Economics Research Programme Research Articles

Coping with irrationality in orthodox economic theory

Purpose The purpose of this paper is to critically assess the assumptions regarding human behaviour in orthodox neoclassical economic theory. The orthodox neoclassical economic theory prescribes rational models of human behaviour, but the strictness of the criteria, developed to promote theoretical consistency and conceptual elegance, commonly fails to fully accommodate all of the empirical material. To save the core of the orthodox neoclassical economic theory research program and to neutralize and mute criticism regarding its predictive failures, its proponents engage in expedient theorizing, the expansion of the initial theoretical framework by adding ad hoc hypotheses and/or including additional explanatory factors; in many cases, dismissed as “unnecessary complications” (as in the case of morality and ethics – two conspicuously “non-economic” concepts) in the initial formulation of theoretical propositions of the core theories. Design/methodology/approach The paper reviews a body of heterogeneous literature to introduce and examine the use of expedient theorizing in economic thinking. Findings In the present case, the hyperrationalist axiom regarding the efficacy of calculative practices to maximize individual utility is accompanied by moralist concerns (and, by implication, corrective and disciplinary action) regarding the failure to adhere to such prescriptions. Expedient theorizing, thus, becomes a key mechanism in the political economy of truth that currently grants orthodox neoclassical economic theory significant authority to inform policy-making in substantial ways and considerable prestige. Originality/value The orthodox neoclassical economic theory constitutes the blueprint for policy-making and institutional change, and, therefore, the key economic ideas being the constitutive elements of the contemporary economy demand scholarly attention. The paper thus points at theoretical inconsistencies in the orthodox neoclassical economic theory and introduces the concept of expedient theorizing as its remedy.

Meeting blindly… Is Austrian economics useful for dynamic capabilities theory?

Abstract This paper relates competition studies and views on competition policy within Austrian economics to the dynamic capabilities theory. The idea of interacting research programs in economics is used to provide the frame for reflecting on particular issues of competition, on the one hand, and (1) ignorance, (2) knowledge (including tacit knowledge), (3) rationality, (4) equilibrium, (5) innovation, (6) entrepreneurship, and (7) monopoly, on the other hand. Unlike the majority of previous studies, these issues are discussed here mainly through the lens of new institutional economics. Williamson's three-level scheme is used to explain opportunities and constraints for mutually enriching exchange of concepts between different but close approaches in economic research. This paper shows that there are important interconnections and complementarities despite significant differences in objects of study and weak mutual flows of ideas and concepts.

Beyond the Realist Program of Mainstream Economic Theory: Phenomenology in Economics

Since it evolved into its current form, mainstream economics relies strongly on mathematical tools and methods. Although using ideal types (as Max Weber used the term) is not the only way of exploring and studying the real world, economic theory has not paid considerable attention to those phenomenological methods that generated a renewal of sociology, mainly in the United States, decades ago. In this paper, some specialties of phenomenology as a method of social sciences are reviewed that make it suitable for being the foundation of a research program in economics to complement results we already have. In Section 1 a general introduction is given in which the mathematical approach of economics and its shortcomings are reviewed. The main emphasis is on the evident realization that 'homo oeconomicus' cannot help us to understand real economic agents' behavior and their motives. In Section 2 phenomenology is suggested as a general end comprehensive way of studying and understanding socio-economic reality. Some of Husserl's main ideas are surveyed that are important from the point of view of phenomenological sociology, that is, our guide in questioning economic life. The main concept of Section 3 is 'Life World'. Husserl described our life world as the unquestioned basis our everyday life and knowledge. Following the way that phenomenological sociology has already walked we get to the general strategy of people by which they make real world surrounding them understandable. Types as the fundamental navigation instrument stand in the center of our attention in Section 4. All the elements and agents of our life world are directed under types by which people can make anticipations on the behavior of their fellow-men. In Section 5 we get to experimental economics, referring to the famous and well-known experiments of Vernon L. Smith on market bubbles. Economists know that market bubbles disappear after 2 or 3 experiments done with the same agents - by that time rules and patterns of other players' actions get known to all the agents participating in the game. Phenomenology can offer new aspects to consider: as agents get into a new milieu that laboratory makes they have to abandon the validity of their types of cognition. As more and more turns are taken in the game, these types regain their validity and they can become available when it comes to direct actions in the laboratory again.

