Essentials of Constructive Heterodoxy: Behavior

Abstract

For a host of compelling methodological reasons, homo oeconomicus has to be replaced. This is consensus, the open question is how this could be accomplished. What is required first is the separation of the formal foundations into a structural and a behavioral part. This paper introduces the propensity function as general formalization of Economic Man/Woman. The propensity function is a compact formal expression of random, semi-random, and deterministic behavioral assumptions. It is shown how, in a random environment, target-oriented behavior produces stochastic stability and optimality in the product market. With homo oeconomicus the conception of simultaneous equilibrium, too, vanishes.

Keywords: new framework of concepts, structure-centric, axiom set, determinism, indeterminism, propensity function, information function, action function, Law of Supply and Demand, price setting

JEL Classification: B59, D01, D80