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Generalization of results and neoclassical rationality: unresolved controversies of behavioural economics methodology

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Abstract

Many of behavioural economists have succumbed to misconception that economic models must be identified with observable reality. Therefore, behavioural approach enriches the sober neoclassical models with various psychological aspects of decision making in order to describe immediate reality more accurately. However, in contrast to natural sciences, social sciences aim at variance-based phenomena and thus the trade-off between theoretical objectiveness and empirical particularity remains. Behavioural insights are then at risk of being a mere fragmented empirical “evidence” of psychological descriptivism, which in combination with typical value neutrality should keep us vigilant about application in public policy. Secondly, the paper provides a progressive reading of rationality through a neoclassical lens. It is argued that rationality of a typical Bayesian decision-maker is immune to most of behavioural critique. It is shown on various examples that central behavioural concepts like satisficing behaviour or prospect theory cannot fundamentally challenge pillars of the neoclassical framework.

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Notes

  1. The reason why the following argumentation is based on Sen, despite he is not a behavioural economist, is that Sen is one of the few prominent economists who confronts neoclassical concept of rationality theoretically, not empirically. Sen's contribution therefore represent a unique theoretical base and inspiration for behavioural approach up to this time.

  2. Compare with Sen (1993) who reached similar conclusion but out of neoclassical paradigm.

  3. See argumentation on satisficing behaviour in the previous part of the paper.

  4. Naturally, assumptions can never be realistic; see e.g. Kanazawa (1998).

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  1. Masaryk Institute of Advanced Studies, Czech Technical University in Prague, Kolejní 2637/2a, 160 00, Prague 6, Czech Republic

    Robin Maialeh

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Maialeh, R. Generalization of results and neoclassical rationality: unresolved controversies of behavioural economics methodology. Qual Quant 53, 1743–1761 (2019). https://doi.org/10.1007/s11135-019-00837-1

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