UM ENSAIO SOBRE OS PROGRAMAS DE PESQUISA LAKATOSIANOS E A METODOLOGIA DA ECONOMIA NEOCLÁSSICA: CONTRIBUIÇÕES E CRÍTICAS

A obra de Imre Lakatos procurou proporcionar um refinamento à abordagem falsificacionista popperiana, que o inspirou, mediante a incorporação de conceitos desenvolvidos por Thomas Kuhn, mas sem negar algumas das hipóteses clássicas do falsificacionismo, como os critérios demarcacionistas e a ênfase na investigação e nos testes empíricos. As principais ideias do autor consistem na noção de programa de pesquisa como uma estrutura dotada de um núcleo irredutível de hipóteses básicas das teorias levantadas, protegido por um cinturão protetor de hipóteses auxiliares e por heurísticas positivas e negativas que guiam o processo de investigação científica. O pensamento de Lakatos foi discutido na metodologia da economia por parecer defender boa parte do trabalho teórico e empírico dessa profissão. Contudo, apesar de um entusiasmo inicial, a aplicação dos programas de pesquisa lakatosianos na ciência econômica passaram a ser criticados pela bibliografia em geral a partir dos anos 1980. Parte dessas críticas dirigiu-se diretamente a Lakatos; outra se dirigiu ao pensamento falsificacionista; e outras atacaram os próprios critérios demarcacionistas da metodologia científica. O presente estudo busca realizar uma revisão bibliográfica sobre os principais pontos destacados nesse debate.

A probabilistic ghost in the experimental machine

This paper focuses on the opposition between two contemporary research programs in economics: behavioral economics (BE) and experimental market economics (EME). Our claim is that the arguments of this opposition can be clarified through the lens of another opposition in the philosophy of probability and in probability theory, between Bayesianism and frequentism. We show how this probabilistic opposition has indirectly shaped a controversy in psychology that opposes two research programs – Heuristics and Biases and Ecological Rationality – which play respective roles in the foundations of individual rationality in BE and EME. To understand these theoretical interrelationships, we investigate the 1996 controversy between Kahneman, Tversky, and Gigerenzer. Those psychologists held different views on how probabilistic representations influence the context-dependency of rationality. This provides a rationale to suggest that a probabilistic ghost may be haunting the experimental machine in economics, and explains how and why the oppositions between BE and EME are structured around the interplay between the norms of rationality and the context in which rationality is exercised.

From alienation to capability deprivation: Reconstructing a sociological concept

Among sociology’s normative narratives, alienation figures as one of the most captivating, influential and contested. Anchored in Hegel and Marx, the idea of alienation generated valuable theoretical and empirical tools for explanation as well as offering a normative critique of modernity. However, I argue that the concept of alienation needs to be reconstructed, suggesting that it can be renewed via Amartya Sen’s idea of capability deprivation. The article seeks to accomplish the dual task of showing what capability deprivation can replace in the standard accounts of alienation and what can be productively retained. It reconstructs alienation’s normative core, discussing it within the context of Sen’s and Nussbaum’s versions of capabilities. Having already inaugurated a novel research program in economics and political philosophy, the article proposes that the capabilities approach can contribute to improving sociological reasoning on pressing social problems and can serve as an explanatory partner to sociology’s scientific tools. I argue, therefore, that the explanatory power and normative appeal of the concept of alienation has waned considerably and that whatever correct intuitions about human sociality supported it and gave it its impetus for several decades no longer continue do so.

Creating Quality Undergraduate Research Programs in Economics: How, When, Where (And Why)

While undergraduate research (UR) has been growing across the academy for decades, economics has been relatively slow to adopt it as pedagogy. We argue for the development of comprehensive UR programs that not only require capstone research experiences, but integrate foundational research skills throughout the curriculum. Fundamentally, there is a hierarchy whereby students learn basic research skills in lower-level courses, develop ability integrating content knowledge and research skills in upper-levels, and produce independent or collaborative research projects in later semesters. To facilitate such improvements, we make six recommendations for departments to consider when building or strengthening their UR environment.

