You shouldn’t, your comment are greatly appreciated.

“But it is my impression that a narrow conception of rationality was treated as part of the core by a majority of econ theorists”

I completely agree with your description of core and simplifying assumptions, and that it is changes in core assumptions that truly change the discipline.

Here is where our view diverge though. Having been raised as a micro-economist I’ve always felt that the fundamental assumptions of the economic method were very weak – we merely added more restrictive assumptions in order to get results. The introduction of behavioural economics will simply give microeconomists more types of models to play with, rather than change they way they perform economics I believe.

Macro-economics is a different story – again in this case I don’t believe that the introduction of behavioural economics will be as revolutionary as say the Lucas critique, however I do believe that models involving bounded rationality will help to continue the evolution of new classical models. Macro-economics is currently in flux – I think that the new classical methodology will remain and be built upon with increasingly realistic assumptions (that is what New Keynesian economics does).

Fundamentally, I just see economics as a term for framing issues through the lens of methodological individualism. The introduction of behavioural economics will not change this, however it will definitely change many of the normative assumptions made using economic models – something that is outside of ‘the core’.

Different assumptions play different roles in econ theory. Even to say they simplify is to cover a lot of diversity. For example, some simplifying assumptions are “negligibility assumptions” and some are “domain restrictions” in the language of Musgrave. These kind of assumptions are unlikely to insisted on as a matter of “rigour”. That is, you might be criticised for unnecessary complication, but that would usually only be a peccadillo. Then there are assumptions that embody the perceived core of the theoretical programme. Of course people will differ about what they think is in the core, just as we differ about what we think is socially acceptable in the real world. But it is my impression that a narrow conception of rationality was treated as part of the core by a majority of econ theorists.

So is it a revolution when the core gets revised? Are we going to come up against a definitional dispute about “revolution” as well as about “rationality”?

Any thoughts on whether the counterpart for the psychologists – the cognitive revolution – was misnamed?

It is damn expensive isn’t it :P. I guess he has to pay for his airfare somehow 😉

I think he means (correct me if I’m wrong though) that it doesn’t constitute a major ontological change, insofar as in either case economics is dealing with ‘rational agents’ who are ‘maximising utility’ (rule following can still be placed in a utilitarian framework).

Furthermore, in terms of methodology will behavioural methods replace or add to current microeconomic analysis? I believe that it will add to the analysis – it will be more akin to the evolution of economic analysis rather than a revolution.

Why you might ask? Well current economic models are built on the supposition that may of the assumptions are simplifying assumptions, ergo the changing of these assumptions was already part of the overall scope for the development of economic thought in the first place.

If rauparaha sees it the same way I do, then we are not saying it won’t be an important change – but it just won’t be a ‘revolution’ in economic thought. If anything it illustrates that economic thought it developing.

I am picking that the change is immense. But I’ll leave my reasons for later.

You can criticise models which solely use adaptive expectations as unrealistic, but I don’t think rational expectations are much of an improvement as far as increasing the explanatory power of the models goes.

And any model that doesn’t assume rational expectations, even if empirically valid now, is vulnerable to the criticism that eventually people will wise up and the model will stop working. While I like behavioural economics, I wonder sometimes whether the results are always applicable to real-world situations where rewards are substantially higher and “games” are played over and over again.

(I’m know I’m glossing over the distinction between rational expectations and rational behaviour).