Review Symposium : Can Economic Theory Explain Everything?

Homo economicus, as an explanatory model in the social and behavioural sciences has made an impressive comeback. Not so many years ago, he held no sway whatever with sociologists and psychologists. Indeed, even economists refused to take him seriously in the domain of his theory’s original, intended interpretation: the theory of consumer choice and of the firm. The idea that human action, economic or otherwise, was strictly determined by the maximization of utility or preference subject to the constraint of beliefs about available alternatives, was considered so implausible, that even in economics, where this assumption stands at the theoretical core, its explanatory pretensions were systematically pruned to their barest minima. According to one tradition, stemming from Marshall, the implausibility of the view of man as a lightning calculator was no defect in economic theory, for that theory is really not concerned with the explanation of the actions of individual agents-i.e., consumers and producers. Thus, in Value and Capital, Hicks wrote: ’In... our discussions... [of the laws of consumer demand] we have been concerned with the behaviour of a single individual. But economics is not in the end, much interested in the behaviour of single individuals. Its concern is with the behaviour of groups. A study of individual demand is only a means to the study of market demand. Fortunately, with our present methods we can make the transition easily.&dquo; If, as Hicks says, ’our study of the individual consumer is only a step towards the study of a group of consumers... [and] falsifications may be trusted