Is economics not transparent enough?
I ask this question after reading this awesome post from the Freakonomics post (ht Antidismal) (Disclaimer: It is really only awesome if you are into economics 😛 ). Specifically, these two points that are often raised in presentations:
23. The motivation of the agents in this theory is so narrowly egotistic that it cannot possibly explain the behavior of real people.
24. The flabby economic actor in this impressionistic model should be replaced by the utility-maximizing individual.
Now as you might notice – these two criticisms contradict 🙂 .
Over time I have stated that one of the advantages of mainstream economics is that the assumptions it makes are transparent. However, if us economists can’t agree on the appropriate characterisation of an economic actor (and thereby we adjust our characterisation in an ad hoc manner), how can the results of our economic models be transparent (as what determines the fundamental “rational agent” is unclear)?
Discuss 🙂 (I will try to come up with an answer when I wake up 😉 )