'To Navigate Safely in the Vast Sea of Empirical Facts': Ontology and Methodology in Behavioral Economics

39 Pages Posted: 31 Aug 2014 Last revised: 25 Oct 2014

See all articles by Erik Angner

Erik Angner

Department of Philosophy, Stockholm University; Institute for Futures Studies; Interdisciplinary Center for Economic Science

Date Written: August 24, 2014

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

JEL Classification: B41, D11

Suggested Citation

Angner, Erik, 'To Navigate Safely in the Vast Sea of Empirical Facts': Ontology and Methodology in Behavioral Economics (August 24, 2014). Forthcoming in Synthese; GMU Working Paper in Economics No. 14-35. Available at SSRN: https://ssrn.com/abstract=2489061

Erik Angner (Contact Author)

Department of Philosophy, Stockholm University ( email )

Universitetsvägen 10 D
Frescati
Stockholm, 106 91
Sweden

HOME PAGE: http://erikangner.com

Institute for Futures Studies ( email )

Holländargatan 13
Stockholm, SE-101 31
Sweden

HOME PAGE: http://www.iffs.se/en/research/researchers/erik-angner-1/

Interdisciplinary Center for Economic Science ( email )

400P Truland Building
George Mason University
Fairfax, VA 22030
United States

HOME PAGE: http://ices.gmu.edu/people/affiliated-faculty

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