Rational actors. Or not.

They say dislocation is necessary to radically change our ways of understanding and making sense of the world. David Brooks in today’s New York Times is arguing that the financial crisis (a dislocation if ever there was one) has pushed what was previously a marginal theory of economics into centre stage. In this newly emerging economic theory, people are not rational actors, they do not respond in fairly predictable ways to incentives, the economy is not efficient. Instead,

each person’s mind contains a panoply of instincts, strategies, intuitions, emotions, memories and habits, which vie for supremacy. An irregular, idiosyncratic and largely unconscious process determines which of these internal players gets to control behavior at any instant. Context — which stimulus triggers which response — matters a lot. […]

Most important, people seek relationships more than money. If behaving a certain way helps a stock trader or a regulator fit in with his crowd, he’s likely to keep doing it without too much rigorous self-examination.

Now, i’m sure this has been a fairly widespread way of viewing people in the humanities for quite some time. Finally, economics is catching up. And I hear that physicists are reading Foucault these days too…

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2 Comments to “Rational actors. Or not.”

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