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Synthese

, Volume 192, Issue 11, pp 3557–3575 | Cite as

“To navigate safely in the vast sea of empirical facts”

Ontology and methodology in behavioral economics
  • Erik Angner
Article

Abstract

This paper examines issues of ontology and methodology in behavioral economics: the attempt to increase the explanatory and predictive power of economic theory by providing it with more psychologically plausible foundations. Of special interest is the epistemological status of neoclassical economic theory within behavioral economics, the runaway success story of contemporary economics. Behavioral economists aspire to replace the fundamental assumptions of orthodox, neoclassical economic theory. Yet, behavioral economists have gone out of their way to praise those very assumptions. Matthew Rabin, for example, writes that behavioral economics “is not only built on the premise that [orthodox] economic methods are great, but also that most mainstream economic assumptions are great.” These apparently contradictory attitudes toward neoclassical theory raises the question of what, exactly, its epistemological status within behavioral economics is. This paper argues that the paradox can be resolved, and the question answered, by thinking of the epistemological status of neoclassical theory within behavioral economics in terms of Max Weber’s ideal types: analytical constructs that are not intended to be descriptively true of anything but which nevertheless can be used for a variety of theoretical purposes. The analysis is consistent with many of the insights from the philosophical literature on models in science and has important implications for the practice of economics—behavioral and neoclassical—as well as for the very nature of rationality.

Keywords

Ideal types Rational-choice theory Microeconomics Behavioral economics Max Weber 

Notes

Acknowledgments

I am grateful to Colin Bird, Jeroen Van Bouwel, Floris Heukelom, George Loewenstein, and two anonymous referees for constructive comments on earlier drafts. Errors remain my own.

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Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  1. 1.Department of Philosophy, Department of Economics, and School of Policy, Government, and International AffairsGeorge Mason UniversityFairfaxUSA

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