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The Role of Psychology in Austrian Economics and Game Theory: Subjectivity and Coordination

Author

Listed:
  • Richard Arena

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

  • Lauren Larrouy

    (University of Nice Sophia Antipolis, France
    GREDEG CNRS)

Abstract

In this contribution we relate the respective works of two important economists, Friedrich von Hayek and Michael Bacharach, namely one of the main intellectual leaders of the Austrian Schools and one of the most original game theorists. Hayek and Bacharach are two authors - few in number – who do not conceive that economic analysis could be built without the help of psychology. They both considered that subjective perceptions of the real world provide the first stage of decision processes and that, within this stage, psychological factors played a fundamental role. Therefore, they both proposed how perceptions, economic rationality and social coordination could be combined. However economists who really accept to take psychology into account often face new difficulties. The incorporation of subjectivity in economic behaviour can make much more complex the analysis of economic and social coordination. To overtake these new difficulties we will see that both Hayek and Bacharach integrate a specific approach to human cognition and resort to an evolutionary explanation of social coordination. This is the main message we deliver in this contribution.

Suggested Citation

  • Richard Arena & Lauren Larrouy, 2015. "The Role of Psychology in Austrian Economics and Game Theory: Subjectivity and Coordination," GREDEG Working Papers 2015-15, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
  • Handle: RePEc:gre:wpaper:2015-15
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Austrian economic theory; game theory; cognitive psychology; subjectivism; social coordination;
    All these keywords.

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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