Assessing the preferences of plant breeders for utilization, benefit sharing and priorization of conservation of wild rice relatives in Sri Lanka

The purpose of this study was to assess empirically the preferences of plant breeders for utilization, benefit sharing and conservation of the genetic resources of Wild Rice Relatives (WRR) in Sri Lanka. The “Choice Experiment Models” (CEM), i.e. stated preference method uses to obtain Option Values for non-market goods by exploring the individuals’ stated behavior in a hypothetical setting, were employed with the primary data collected from a panel of reputed plant breeders (n = 30) work at the administrative capacity in various reputed academic and research institutions in Sri Lanka. The data collection process was characterized by a face-to-face interview with each breeder during March to May 2009, which was supported by a structured questionnaire designed specifically for the CEM. The outcome of analysis shows that, from the breeders’ point of view, the benefit for an individual, in general, for conserving WRR for the future is nearly Rs. 10. Given the facts that there are not much significant direct uses of WRR revealed to date; there exists yet unrevealed benefits to the society (e.g. use of favorable genes in WRR to improve the quality of cultivated rice varieties), and the outcome of previous studies divulge that the gene sequence of different WRR populations belong to different geographical area varies significantly, the option value derived through this analysis implies that conservation of WRR can be done in-situ effectively, if people reside close to the areas where they are growing predominately would like to contribute more than the value that the scientists expected. The results highlight the importance of carrying out extensive economic research program focusing of the people adjacent to the areas where WRR growing to estimate such values as so would facilitate setting up alternative institutional arrangements (i.e. public / private) work for effective conservation of CWR, in general, and WRR, in particular.

Three ways of linking laboratory endeavours to the realm of policies

This paper elucidates experimental economists' recent attempts to link their laboratory endeavours to the realm of policies. To be concrete, by concentrating on some of the well-known policy-related works conducted by three thriving research programs in experimental economics, this paper demonstrates what kinds of perspectives contemporary experimental economists take towards a foundational issue in economics, rationality. The disunity this paper finds in experimental economists' practices is interpreted as a source of strength, rather than weakness, for experimental economics as a whole.

Creating Quality Undergraduate Research Programs in Economics: How, When, Where (and Why)

For decades, economics has been relatively slow to adopt it as pedagogy. We argue for the development of comprehensive UR programs that not only require capstone research experiences, but integrate the development of foundational research skills throughout the curriculum. Fundamentally, there is a hierarchy whereby students learn basic research skills in lower-level courses, develop ability integrating content knowledge and research skills in upper-levels, and produce independent or collaborative research projects in later semesters. Successful UR programs depend on understanding this developmental model, integrating it into the curriculum, and taking advantage of resources to support it. To facilitate such improvements, we make six recommendations for departments to consider when building or strengthening their UR environment.

Behavioural and experimental economics: are they really transforming economics?

Behavioural and experimental economics are part of an increasingly pluralistic mainstream economics, sharing with other recently established research programmes the revision of fundamental assumptions of the previously dominant neoclassical economics research programme. The recent proliferation and consolidation of these new approaches creates the possibility for the emergence of a new orthodoxy of economics, i.e. a new general research programme capable of replacing neoclassicism. The goal of this paper is to investigate the potential contribution of behavioural and experimental economics to help build a general research programme capable of supplanting neoclassical economics and thereby transforming economics. To this end, it focuses on two influential applied fields of behavioural and experimental economics--choice architecture and design economics. Copyright The Author 2011. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Getting past “rational man/emotional woman”: comments on research programs in happiness economics and interpersonal relations

Orthodox neoclassical economics portrays reason as far more important than emotion, autonomy as more characteristic of economic life than social connection, and, more generally, things culturally and cognitively associated with masculinity as more central than things associated with femininity. Research from contemporary neuroscience suggests that such biases are related to certain automatic processes in the brain, and feminist scholarship suggests ways of getting beyond them. The “happiness” and “interpersonal relations” economics research programs have made substantial progress in overcoming a number of these biases, bringing into consideration by economists a wide range of phenomena which were previously neglected. Analysis from a feminist economics perspective suggests several fronts on which research could most profitably continue.

Kahneman and Tversky and the making of behavioral economics

In the 1950s and 1960s, mathematical psychology and behavioral decision research arose in the unique context of the University of Michigan. These two psychological programs gave rise to Daniel Kahneman and Amos Tversky's famous research of the 1970s. In the early 1980s, Kahneman and Tversky's research was incorporated into financial economics, resulting in the new field of behavioral finance. In the 1990s, behavioral finance broadened its scope and became behavioral economics, a dominant new research program in economics. Despite its explorations in various directions and its claim of Herbert Simon's heritage in the 2000s, behavioral economics remains firmly attached to the framework as set out by Kahneman and Tversky.

