Abstract
We argued in the preceding chapter that explanations furnished by the neoclassical theory of individual choice (CCT) need not be analytically trivial in that they are, in the sense outlined, capable of falsification by means of observational evidence. Nevertheless, it has remained an occupational trait among many economists to resist, at all costs, the empirical refutation of proposed explanatory arguments.’ To this end, one celebrated stratagem has been to claim that neo-classical economic theory assumes the activities of a rational agent. Hence, to take the case of CCT, all instances of consumer choice which at first sight cannot be accounted for by the axioms of this theory are apparently rendered logically innocuous, not involving evidential counterexamples to the theory, by designating them “irrational” behaviour.
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References
Mark Blaug, in his The Methodology of Economics (Cambridge: Cambridge University Press, 1980), esp. Chap. 15, subjects this methodological tendency of contemporary economists to critical scrutiny.
We shall argue below (esp. Chap. 16), against neo-classical orthodoxy, that criteria of rationality can be extended to the assessment of (final) ends, not just means.
For a conventional account of the irrationality of intransitivities see D. Davidson, J.C.C. McKinsey and P. Suppes, “Outline of a Formal Theory of Value”, p. 145. Or see G. Tullock, “The Irrationality of Intransitivity”, Oxford Economic Papers, Vol. 16, 1964, pp. 401–06. 7 .Critical response by economists themselves to this orthodox view can be found in Paul Anand, “Are the Preference Axioms Really Rational?” sec. 3, and R. Sugden, “Why be Consistent? A Critical Analysis of Consistency Requirements in Choice Theory”.
M. Friedman and L. J. Savage, “The Expected Utility Hypothesis and the Measurability of Utility”, Journal of Political Economy, Vol. LX, Dec. 1952, pp. 463–72. In the theory of choice under conditions of risk the consumer attempts to maximize the value of expected utility (the utility of an outcome weighted by its probability) rather than utility simpliciter. We shall focus on this version of choice theory in Chapter 12.
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© 2001 Springer-Verlag Berlin Heidelberg
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Hodgson, B. (2001). Rationality, Values, and Economic Theory. In: Economics as Moral Science. Studies in Economic Ethics and Philosophy. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-04476-6_3
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DOI: https://doi.org/10.1007/978-3-662-04476-6_3
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