Subjectivism in Economics — A Suggested Reorientation

Abstract

The subjective nature of individual intentions, evaluations, and expectations is a major problem in the attempt to explain observable economic behaviour. “Austrian” and other subjectivist economists have always emphasized its importance in contrast to neoclassical economics where it is played down by means of perfect information assumptions. Important as the problem is, it does not necessitate an aprioristic approach as is argued by proponents of the “Austro-American” school. In fact, as this paper points out, such an approach, if it were to be consistent, would render economics a sterile logic (“praxeology”) incapable of explaining any empirically observed economic behaviour.

As a way of coping with the subjectivism problem, a revival of the idea of a psychological foundation for the theory of economic behaviour is therefore suggested. (This idea can already be found in the work of early “Austrian” writers though not as a consistent programmatic vision.) A brief outline is given of how results from psychological research can be utilized in explaining individual economic behaviour without interfering with the subjectivism problem. Some bounds are reached, however, where (objective) novelty is created in the subjective intentions, evaluations, and expectations of the agents. But even here further insights can be gained by adopting the perspective of an evolutionary theory.