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Suckers, Punters, Pathbreakers: When Homo Oeconomicus Is Selflessly Selfish (Essay)

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eBook details

  • Title: Suckers, Punters, Pathbreakers: When Homo Oeconomicus Is Selflessly Selfish (Essay)
  • Author : The Cato Journal
  • Release Date : January 22, 2011
  • Genre: Politics & Current Events,Books,
  • Pages : * pages
  • Size : 251 KB

Description

Rational choice presupposes that people do what they like better than any available alternative, If, however, we mistrust what they declare to like or what psychology is supposed to tell us about it (a pardonable enough mistrust), we can only infer what they like from observing what they do. We must be content with revealed preference. The theory of choice is locked into the tautology of "they do what they like because they like what they do," and requiring their preferences to be orderly and consistent is of little practical help. In its elegance, modern choice theory, as represented in neoclassical economics, is too smooth and slippery to be very useful. The resulting frustration seems to me to have two consequences. One is a more or less unconscious backsliding into old-fashioned utility theory. We know more than revealed preference tells us; we know what people like, therefore we can predict their choices (more or less) before knowing what they chose. They like "utility," the motive for choice. More formally, the things a person likes are arguments in his "utility function" that he seek to maximize if he is rational. Further tempting detours on this road may lead to suppositions about a stable relation between "utility" and income (the "diminishing marginal utility of money") and about the addition and subtraction of different people's "utilities," both suppositions permitting irresistibly attractive conclusions about "maximizing aggregate social utility" and others of the same family.


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