Why do scientists cheat? Insights from behavioral economics

Abstract

Based on a review of the books by Wible (2014), Stephan (2012), and Lanteri and Vromen (2014), I discuss three different ways in which behavioral economics can enrich the understanding of scientific misbehavior. First, behavioral economics suggests that economic theories of scientific misbehavior, such as the one by Wible (2014), should consider moral costs of cheating, i.e. costs that arise from an individual’s desire to do the “right thing.” Second, behavioral economics demonstrates several ways in which the features of the reward scheme in science,as described by Stephan (2012), can favor cheating. Her conclusion that shirking is rarely an issue in science seems optimistic. Third, behavioral economics indicates that individual characteristics matter for cheating. According to Lanteri and Vromen (2014), economists possess different characteristics than other researchers. Hence, the reaction to incentives may differ across disciplines. Considering these insights is important to assess how a goal such as the pursuit of truth can be achieved efficiently.     

Two-tier rationality and reflexivity: an examination of the foundations of economic reason

This paper develops a two-tier concept of rationality which broadens the orthodox notion of instrumental rationality in economics. In the first section, I conceive the idea of “background rationality” to consist in the ability to act normally, i.e., according to social conventions appropriate to the context. Background rationality is a necessary condition for the exercise of its instrumental counterpart. Implications and applications of this for economic phenomena are investigated in Section II. The third section draws parallels between the approach to rationality developed in this paper and Thorstein Veblen's notion “habits of thought”. I argue that a viable concept of rationality must itself be subject to explanatory scrutiny and justification and not merely posited as given.     

Behavioural economics: Classical and modern

Abstract

In this paper, the origins and development of behavioural economics, beginning with the pioneering works of Herbert Simon and Ward Edwards, are traced and (critically) discussed. Two kinds of behavioural economics – classical and modern – are attributed, respectively, to the two pioneers. The mathematical foundations of classical behavioural economics are identified, largely, to be in the theory of computation and computational complexity; the mathematical basis for modern behavioural economics is claimed to be a notion of subjective probability. Individually rational economic theories of behaviour, with attempts to broaden – and deepen – the notion of rationality, challenging its orthodox variants, were decisively influenced by these two mathematical underpinnings.     

THE CITATION IMPACT OF FEMINIST ECONOMICS

Abstract

Feminist economics is a transformative project. However, transformation generates resistance. Feminist economics can be deliberately excluded, co-opted through an uncritical application of rational choice theory, or ignored. And feminist economics can be listened to: when the United Nations consults feminist economists; when feminist economists publish in widely read journals; when a student finds inspiration in a Feminist Economics article. All of these are ways feminist economics can, and has, influenced the profession. After ten years of discourse, it is possible to take stock and assess the impact of feminist economics. This article provides a partial assessment through a consideration of citations of the journal Feminist Economics, describing its impact on mainstream economics, heterodox economics, and other disciplines. While the overall project of feminist economics encompasses much more than just one journal, studying the citations for Feminist Economics is a first step toward assessing the influence of the entire corpus.     

The diversity of models as a means to better explanations in economics

ABSTRACT

In Economics Rules, Rodrik [(2015). Economics rules: Why economics works, when it fails, and how to tell the difference. Oxford: Oxford University Press] argues that what makes economics powerful despite the limitations of each and every model is its diversity of models. Rodrik suggests that the diversity of models in economics improves its explanatory capacities, but he does not fully explain how. I offer a clearer picture of how models relate to explanations of particular economic facts or events, and suggest that the diversity of models is a means to better economic explanations.     

