Academic journal article The Journal of Philosophical Economics

Behavioural Controversy concerning Homo Economicus: A Humean Perspective

Academic journal article The Journal of Philosophical Economics

Behavioural Controversy concerning Homo Economicus: A Humean Perspective

Article excerpt

Introduction

Behavioural economics (BE), the most recent sub-discipline, has emerged over the past half century or soas a sort of protest against some decision-making characteristics of Homo Economicus(HE) (Anger & Loewenstein 2012; Altman 2006). The initial objectives of this protest were to add more realism in the economists' decision-making model: 'At the core of behavioural economics is the conviction that increasing the realism of the psychological underpinnings of economic analysis will improve economics on its own terms-generating theoretical insights, making better predictions of field phenomena and suggesting better policy.' (Camerer & Loewenstein 2004) The current developments in the area, however, have far exceeded those initial intentions. Modern behaviouralists directly challenge the methodological soundness of orthodox economics and question the empirical accuracy of its theories. These behavioural claims have been taken seriously by both academic and public administrators, which is evidenced by the fact that world renowned universities- like Harvard, Yale and UCLA- offer graduate degrees on the subject and behavioural experts are being invited in increasing numbers by both national and supra-national public agencies to make policy analysis and recommendations (Altman 2011; Datta & Mullainathan 2012).

These academic and policy ramifications offer a good ground to evaluate the behavioural criticisms against Homo Economicus. For, the basic economic laws owe their rationality and empirical validity from this concept. This statement becomes abundantly clear if one looks closely into Robbins' (1932) definition: Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. Robbins and all other important authors, including Marshall, underline HE's decision-making role in undertaking economic activities and by that forms the foundation of the laws of demand and supply. Economists are well aware that all laws and principles developed in economics have been directly or indirectly guided by theories of demand and supply. Accordingly, the conceptual and empirical implications of the whole body of economic laws become weak if the conceptualisation of Homo Economicusis found faulty.

Economic theories in the both sides of the isle, it may be mentioned, are growing fast in terms of both sophistication and volume -a scenario, which suggests that the debate over the nature and role of HE in the economic theorisation has reached an impasse. Thus, the prospect of adding fresh ideas to the discussion through conventional approaches is very slim. Accordingly, inputting fresh ideas to the debate would require, it may argued, examining the controversy from somewhat different analytical perspectives, perhaps crossing the theoretical boundary of economics. For, it is quite possible that behavioural and mainstream economists foster differing 'perceptions' of the term HE and accordingly argue from angles and contexts.

This point seems to be supported by the following quote from Hume, '... the faculties of the mind are supposed to be naturally alike in every individual; otherwise nothing could be more fruitless than to reason or dispute together; it were impossible, if men affix the same ideas to their terms, that they could so long form different opinions of the same subject; especially when they communicate their views, and each party turn themselves on all sides, in search of arguments which may give them the victory over their antagonists' (Hume 1748: 90).

An exploratory attempt is made in this paper to assess the HE controversy from the perspective of Hume's empiricist theory of human knowledge. Organised in six sections, the paper proceeds as follows: The next section discusses the primary concern of this article- meaning and origin of Homo Economicus. Section III briefly reviews the behavioural HE criticisms. Hume's theory of human knowledge, the analytical tool of this paper, is summarised in Section IV. …

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