While it is well known that Carl Menger and Stanley Jevons adopted very different views on the role of mathematics in economics1, it is usually admitted that their respective views on the theory of value were relatively close. Indeed, both strongly objected to the classical theory of value which is based on objective costs of production, whether these be labour or capital costs. Moreover, each elaborated, roughly at the same time, an alternative economic theory based on a comparison between the (...) various degrees to which needs are fulfilled thanks to goods whose effect tends progressively to diminish with the fulfilment of these needs. Furthermore, each managed to ground a theory of economic exchange on the fact that people are rational enough to choose which of two goods will provide them with the greatest benefit. In the face of such similarities, it is tempting to conclude that, while using very different terminologies, these two economists developed quite similar analyses whose key element is a subjective theory of value which was opposed to the objective theory of the classical economists. It is true that specialists of Austrian economics have often underscored the originality of Menger's position and its differences with those of the two other fathers of the so-called marginalist revolution, but while they have seriously questioned the.. (shrink)
It would be very difficult to discuss the question concerning the hypothesis of omniscience in microeconomics without relating this hypothesis to the more fundamental hypothesis of rationality (usually referred to as rationality principle or postulate) which is at the base of the very idea of an economic theory and even social sciences. Indeed omniscience is a quality which was typically attributed to homo oeconomicus whose essential characteristic is to be perfectly "rational". This association between omniscience and rationality goes back to (...) the marginalist revolution which progressively brought economists to model economic agents as rational calculators who make each decision by systematically maximizing their utility through the standard application of more or less sophisticated mathematical methods. But since the very idea of such a maximization has no meaning if all relevant parameters and variables are not carefully taken into account, it became relatively common to associate omniscience (the required knowledge of such parameters and variables) and rationality (the disposition to make decisions which tend to maximize the degree of success in reaching a goal). (shrink)
Ronald Coase is usually considered anything but a methodologist. Thus, it is not surprising that, in the introduction to "How Should Economists Choose?", which is the only paper Coase wrote on a methodological topic, he readily confessed his relative ignorance of philosophy of science, candidly observing that "Words like epistemology do not come tripping from my tongue" (HSEC, 6). However, given the importance of this Nobel Prize winner's contribution to the renewal of theoretical thinking in economics, everyone should admit that (...) his infrequent reflections on methodology, however crude they might look to methodologists, undoubtedly merit close consideration. Whatever methodological clarification these reflections might procure, it is surely worthwhile briefly to analyze them, with the hope of understanding a little better some dimensions of Ronald Coase's way of thinking and, more specifically, of emphasizing some implications of the close relationship between his methodological views and his radical conception of the market. With this in mind, I will first illustrate how far these methodological views seem, at first glance, to be dominated by a fundamental commitment to a straightforward realism; I will then show that they are instead subordinated, in a more complex way, to what I have just called Coase's radical conception of the market and, in conclusion, I will point out some questions raised by this situation. (shrink)
There is a general consensus among economists that the notion of rationality plays a central role in microeconomics. It is important to note, however, that they are far from agreement on the meaning of this notion. It would be difficult to lay out a set of welldefined concepts of rationality, but it might be useful to distinguish three quite different approaches around which economists tend to situate themselves when characterising this notion. I prefer to refer to three "approaches" rather than (...) to three concepts, as I did in the title of the paper, because the concepts of rationality which correspond to these approaches cannot be isolated easily. Indeed, their unsettled definitions often overlap, and even when they purport to be related to opposing approaches, they are more or less interrelated. In any case, I propose to refer to these three approaches as "rationality-purposefulness", "rationality-efficiency", and "rationality-consistency". According to rationalitypurposefulness, an action is rational if and only if it is oriented towards the satisfaction of the agent's purpose, as most Austrian economists would tend to say. According to rationality-efficiency, an action is rational if and only if it actually maximises a positively valued magnitude such as utility or profit, as many neoclassical economists would say, especially when adopting a traditional approach. By contrast, rationality-consistency states that choices are rational if and only if it they are consistent as a set, which implies in particular that they are transitive. (shrink)
It is frequently repeated that the rationality principle is the fundamental principle of economics and it is so much so that the same principle is equivalently designated as the «economic principle»1. However, it is often the doom of fundamental principles that they are so intimately associated with the science itself that those who practice this science rarely take notice of their presence and of their role. Consequently, it is not surprising not to find any entry for "rationality" or for "rationality (...) principle" in virtually any treaties on economy. If rational behaviour is the object of economics like living organism is the object of biology, specific references could hardly be expected in either of these sciences to what is nothing but the affirmation of the very existence of their subject matter. (shrink)
There is no doubt that Carl Menger and Ludwig von Mises can be considered as two of the most representative and influential members of the Austrian school of economics. However, given the fact that this school is well known for being a methodological school, it might be surprizing to note how far these two prominent economists apparently stand on methodological questions. While Menger frequently insisted that "no essential differences between the ethical and the natural sciences exists, but at most only (...) one of degree"1, Mises emphasizes the alleged gulf between social and natural sciences to the point of adopting what he called a "methodological dualism". As a consequence of this dualism, Mises did not hesitate when it comes to the analysis of human action to refer to laws "derived a priori" that "permit of no exception" because they belong to "an aprioristic and universally valid theory" 2. Such an uncompromising apriorism was so contrary to the empiricist mood of.. (shrink)
This article proposes an interpretation of the chapters of the Nicomachean Ethics concerning exchange and friendship. Rejecting approaches where Aristotleanticipates modern labour or need-based theories of value, the article claims that those notions of labour and need are required for a satisfactory interpretation of the most obscure passages of Book V Finally, Aristotle’s texts on exchange and friendship are related in such a way that the latter, since it is free from any political considerations, allows us to better understand the (...) philosopher’s view on exchange. (shrink)
This paper aims to show that, throughout the history of economics, an increasingly wide gap has developed between the rationality principle, usually considered as the fundamental principle of economic science, and the notion of rationality that progressively became a standard component of any model of modern microeconomics. This claim is illustrated through an analysis of the various ways in which ?rationality? was understood from classical economics to contemporary debates where axioms such as transitivity and independence, which contemporary economists associate with (...) the notion of rationality, are subjected to a number of devastating critiques. Another claim of this paper is that, while these critiques put the modern notion of rationality seriously into question, they leave the rationality principle undamaged since they were typically made in the name of that principle. It concludes with an argument emphasising the underestimated importance of the rationality principle for economics. (shrink)
Popper's short essay about the rationality principle has been the target of many criticisms which have raised serious doubts about its consistency. How could the well-known promoter of falsificationism suggest that we not reject a principle that he himself describes as false? Nonetheless, the essay can be read in a way that makes it appear much more consistent. Better sense can be made of Popper's own examples (the flustered driver, the pedestrian, etc.), by taking seriously his view that the rationality (...) principle might be "approximately true" and falsified only in very rare cases, while also giving proper attention to his four rather elliptical arguments. (shrink)
