ABSTRACT
The chapter maps the paradigmatic struggle between neoclassical and behavioral economics. Gary Becker’s The Economic Approach to Behavior is used as a template for analysis of economic imperialism that promises to deliver a general theory of human behavior. Its cornerstones—maximizing behavior, market equilibrium, and stable preferences (or efficiency in their place)—are examined. The ideal type of homo economicus is espoused. Its defining feature is not selfishness, but rather motivational symmetry and especially rationality. Neoclassical notion of rationality is erected upon the intuitive foundation of instrumental rationality inherent to human folk psychology (theory of mind) but emphasizes consistency over everything else and is axiomatically grounded. Neoclassical approach is threatened if the presence of systematic mistakes in human behavior is demonstrated, with violations of its axioms such as completeness, transitivity, independence of irrelevant alternatives, and invariance being the most worrisome. Systematic mistakes can be demonstrated using the scenario of Asian Disease and other experimental techniques. Neoclassical economics is committed to predictive success as a criterion against which theories are to be evaluated: systematic mistakes represent predictable irrationality and open the possibility that behavioral economics will have better predictive performance. Behavioral economics’ findings regarding bounded rationality may represent a fleeting predictive advantage, however. The issues of translatability to basic sciences, reflexivity, and arms races remain relevant. The question of the extent to which irrationality responds to incentives and learning remains unresolved. This still leaves some settings—such as mass politics of a liberal democracy—untouched, though.
