Learning and Decision-Making in Economics and Psychology: A Methodological Perspective
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It is, as Latsis (1976, p. 22) has argued, an established part of the “positive heuristic” of standard neoclassical economics to avoid explicit psychological content. In recent years, however, and particularly in the area of human judgment and decision-making, psychological research has been forcing its attention on economists. Simon’s theories of decision-making and of satisficing behavior (1959, 1978, 1979) and work by Kahneman and Tversky on prospect theory (1979) and on judgmental heuristics and biases (Tversky and Kahneman, 1974) are very well known and have been widely referred to in the economics literature. The notions of heuristics and rules of thumb now appear quite frequently, and it is no longer uncommon to find economists other than institutionalists expressing doubts concerning the empirical validity of the concepts of rational behavior contained in the standard theories of the maximization of expected utility and Bayesian revision of subjective probabilities in the light of new information (Arrow, 1982; Schoemaker, 1982; Hey, 1983a).
KeywordsProspect Theory Probability Judgment Rationality Principle Verification Bias True Rule
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- 1.In the opinion of this author, Feyerabend’s (1970) criticism that Lakatos’ methodology is, in fact, a position of “anything goes” has considerable merit.Google Scholar
- 2.This is due to differences in the treatment of knowledge. Popper’s treatment is neither inductivist nor a priorist nor subjectivist. Popper’s view of knowledge is that it is conjectural but potentially objective. Knowledge is objective to the extent that it has been expressed and is available to be criticized. Latsis’ (1976) inclusion of Popper in the Austrian camp is certainly questionable (Hands, 1985). Boland (1982, pp. 174–187) has indicated how ideas from Hayek and Popper might be combined.Google Scholar
- 3.Not without justice Berkson and Wettersten (1984, p. 31) claim that Popper’s point of view is not merely antipsychologistic but antipsychology.Google Scholar