Causal versus Consequential Motives in Mental Models of Agent Social and Economic Action: Experiments, and the Neoclassical Diversion in EconomicsVernon Smith () Kyklos, 2020, vol. 73, issue 3, 341-370 Abstract: Since the neoclassical revolution of the 1870s, reasoning and analysis in economic theory has been dominated by utility theory, in which: Action implies Outcome implies Utility. I describe three prominent and unexpected failures of this utilitarian framework to predict the replicable outcomes of experiments. First, in supply and demand experiments for non‐durables the predicted equilibrium obtains, but under conditions violating those thought necessary: complete information, large numbers and price‐taking behavior. The failure is in not accounting for the weak conditions under which equilibrium is actually attained. Second, in asset markets it is thought that price bubbles cannot rationally occur under complete common information on fundamental value. Replicable experiments consistently yield price bubbles in violation of this prediction. Third, in two‐person trust and ultimatum games, equilibrium predicted outcomes failed decisively and massively. The observed failures stem from modelling only the outcome consequences of actions, not “the impulses from which action proceeds.” Utility theory rigidly binds the origins of action to their outcome value, thereby trumping alternative mental models of the actor. Date: 2020 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:kyklos:v:73:y:2020:i:3:p:341-370 Ordering information: This journal article can be ordered from Access Statistics for this article Kyklos is currently edited by Rene L. Frey More articles in Kyklos from Wiley Blackwell |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.