To navigate safely in the vast sea of empirical facts

Synthese 192 (11):3557-3575 (2015)
Authors
Erik Angner
Stockholm University
Abstract
This paper examines issues of ontology and methodology in behavioral economics: the attempt to increase the explanatory and predictive power of economic theory by providing it with more psychologically plausible foundations. Of special interest is the epistemological status of neoclassical economic theory within behavioral economics, the runaway success story of contemporary economics. Behavioral economists aspire to replace the fundamental assumptions of orthodox, neoclassical economic theory. Yet, behavioral economists have gone out of their way to praise those very assumptions. Matthew Rabin, for example, writes that behavioral economics “is not only built on the premise that [orthodox] economic methods are great, but also that most mainstream economic assumptions are great.” These apparently contradictory attitudes toward neoclassical theory raises the question of what, exactly, its epistemological status within behavioral economics is. This paper argues that the paradox can be resolved, and the question answered, by thinking of the epistemological status of neoclassical theory within behavioral economics in terms of Max Weber’s ideal types: analytical constructs that are not intended to be descriptively true of anything but which nevertheless can be used for a variety of theoretical purposes. The analysis is consistent with many of the insights from the philosophical literature on models in science and has important implications for the practice of economics—behavioral and neoclassical—as well as for the very nature of rationality
Keywords Ideal types  Rational-choice theory  Microeconomics  Behavioral economics  Max Weber
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DOI 10.1007/s11229-014-0552-9
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References found in this work BETA

The Foundations of Statistics.Leonard J. Savage - 1954 - Wiley Publications in Statistics.
How Models Are Used to Represent Reality.Ronald N. Giere - 2002 - Philosophy of Science 71 (5):742-752.

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