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Extending Behavioral Economics' Methodological Critique of Rational Choice Theory to Include Counterfactual Reasoning

Author

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  • John B. Davis

    (Department of Economics Marquette University)

Abstract

This paper extends behavioral economics' realist methodological critique of rational choice theory to include the type of logical reasoning underlying its axiomatic foundations. A purely realist critique ignores Kahneman's emphasis on how the theory's axiomatic foundations make it more normative. I extend his critique to the theory's reliance on classical logic, which excludes the concept of possibility employed in the counterfactual reasoning. Nudge theory reflects this in employing counterfactual conditionals. This answers the complaint that the Homo sapiens agent conception ultimately reduces to a Homo economicus conception, and also provides grounds for treating Homo sapiens as an adaptive, non-optimizing, reflexive agent.

Suggested Citation

  • John B. Davis, 2018. "Extending Behavioral Economics' Methodological Critique of Rational Choice Theory to Include Counterfactual Reasoning," Working Papers and Research 2018-02, Marquette University, Center for Global and Economic Studies and Department of Economics.
    • Handle: RePEc:mrq:wpaper:2018-02
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    File URL: https://epublications.marquette.edu/econ_workingpapers/62
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    Citations

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    Cited by:

    1. John Davis, 2018. "Extending behavioral economics' methodological critique of rational choice theory," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 2(2), pages 5-9, September.
    2. John Davis, 2020. "Belief reversals as phase transitions and economic fragility: a complexity theory of financial cycles with reflexive agents," Review of Evolutionary Political Economy, Springer, vol. 1(1), pages 67-84, May.
    3. John Davis & Theodore Koutsobinas, 2021. "Attribute substitution, counterfactual thinking, and heterodox economics," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 5(S3), pages 45-54, October.

    More about this item

    Keywords

    problem of deduction; modal reasoning; counterfactual conditionals; nudge; reflexive agents;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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