Re: Utility maximizing

[Paul Henry Rosenberg <rad@xxxxxxx>]

Robyn Miller wrote:

> ----------
> > From: Mason A. Clark <masonc@xxxxxxxxxxxxx>
> > To: POST-KEYNESIAN THOUGHT   <pkt@xxxxxxxxxxxxxxxx>
> > Subject: Re: Utility maximizing
> > Date: Friday, September 19, 1997 4:43 PM

....<snip>...

> >    If it is assumed that consumers maximize utility, is that not then
> >    an assumption that the free market makes the economically correct
> >    decisions?
>
>
> Yes
>
>  And that those are the decisions the economy should be
> >    structured to satisfy?
>
> No
>
>  Is this not laissez faire, neo-liberal economics?
>
> Not really.  It is an acknowledgemnt of how economic actors *would* behave
> without social, legal, cultural or governmental restrictions.  It is
> "economic man" laid bare.

Yes, but "economic man" does not correspond to actual man or women, even
in situations where cultural and social effects, etc. are minimized.

> How society choses to respond to this man,
> assuming that his innate, purely economic side is not tempered by cultural
> norms and the like

There are 2 separate problems here.  #1 -- There is no such thing as
"his innate, purely economic side... not tempered by cultural norms and
the like," and #2 -- Even apart from cultural norms, human psychology
does NOT correspond with the assumptions of rational economic man.

I commented on #2 early this year with respect to some points made by
Robert Kuttner in *Everything For Sale*, where he referenced the work of
people like Richard Thaler, Daniel Kahneman and Amos Tversky, Amiartya
Sen, Albert Hisrchman, and Mark Lutz and Kenneth Lux.

It turns out to be rather easy to set up experiments where markets fail
to clear, for example.

In fact, markets are *social constructs* and people have to learn how to
make them work.  In some areas -- inside the family for instance --
people have not just "failed" to learn how to make them work, they
regard such an enterprise as immoral.

> - is our CHOICE (and society, in attempting to maximize
> its own aggregate utility must certainly consider measures that would tame
> such an amoral beast).  This explains, perhaps, *why* we have religion,
> government, cultural norms, a legal system etc.

That is, if you accept the myth that "economic man" represents some kind
of ontological/historical primitive.

In reality, these other systems developed more or less simultaneously
with markets when all were in relatively primative forms, though we can
be fairly certain that cultural norms preceded the existence of markets
by several tens of thousands of years at least.
They are AT LEAST as much expressions of our basic human nature as
markets are, perhaps even more.

> Without the willingness to
> acknowledge how we *would* behave if society or the government did not
> intervene to impose "costs" on certain blatantly anti-social behaviors, we
> would have no basis from which to argue that, as cultural barries to such
> behaviors ctumble - something should be done through the legal
> system/government to keep them in check.

Even if the myth of "economic man" were true, this argument would fail.
It's analogous to arguing that we need to know what absolute zero is in
order to justify building a fire to keep warm.  Surely we need only
argue for a better state with reference to that state itself.  No
ultimates, real or imagined, need be invoked.

> It is our acceptance of how
> economic man, naked of cultural or governmental restrains *would* act, that
> provides us with the means to argue that we *should* act.

"A" means, not "the" means.  And, I would argue, an argument framed in
opposition to a mythical extreme is likely to veer ever further from
empirically grounded rationality, the more it is developed.  One
unrealistic assumption countered by another is no way to guarantee
convergence toward the real.

> >    For good or bad.
> >
> >    If the theory incorporates an ideology at the outset, does it not hope
> >    then to prove the validity of the theory  -- and the ideology?
>
> I'm not sure why such a theory is inherently perceived as ideological.

For the reasons I've just stated, among others.  It posits a vision of
"human nature" and every positing of "human nature" inevitably carries
with it ideological assumptions.  This is not to say one can't build
different ideological positions around a shared concept of human nature
-- surely one can.  But one has already excluded some possibilities and
made it easier to support some possibilities than others.

The anthorpological and biological evidence is quite strong that people
come with a built-in prosocial nature that is subject to wide
variability and plasticity of expression.  We are not social atoms, as
the myth of "economic man" would have it.  Any theorizing based on that
myth is therefore counter to the best empirical evidence we have.

Of course, there may be many situations in which one can build a
good-enough model based on these assumptions -- just as Ptolemaic
astronomy built good-enough models for planetary motion, even up till
the time of Copernicus and beyond.  The flexibility and adaptability of
the system does not prove that it is right, or that it is
philosophically nuetral either.


--
Paul Rosenberg
Reason and Democracy
rad@xxxxxxx

"Let's put the information BACK into the information age!"