Cherry-picking economic models

24 Aug, 2019 at 22:39 | Posted in Economics | 2 Comments

How would you react if a renowned physicist, say, ​Richard Feynman, was telling you that sometimes force is proportional to acceleration and at other times it is proportional to acceleration squared?

cartoon-hand-picking-cherry-24380737I guess you would be unimpressed. But actually, what most mainstream economists do amounts to the same strange thing when it comes to theory development and model modification.

In mainstream economic theory,​ preferences are standardly expressed in the form of a utility function. But although the expected utility theory has been known for a long time to be both theoretically and descriptively inadequate, mainstream economists all over the world gladly continue to use it, as though its deficiencies were unknown or unheard of.

What most mainstream economists try to do in face of the obvious theoretical and behavioural inadequacies of the expected utility theory, is to marginally mend it. But that cannot be the right attitude when facing scientific anomalies. When models are plainly wrong, you’d better replace them! Instead of mending the broken pieces it would be much better to concentrate on developing descriptively accurate models of choice under uncertainty.

Expected utility theory is seriously flawed since it does not take into consideration the basic fact that people’s choices are influenced by changes in their wealth. Where standard microeconomic theory assumes that preferences are stable over time, behavioural economists have forcefully again and again shown that preferences are not fixed, but vary with different reference points. How can a theory that doesn’t allow for people having different reference points from which they consider their options have a (typically unquestioned) axiomatic status within economic theory?

Much of what experimental and behavioural economics come up with, is really bad news for mainstream economic theory. It unequivocally shows that expected utility theory is nothing but transmogrifying truth.

But mainstream economists do not see this​ since they have the weird idea that economics is nothing but a smorgasbord of ‘thought experimental’ models. For every purpose you may have, there is always an appropriate model to pick.

ChameleonBut, really, there have​ to be some limits to the flexibility of a theory!

If you freely can substitute any part of the core and auxiliary sets of assumptions and still consider that you deal with the same theory, well, then it’s not a theory, but a chameleon.

The big problem with the mainstream cherry-picking view of models is of course that the theories and models presented get totally immunized against all critique.  A sure way to get rid of all kinds of ‘anomalies,’ yes, but at a far too high price. So people do not behave optimizing? No problem, we have models that assume satisficing! So people do not maximize expected utility? No problem, we have models that assume … etc., etc …

A theory that accommodates for any observed phenomena whatsoever by creating a new special model for the occasion, and a fortiori having no chance of being tested severely and found wanting, is of little real value.


  1. “Instead of mending the broken pieces it would be much better to concentrate on developing descriptively accurate models of choice under uncertainty.”

    Personally I believe there is very little role for maths, models and ”thought experiments’ in the social sciences or humanities. Occasionally there may be, but really it’s only on the margins. It’s really about content and building up the story from the facts. Not making stories from with little content and a lot of abstraction.

    This includes the vocational subjects. Think of psychology. If you were concerned about mental health issues, would you take your child to a psychiatrist who is likely to have a wide understanding of child psychology and the range of factors that are likely to shape a child’s character, or would you take him/her to someone ‘with a model’.

    Like history, economics deal with many interrelated factors, much of the most important of which is unquantifiable. And you simply must consider them all.

    • An interesting perspective that could be explained as the role that neo-classical economics played in paving the way for the neo-liberal age.

Sorry, the comment form is closed at this time.

Blog at
Entries and comments feeds.