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May 03, 2005



Or perhaps it consists of one idea, to wit seeing whether a small number of notions - such as equilibrium, optimization... - can yield enough insight into social affairs to allow a usefully accurate prediction of the consequences of changes in social arrangements. Looked at like that, the possibility is open that Economics, or some subset of it such as economic modelling, will fail; its predictions will be so poor that it makes sense to abandon the effort. Some might suspect that economic modelling has reached that state: a failed intellectual adventure?


well, one could certainly play the rhetorical game of rationalising all human behaviour as rational choice under constraints, and this can be a fruitful investigative strategy, but I think it rather stretches credulity to believe the world is actually like that.

The rational choice model has proved very powerful , but there is just too much good work around on the effects of social norms, 'hot' and 'cold' psychological mechanisms (like cognitive dissonance) and other awkward 'non-rational' explanatory mechanisms to say that all is rational.

An additional problem is one of actually defining what are rational beliefs and preferences. What does it mean for prefences to be formed rationally (as opposed to just being internally consistent)? For beliefs to be formed rationally?

Lots of murky waters there.


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