Prospects for Mathematical Psychological Economics

Part of the Recent Economic Thought Series book series (RETH, volume 13)


Economists and psychologists share an ultimate aim: to predict human behavior. Being economists and psychologists — rather than mathematicians, chartists, computer scientists, or whatever — they also share a penultimate aim: to explain human behavior. Both aims imply a belief that there is something systematic about human behavior. This, in turn, implies that there must be some role for mathematics in modeling that behavior. The only question that remains, therefore, is what role?


Human Behavior Optimality Theory Utility Theory Expect Utility Theory Stylize Model 
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  1. 2.
    In other words, for the sake of the current argument, it is being assumed that the economic theorist is able to identify relevant features of the real-world problem — and not introduce irrelevancies. But even this assumption may be wrong. We will return to this point in due course.Google Scholar
  2. 3.
    For reasons mentioned above and elaborated on below.Google Scholar
  3. 4.
    The decision at time t will appear uncertain at time (t-1), because it will be conditional on information that is to be revealed between (t-1) and t; but by the time t has been reached this information will have been revealed, and the decision t will be a deterministic function of the information available at that time. So, on the presumption that the economist can observe that which the decision-maker observes, the empirical relationship should be deterministic. Of course, this is not true if certain variables cannot be observed by the economist; this suggests a further possible alternative — though one not often heard — for including a random term in empirical relationships.Google Scholar
  4. 5.
    One should qualify this statement in certain respects, though its broad thrust stands.Google Scholar
  5. 6.
    This is a useful antidote to those who argue that the predictions of economics are as if predictions. “Okay, so Ivan Lendl does not know the laws of physics, as they concern tennis playing, but he plays as if he does.” True, but not everyone can play tennis as well as Lendl.Google Scholar

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© Kluwer Academic Publishers, Boston 1988

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