Essays on Economic Behaviour

The main thesis of these essays is that social phenomena are different from psychological phenomena and thus social sciences do not belong to behavioural sciences. Chapter 1 introduces the fundamental problem of the rational choice theory ("Macaulay's problem"): either the theory is empirical and false or it is without empirical content and true. Various suggested solutions to this problem are reviewed and criticized. It is argued that the problem is evaded once it is admitted that rational choice theory does not attempt to explain behaviour. It was developed to explain decreasing individual demand and its extension to behavioural sciences is illegitimate. In Chapter 2 the difference between the interpretation of rationality in choice theory and demand theory is shown. It is argued that choice theory must adopt the agent's point of view, while demand theory proceeds from the point of view of an observer. Chapter 3 applies the argument to the problem of indifference ("Nozick's problem"): it claims that choice theory must adopt strict ordering of alternatives because indifference is already accounted for in the description of the choice alternatives. The difference between the consumer perception and the objective price-quantity relation embodied in the demand function is further explored in Chapter 4 on the example of the Rothbardian demand theory. It is argued that the law of marginal utility defined in terms of subjective units (i.e. units relevant to the consumer) does not imply nonincreasing demand. Chapter 5 is complementary to the previous and attempts to answer the question, whether the concept of marginal utility is compatible with ordinalism. Finally, Chapter 6 discusses on the methodological level the difference between behavioural sciences and economics. It argues that the difference can be conveniently described with the help of Popper's concepts of 'World 2'and 'World 3'.