La neuroéconomie dans l’agenda de l’économie comportementale

Neuroeconomics in the Behavioral Economics Agendum. The behavioral economics was successful and this success was increasing firstly due to the development of the experiments in economics. The pursuit of this success appears to have a lot to be bet on the perspectives opened by neuroeconomics, which would thus be nothing else than a natural continuation of the behavioral economics research program. This paper shows that it is not at all about a simple continuation but about a real methodological choice based on a strong break. This question can be perfectly summarized by the stated principle by Camerer, Loewenstein and Prelec : asking the brain, not the person. As a consequence, for the economist, observing the brain activity would thus be more relevant to understand the human being behavior than to focus directly on it.

Institutions: Top Down or Bottom Up?

A large research program in economics has established a persuasive link between institutions and economic development. But what does this imply for development policymaking? Can a political leader or aid agency seeking to promote development readily change institutions? This article starts off wildly general, and then moves to specifics.

A New Dataset on Infant Mortality Rates, 1816—2002

Systematic data on annual infant mortality rates are of use to a variety of social science research programs in demography, economics, sociology, and political science. Infant mortality rates may be used both as a proxy measure for economic development, in lieu of energy consumption or GDP-per-capita measures, and as an indicator of the extent to which governments provide for the economic and social welfare of their citizens. Until recently, data were available for only a limited number of countries based on regional or country-level studies and time periods for years after 1950. Here, the authors introduce a new dataset reporting annual infant mortality rates for all states in the world, based on the Correlates of War state system list, between 1816 and 2002. They discuss past research programs using infant mortality rates in conflict studies and describe the dataset by exploring its geographic and temporal coverage. Next, they explain some of the limitations of the dataset as well as issues associated with the data themselves. Finally, they suggest some research areas that might benefit from the use of this dataset. This new dataset is the most comprehensive source on infant mortality rates currently available to social science researchers.

Analyzing Cost-Efficient Production Behavior Under Economies of Scope: A Nonparametric Methodology

In designing a production model for firms that generate multiple outputs, we take as a starting point that such multioutput production refers to economies of scope, which in turn originate from joint input use and input externalities. We provide a nonparametric characterization of cost-efficient behavior under these conditions, and subsequently institute necessary and sufficient conditions for data consistency with such efficient behavior that only include observed firm demand and supply data. We illustrate our methodology by examining the cost efficiency of research programs in economics and business management faculties of Dutch universities. This application shows that the proposed methodology may entail robust conclusions regarding cost-efficiency differences between universities within specific specialization areas, even when using shadow prices to evaluate the different inputs.

Theorizing About Violence

The director of the Economic and Social Research Council Violence Research Program (VRP) in the United Kingdom discusses and debates the impacts of the program in the context of contemporary ideas about violence and current U.K. policy and practice in the field. The projects in the program included 2 historical studies and 18 contemporary studies of violence in the home, schools, prisons, neighborhoods, leisure establishments, massage parlors, and on the street. For example, studies focusing on the nighttime economy in U.K. cities, on paramilitary punishment beatings in Northern Ireland, and on violence experienced and perpetrated by girls are discussed here. Five projects addressed gendered violence, and three addressed domestic violence specifically. Lessons from the VRP are drawn out in this article in a personal account. These lessons include the fact that violence is not hidden, that the meanings of violence are gendered, and that people's accounts of violence matter.

Putting a Stop to Domestic Violence in the United Kingdom

In this article, the director of Women's Aid, the national domestic violence charity in England, reflects on the role of Women's Aid and activism in the development of responses to domestic abuse and in the Economic and Social Research Council Violence Research Program. The article also reflects on the relationship between researchers and domestic violence activist services.

Contingent valuation controversies: Philosophic debates about economic theory

Contingent valuation (CV) is a survey-based method designed for the valuation of public goods primarily developed by neo-classical economists. CV is controversial because it involves asking individuals directly about monetary valuation. Especially this is controversial for valuation of the mere existence of an amenity. From an evaluation of several CV controversies it is concluded that these primarily reflect an underlying debate about economic theory. Some economists, leaning towards a positivist view on science, conclude that CV is beyond the economics research programme. Even some critics of neo-classical economics dismiss CV on a positivist interpretation of economic theory. It is concluded that CV seems to conform to the theoretical core of economics, given a “non-positivist” interpretation of these axioms and assumptions.