Economic Marriage Research Articles

Economic Theory: Structural Abstraction or Behavioral Reduction

In physics, optimization is an organizing principle for natural phenomena. Entropy tends toward its maximum and marbles roll toward minimum potential energy, all without intent or purpose. Injection of this principle into economics initially followed the physicists' organizing perspective, and helped develop the powerful insights of the abstract partial and general equilibrium theory. However, humans and their institutions being their unit of analysis, it was not long before optimization in economics acquired a behavioral spin. Photons may travel along paths that minimize their travel time without intent or purpose; but economists were too human to think in a similar vein of the people buying ice cream or cars. Once optimization was posited as a behavioral principle of individual human beings, it was easy for cognitive sciences to show that it lacked descriptive validity; however, individual behavior is more complex and less predictable. The aggregate characterizations of Walrasian abstraction could not be derived starting from such complex micro-level behavior. If psychology and equilibrium theory were to be reduced into a single science, something had to give. Given the cognitive limitations humans share with all organisms, validity and relevance of the conclusions of equilibrium theory became suspect. The marriage of economics and computers led to a serendipitous discovery: there is no contradiction between suboptimal behavior of individuals and aggregate-level outcomes derivable from assuming individual optimization. Science does not require integration of adjacent disciplines into a single logical structure. As the early twentieth century unity of science movement discovered, if we insist on reducing all sciences to a single integrated structure, we may have no science at all. In Herbert Simon's words (1996, p. 16): This skyhook-skyscraper construction of science from the roof down to the yet unconstructed foundations was possible because the behavior of the system at each level depended on only a very approximate, simplified, abstracted characterization of the system at the level next beneath. This is lucky; else the safety of bridges and airplanes might depend on the correctness of the 'Eightfold Way' of looking at elementary particles. This is the story of how we found that economists can have their cake while psychologists eat it too, including some antecedents and consequences of the discovery.

Economic Theory: Structural Abstraction or Behavioral Reduction?

In physics, optimization is an organizing principle for natural phenomena. Entropy tends toward its maximum and marbles roll toward minimum potential energy, all without intent or purpose. Injection of this principle into economics initially followed the physicists’ organizing perspective and helped develop the powerful insights of the abstract equilibrium theory. However, humans and their institutions being the unit of analysis, economists could not long resist the temptation to give optimization a behavioral spin. Photons may travel along paths that minimize their travel time without intention or purpose; but economists were all too human to think in a similar vein of the people buying ice cream or cars. Once optimization was posited as a behavioral principle of individual human beings, it was easy for cognitive sciences to show that it lacked descriptive validity. Individual behavior is more complex and less predictable. The aggregate characterizations of Walrasian abstraction could not be derived starting from such complex micro-level behavior. If psychology and equilibrium theory were to be reduced into a single science, something had to give. Given the cognitive limitations humans share with all organisms, validity and relevance of the conclusions of equilibrium theory became suspect. The marriage of economics and computers led to a serendipitous discovery: there is no internal contradiction in suboptimal behavior of individuals

Infectious Diseases, Public Policy, and the Marriage of Economics and Epidemiology

The assumption of rational choice helps in understanding how people respond to infectious diseases. People maximize their well- being by choosing levels of prevention and therapy subject to the constraints faced. Objectives and constraints are numerous, necessitating tradeoffs. For example, this approach predicts how people respond to changes in the risk of infection and to the availability of diagnostic tests. The combination of individual rationality with epidemiological models of infection dynamics predicts whether individual choices about infectious disease prevention and therapies produce the best possible social outcomes. If not, individuals’ choices generate rationales for government interventions to influence the levels of preventive and therapeutic activities. Optimal policy usually means accepting endemic infection, but at a level lowered by a coordinated package of interventions. Economics combined with epidemiology provides much qualitative guidance on the design of such packages, including immunization programs.