon raises important issues about (i) what part empirical findings play in how economists come to believe things; and (ii) how believable inferences are to be made from literatures displaying such contrary results. This paper documents this ?emerging contrary result? phenomenon, and investigates the factors causing (...) it. It considerably expands the list of emerging contrary results contained in my 1995 JEM paper. Of more importance, this paper identifies alternative explanations for these instances, and explores whether particular explanations can be plausibly assigned to the 26 examples in this paper. (shrink)

Analytical philosophy has been challenged by experimental approaches that make use of, among other things, cognitive science methods. In this paper we illustrate the benefits of merging philosophy with neuroscience, using an example of research in the foundations of social science. We argue that designing novel experiments to answer specific philosophical questions has several advantages compared to relying passively on neuroscientists' data. In this particular case, the data redirect attention towards topics ? such as inductive reasoning ? that are relatively (...) overlooked by mainstream social neuroscience. (shrink)

We critically review the methodological practices of two research programs which are jointly called ?neuroeconomics?. We defend the first of these, termed ?neurocellular economics? (NE) by Ross (2008), from an attack on its relevance by Gul and Pesendorfer (2008) (GP). This attack arbitrarily singles out some but not all processing variables as unimportant to economics, is insensitive to the realities of empirical theory testing, and ignores the central importance to economics of ?ecological rationality? (Smith 2007). GP ironically share this (...) last attitude with advocates of ?behavioral economics in the scanner? (BES), the other, and better known, branch of neuroeconomics. We consider grounds for skepticism about the accomplishments of this research program to date, based on its methodological individualism, its ad hoc econometrics, its tolerance for invalid reverse inference, and its inattention to the difficulties involved in extracting temporally lagged data if people's anticipation of reward causes pre-emptive blood flow. (shrink)

Many of the arguments for neuroeconomics rely on mistaken assumptions about criteria of explanatory relevance across disciplinary boundaries and fail to distinguish between evidential and explanatory relevance. Building on recent philosophical work on mechanistic research programmes and the contrastive counterfactual theory of explanation, we argue that explaining an explanatory presupposition or providing a lower-level explanation does not necessarily constitute explanatory improvement. Neuroscientific findings have explanatory relevance only when they inform a causal and explanatory account of the psychology of human decision-making.

In this paper I examine Don Ross’s application of unificationism as a methodological criterion of theory appraisal in economics and cognitive science. Against Ross’s critique that explanations of the preference reversal phenomenon by the ‘heuristics and biases’ programme is ad hoc or ‘Ptolemaic’, I argue that the compatibility hypothesis, one of the explanations offerd by this programme, is theoretically and empirically well-motivated. A careful examination of this hypothesis suggests several strengths of a procedural approach to modelling cognitive processes underlying individual (...) decision making, compared to a multiple-agent approach which Ross promotes. I argue that the debate between economists and psychologists are both theoretical and empirical, but cannot be resolved by appealing to the ideal of unification. (shrink)

I discuss the role of economics in the study of social cognition. A currently popular view is that microeconomics should collapse into psychology partly because cognitive science has shown that valuation is constitutively social, whereas non-psychological economics insists that it is not. In the paper I resist this view, partly by reference to the relevant history of economic theory, and partly by reference to an alternative model of the way in which that theory complements, without reducing to, psychological accounts of (...) social cognition. (shrink)

Three recent book-length studies in the philosophy of economics (Mirowski 2002, Davis 2003, Ross 2005) have drawn attention to the fact that mainstream economic theory has consistently avoided commitment to any particular model of the person. This is the most significant respect in which economics has kept aloof from part of psychology. The widespread belief, on the other hand, that economists’ attentiveness to the psychology of choice and decision had to wait for the Allais challenge and then for Kahneman and (...) Tversky is a myth. It is true that for a brief period after World War II economists led by Samuelson tried to operationalize choice as analytically derivative from observed consumer demand. This was a minor episode in the history of theory. Ross (2005) argues that, if anything, mainstream microeconomics has been more sensitive to theoretical fashions in the psychology of choice than has been good for it. (shrink)

This paper argues that the most common reading of Robbins’s Essay on the Nature and Significance of Economic Science in the methodology literature, according to which it was an historical foil for subsequent positivist-empiricist ideas, underestimates its contemporary relevance. In light of recent scholarship on 1930s positivism in philosophy, Robbins’s Essay is better interpreted as representing an attitude I call ‘broad positivism’, which remains a live option in contemporary philosophy of science. In consequence, the basis of Robbins’s preference for clear (...) demarcation between economics and psychology should be regarded as not merely historical in interest, but as raising valid considerations against the widespread current trend towards ‘correcting’ aspects of economic theory by reference to psychological experiments. (shrink)

