Classical and modern behavioral economics at the light of practical reason

CRESPO, RICARDO F.

Aix-en-Provence

Jornada; III International Conference in Economic Philosophy; 2016

During the second half of the Twentieth Century, economics exported its instrumental maximizing rationality to the analysis of several human activities: a tendency that has been called ?economic imperialism?. After this attempt to encompass all other social sciences in economic logic, we are now witnessing a reverse process: a ?mainstream pluralism? consisting of heterogeneous currents taking elements from different sciences outside economics; ?a reverse imperialism?, as it is called by John Davis (2008). It seems that the time has come for a change of direction, with new emphasis placed on importing insights from other social [and natural] sciences rather than exporting the logic of economics to them. However, this process could finally fail in its intending to broaden the economic logic (Davis 2008). What should be taken into account to in order to block the ?domestication? of the logic of other sciences by economics? We should re-consider other springs of action in economics. Most classical political economists considered different reasons for economic decisions and actions ?corresponding to the four Weberian motivations for human actions: instrumental, value-rational, sociological and psychological. Economics gradually reduced these motivations to instrumental maximizing, the logic of the rational choice theory and of the expected utility theory. This is, though important and sometimes prevalent, only one of the many springs of economic actions. It deals with the allocation of means given ends. Sociological and psychological motives can concern both means and ends. Value rationality, which largely corresponds to the classical notion of ?practical rationality?, is rationality of ends, an inexact rationality sometimes called ?reasonability?, which entails the existence of freedom. Economics needs to recuperate it.In recent years, there has been a booming interest in reconsidering the psychological factors underlying economic behavior. This flame was lit by the representatives of behavioral economics, and it consolidated as a result of laboratory experiments. This way of rehabilitating psychology is not new and it is far from being homogeneous. Kao and Velupillai (2015: 239) distinguish two streams, the ?Classical? ?pioneered by Herbert Simon, and including the contemporary ?ecological rationality? program?, and the ?Modern?, initiated by Ward Edwards and currently associated with Kahneman and Tversky. While the later remains within the framework of optimization under constraints, the former pertains to the field of decision theory. In this paper I will analyze from the point of view of the consideration or not of practical reason three positions representative of these streams: first, Simon´s bounded rationality, second, ?ecological rationality? (Gigerenzer), and finally, modern behavioral economics. Finally, I will analyze the libertarian paternalist proposal of Thaler and Sunstein, which directly derives from Modern Behavioral Economics. Is volition and freedom present in these currents? Do they use practical reason? Are they physicalist currents?Davis, J.B. (2008). ?Recent Economics and the Return of Orthodoxy?, Cambridge Journal of Economics, 32, 349-366.Kao, Y.-F. and K. V. Velupillai (2015). ?Behavioral Economics: Classical and Modern?, European Journal of the History of Economic Thought, 22/2, 236-271.