Monday, November 13, 2017

Edward Fullbrook — Neoclassical economics usually reads its models backwards

In other words, it is not the behaviour of the individual agents that determines the model’s overall structure, nor even the structure of the preference ranking. Instead it is the macro requirement for a particular structure which dictates the behaviour attributed to the individual agents.[2] The “purpose” of this “particular, useful structure” is to rationalize the macro “conclusion” assumed at the beginning of the exercise. The resulting model shows micro phenomena determining macro phenomena, whereas, in fact, it is the starting point of the macro structure that has determined the behaviour of the model’s micro elements. Likewise, “rationality” becomes something defined to meet the exigencies of a desired conclusion.
Then the model becomes prescriptive based on it "descriptive" characteristics: Real individuals in society should behave in accordance with the model assumptions. If they don't, then behavior modification through institutional means is indicated.

Logical slight of hand based on  ideological preference.

Real-World Economics Review Blog
Neoclassical economics usually reads its models backwards
Edward Fullbrook

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