Sunday, May 6, 2018

Alexander Beunder — Behavioral Economics: Still Too Devoted To Homo Economicus?

I think Alexander Beunder attacks the wrong target — rationality. The foundational assumption of homo economics is methodological individualism based on a hidden assumption of ontological individualism, which is characteristic of many forms of liberalism as a philosophical position. The major opposing view is that of Aristotle, that humans are social animals. Thus, the key conceptual distinction is between homo economicus and homo socialis.

The basic assumption of homo socialis is that humans are embedded in social system. The unit of society is not the individual, but rather the family. Individual choice is not free of the influence of culture and institutions.

Homo economicus assumes a "standard individual," that is. a degree of homogeneity such that "rational" individuals can be presumed to similar in their economic preferences as revealed by their choices in markets. This assumption greatly limits the scope to a narrow range of human decision-making and a limited scale, that is, to the micro.

Conversely, homo socialis is influenced by many factors that are influenced by the position of the individual in the social system as whole and in the various subsystems that constitute nodes in the network of relationships.

This is not to say that assuming homo economicus is "wrong." What is illogical is extending the conclusion that result from applying the assumption beyond the limitations of those assumptions.

Homo economicus is a simplification than may lead to interesting and useful insights. However it is taken as necessary methodological approach it is likely to lead astray in wandering beyond the scope and scale of the assumptions.

Homs socialis also suggests that the macro level may not be determined by the micro, as the methodological approach of microfoundations assumes. Rather, the micro may be importantly affected by the macro and meso levels of a social system and its interrelated subsystems.

Rational choice theory is fine — as far as it goes. That may not be very far and to extend it has it has been could be leading to the presumption of knowledge instead of knowledge. And it is entirely possible for behavioral economists to accept the conventional frame while tweaking it from within.

The Minskys
Behavioral Economics: Still Too Devoted To Homo Economicus?
Alexander Beunder, independent journalist and economics tutor at the University of Amsterdam

1 comment:

Anonymous said...

I wonder who can define what an ‘individual’ is? What consciousness is? How it comes about?

Our body is part of the planet and subject to the same physical laws.

Everyone cries and laughs, gets angry and enjoys the same things.

People arrive on this earth and get conditioned by the same ‘mind’ of the culture and civilisation they are born into, and follow the formulas of this world – get caught up in the events and ideologies. Hypnotised. Like Brer Rabbit and the tar baby ....

And yet we all are individuals. Unique! The universes may come and go – you are not happening again, at least in the form you are in now; and for all you know – never again. Unique!

Now is the only opportunity.

Billions and billions come and gone, with something else in common. No one understood why? Or who or what they really were? What they were meant to do? Walk down the aisle of the terminally ill and look deeply into their eyes. You will see truth there like you see in the eyes of a little child. No Causes to fight. No relationships to squabble over. Market forgotten ....

But in human history .... there has always been knowledge of the Self. Which swept all other personal ‘selves’ (assumptions of self – homo socialis, homo economicus etc.) aside. Which anchored the human being in their existence. Then this sovereign took command of the personality life.

‘The palette is not this planet earth and its natural or human events. The palette is the heart ...... ‘