Saturday, 25 July 2009

A Question of Theory?

I'm working my way through this book; it's not a great choice for a non economist like me, and some of it is a bit above my head. Moreover, some professionals seem to confirm my inexpert feeling that it's a bit of a curate's egg as well. But given the title I thought I had to give it a go. Well, the title plus the fact he wrote a couple of smashing Spokesman pamphlets thirty years ago: Socialism and Parliamentary Democracy and Trotsky and Fatalistic Marxism. Both of those influenced me a lot as a teenager...but he's changed his view of the world it seems to me, though I'm cautious about judging the theoretical development of people whose theories I don't fully understand.

What I will take away from the book, however, is this rather striking set of phrases:
The...standard core of utility theory is non falsifiable. ...Boland (1981) asks if any conceivable evidence would refute the standard assumption of maximising behaviour. He shows that such an attempt at falsification could never work. Any claim that a person was is not maximising anything can always be countered by the response that the person is in fact maximising something else. Given that we can never in principle demonstrate that 'something else' is not being maximised, the theory is invulnerable to empirical attack...

The problem with the maximisation argument are doubly severe when it assumes utility is being maximised. There is no experimental or other phenomenon that cannot in principle be 'explained' within a utility maximising framework...No evidence can, in principle, falsify the assumption that behaviour results from individuals or households maximising their encompassing all possible arrangements and interconnections, the important relationships and connections are lost in a sea of universal possibilities. Accordingly, the universality of a theory does not necessarily mean it is useful or informative...
A chapter of carefully phrased caveats and examples follow. But my interest remains with this broad opening claim. Does it imply that the model of 'rational' behaviour which underpins mainstream economics is actually unprovable? & isn't this the very complaint that Popper raised against Marxism all those years ago?

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