Predictably Rational? In Search of Defenses for Rational Behavior in
Mainstream economists everywhere exhibit an "irrational passion for dispassionate rationality." Behavioral economists, and long-time critic of mainstream economics suggests that people in mainstrean economic models "can think like Albert Einstein, store a
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Richard B. McKenzie
Predictably Rational? In Search of Defenses for Rational Behavior in Economics
Prof. Richard B. McKenzie The Paul Merage School of Business University of California Irvine, CA 92697-3125 USA [email protected]
ISBN 978-3-642-01585-4 e-ISBN 978-3-642-01586-1 DOI 10.1007/978-3-642-01586-1 Springer Heidelberg Dordrecht London New York Library of Congress Control Number: 2009928778 # Springer-Verlag Berlin Heidelberg 2010 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permission for use must always be obtained from Springer. Violations are liable to prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: WMXDesign GmbH, Heidelberg, Germany Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)
It is somewhat unusual to begin the treatment of a subject with a warning against attaching too much importance to it; but in the case of economics, such an injunction is quite as much needed as explanation and emphasis of the importance it really has. It is characteristic of the age in which we live to think too much in terms of economics, to see things too predominantly in their economic aspect. . . There is no more important prerequisite to clear thinking in regard to economics itself than is recognition of its limited place among human interests at large. The Economic Organization (1933, p. 1)
Frank H. Knight
Preface
In this book, I undertake a reexamination of rationality, or rational behavior, in the history of economic thought, review strands of scholarly criticisms of rationality, and develop defenses for the continued use of rationality in economic analysis. The emphasis will be on how economists have employed the rationality premise in the post-World War II era, during which time the premise became widely recognized for being at the core of fully formed neoclassical economics and during which time the premise has come under ever more serious attacks that, in no small way, have undermined the credibility of economics as a scientific endeavor (at least according to many behavioral psychologists and behavioral economists whose work will be reviewed later in this book). Economists are a diverse group, which means my reexamination of rationality must be confined. I have chosen to adopt the perspective on rationality that is generally represented by mainstream or (what I equate with) neoclas
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