Critics of mainstream economics typically rest important weight on the differences between people and the 'agents' that populate economic theory and economic models. Hollis and Nell (1975) is both representative of and ancestral to many more recent variations on the theme. Lately, the upgraded status of behavioral economics (BE) within the discipline's mainstream has encouraged a number of writers to use revolutionary rhetoric in promotion of a 'paradigm shift' that includes the rejection of 'rational economic man' (Ormerod 1994, Heilbroner and (...) Milburg 1995, Fullbrook 2003). The current leading developers of BE are generally more circumspect, claiming that their approach complements standard theory rather than promising to supplant it (Camerer and Loewenstein 2004, Angner and Loewenstein this volume). However, they generally join the more florid critics in supposing that microeconomics is bound to improve its empirical relevance to the extent that it substitutes the study of people for that of abstract economic agents. Another body of thought that promotes this view stems from Sen's (1977) attack on standard economic agents as 'rational fools', amplified in Davis's (2003) argument that since economic agents lack some essential properties of human individuals, economic theory requires fundamental reform if it is to make progress in explaining human behavior. (shrink)

The use of sensitivity analysis is routine in some fields of empirical econometrics, although econometric theorists have generally taken a critical attitude towards it. This paper presents a framework in which arguments for and against such analysis can be evaluated. It appears that sensitivity is not necessarily a bad, nor sturdiness necessarily a good.

This paper examines the experiment in macroeconometrics, the different forms it has taken and the rules that have been proposed for its proper conduct. Here an ?experiment? means putting a question to a model and getting an answer. Different types of experiment are distinguished and the justification that can be provided for a particular choice of experiment is discussed. Three types of macroeconometric modelling are considered: the Cowles (system of equations) approach, the vector autoregressive model approach and the computational experiment. (...) JEL Classifications: B41, C5, E37. (shrink)

This article seeks to provide a characterization of theory prevalent in economics and found in many areas of social and natural science, particularly those that make increasing use of rational choice perspectives. Four kinds of theoretical project are identified in which empirical evidence plays a relatively small role in theory acceptance. The paper associates the minor role of evidence in theory formation and acceptance to a need to answer counterfactual questions and argues that is not necessarily incompatible with accounts of (...) science that emphasise truth in the development of theory. However, this view of economics does highlight factors that play a central role in theory acceptance which have not featured very strongly, if at all, in the philosophy of science literature. The article goes on to discuss four areas of economics that illustrate the consequences of using theory acceptance procedures which give relatively little weight to empirical testing. Benefits and costs of counterfactual science as it has developed in economics are discussed. It is concluded that there are good reasons why scientists may not use evidence in theory acceptance, even if an unintended consequence has been to strip economics of valuable empirical sensibilities still evident in natural sciences. (shrink)

This essay examines the role of data and program?code archives in making economic research ?replicable.? Replication of published results is recognized as an essential part of the scientific method. Yet, historically, both the ?demand for? and ?supply of? replicable results in economics has been minimal. ?Respect for the scientific method? is not sufficient to motivate either economists or editors of professional journals to ensure the replicability of published results. We enumerate the costs and benefits of mandatory data and code archives, (...) and argue that the benefits far exceed the costs. Progress has been made since the gloomy assessment of Dewald, Thursby and Anderson some 20 years ago in the American Economic Review, but much remains to be done before empirical economics ceases to be a ?dismal science? when judged by the replicability of its published results. (shrink)

Gul and Pesendorfer (2008) argue that neuroeconomics is evidentially and explanatorily irrelevant to economics, because neuroeconomics and economics ask different questions and utilize different abstractions. They suggest neuroeconomics is only relevant as a source of inspiration for economists. The present paper accepts their basic premise and asks whether the fact that neuroeconomics and economics ask different questions implies that neuroeconomics is irrelevant. The paper argues that Gul and Pesendorfer overlook some important respects in which neuroeconomics is relevant for economics. First, (...) neuroeconomics can improve singular explanations in economics. Second, and more importantly, it improves our understanding of economic phenomena. And finally, it helps us assess the plausibility of our conjectures concerning economic phenomena. It may be true that neuroeconomics will not revolutionize economics (at least in the short run), but it is more than a source of inspiration. (shrink)