Why experimental economics is no real alternative to neoclassical economics

17 October, 2015 at 20:17 | Posted in Economics, Theory of Science & Methodology | Leave a comment

One obvious interpretation is that Model-Platonism implies that economic models are Platonic, if they take the form of thought-experiments, which use idealized conceptions of certain objects or entities (Platonic archetypes). This clearly sounds like a pretty familiar procedure, although the rationale for the thought-experimental character of economic models (if they are conceived as such) has been transformed over the years from apriorism to story-telling ‘without empirical commitment’ …

When interpreting economic models as thought-experiments, that is, as mainly speculative endeavours, these models operate without any obligation to accommodate empirical results. However, if the idealized assumptions employed in these models are interpreted as true forms in a Platonic sense they gain strong empirical relevance, since they are assumed to provide us with a form of knowledge far superior to observational data …

PeanutsPlatonismModel-Platonism as an epistemological concept can be understood as the combination of the following two routines: the reliance on thought-experimental style of theorizing as well as the introduction of idealized, metaphysical and, hence, ‘Platonic’ arguments in the form of basic assumptions … We still find resemblances of the Platonic idea of ‘superior insights’ through ‘true forms’ in economic models. Thereby, these insights are sometimes even believed to be generally immune to conflicting empirical evidence …

Taking assumptions like utility maximization or market equilibrium as a matter of course leads to the ‘standing presumption in economics that, if an empirical statement is deduced from standard assumptions then that statement is reliable’ …

The ongoing importance of these assumptions is especially evident in those areas of economic research, where empirical results are challenging standard views on economic behaviour like experimental economics or behavioural finance … From the perspective of Model-Platonism, these research-areas are still framed by the ‘superior insights’ associated with early 20th century concepts, essentially because almost all of their results are framed in terms of rational individuals, who engage in optimizing behaviour and, thereby, attain equilibrium. For instance, the attitude to explain cooperation or fair behaviour in experiments by assuming an ‘inequality aversion’ integrated in (a fraction of) the subjects’ preferences is strictly in accordance with the assumption of rational individuals, a feature which the authors are keen to report …

So, while the mere emergence of research areas like experimental economics is sometimes deemed a clear sign for the advent of a new era … a closer look at these fields allows us to illustrate the enduring relevance of the Model-Platonism-topos and, thereby, shows the pervasion of these fields with a traditional neoclassical style of thought.

Jakob Kapeller

For more on model Platonism in economics see here and here.

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