Hayek and Keynes: From a common critique of economic method to different theories of expectations

The methodological positions of Hayek and Keynes contain striking similarities. Both authors opposed empiricist approaches to economics that assign priority to mere observation as the source of knowledge. Both emphasised intentionality, motivation and human agency. Notwithstanding this common ground, they had different conceptions of how beliefs are formed and had different explanations of thought and action in economics. Hayek grounded his explanation on an evolutionary theory of the mind, i.e. on psychological premises, whereas Keynes based his view of belief formation on probable reasoning, where probability is a logical concept. Starting from psychological premises Hayek maintained that individuals act rationally only by following rules. As a consequence, he considered conventional expectations to be the primary guide for agents in economic life. Keynes agreed that conventional expectations actually guide economic behaviour, but he maintained that they are justified only in situations of total ignorance. In conditions of limited knowledge, agents can base their action on reasonable expectations, independently of conventions. Moreover, agents?particularly those institutions responsible for economic policy?ought to shun conventional behaviour in order to counteract its negative social consequences. We argue that Keynes's theory of expectations is well grounded upon his theory of logical probability. Hence his advocacy of discretionary policy is rationally justified.     

The neglect of comparison income: An historical perspective

Abstract

Theories of social comparison have a long presence in the social sciences and have provided many useful insights. In economics, the idea of comparison, aspiration or relative income belongs to this theoretical framework. The first systematic usages of this notion can be found in the works of Keynes and Duesenberry. After these works the concept was relatively ignored by orthodox theorists until its recent re-appearance, mainly in the fields of labour and macroeconomics. To the contrary, however, income comparisons continued to play a role in much of Keynesian inspired and non-mainstream economics literature. In the past few years it has made a strong comeback in the literature of job satisfaction and of the economics of happiness. This paper attempts to trace the development of the concept in the modern history of economic thought. It also discusses the main theoretical implications of adopting income comparisons and possible reasons for its relative disregard by orthodox economics.     

What is Heterodox Economics? Conversations with Historians of Economic Thought

Since its intellectual inception, the development of the economics discipline has been accompanied by divergence of thought. Through the years, particularly in the latter half of the twentieth century, a fissure has emerged within the discipline, sociologically dividing conventional, mainstream economics from the dissention of heterodox economics. The nature of that division, however, as well as the nature of heterodox thought is unclear. Historians of economic thought would seem to be uniquely suited to specify the nature of heterodox economics and the mechanism of its marginalization. Although anecdotal, personal interviews with historians of economic thought provide a breadth and depth of study not available through surveys with an immediacy not allowed by doctrinal examination. The purpose of this study and intent of this paper is to reveal the ways that orthodox and heterodox economics differ, whether heterodox economics has any clear research program other than criticizing the limits of the more orthodox view, and what aspects of heterodox economics remain underdeveloped, all through the lens of the historian of economic thought.

An Epistemological Reflection on Social and Solidarity Economy

Social and Solidarity Economy (SSE) is emerging as life affirming solutions to the global crises through the multiple ways people locally reinvent economic life on the margins of the capitalist system based on values of solidarity, reciprocity and sustainability. Although the SSE builds on a strong foundation of real practices and institutions of economic transformation as the way forward for us, this paper argues that this world of practice is in need of its theory to frame discourses and engage with the bigger picture with confidence as an alternative to the dominant economic paradigm. The author argues that the orthodox economics, with its ontological construct of the homo economicus, Cartesian dichotomy and logical positivist epistemology severely constrains our abilities to understand and appreciate economic alternatives based on ‘other’ rationalities. Hence, there is a need for an epistemological revolution to construct a coherent theoretical framework from the wreckages of the neoclassical economics for the SSE. This paper seeks to outline the basic structure and the key elements of the ontological and the epistemological framework for this ‘science-in-the-making’ as a step to stimulate further debate for a paradigm revolution.     

Richard H. Thaler: A Nobel Prize for Behavioural Economics

ABSTRACT

This paper provides an overview of Richard Thaler’s career and the contributions to behavioural economics that earned him the 2017 Nobel Memorial Prize in Economic Sciences. It focuses on his role in exposing and making sense of empirical anomalies in orthodox economics, his analysis of mental accounting, and his work with Cass Sunstein on the notion of libertarian paternalism and the ‘nudge’-based behavioural approach to economic policy. It then considers his contributions critically and explores how, unlike previous behavioural economics, Thaler succeeded in getting his new approach to behavioural economics accepted by mainstream economists.     

Wealth accumulation and economic progress

In an evolutionary dynamic economic theory the accumulation of durable goods (i.e., wealth) is a key feature. Here we show that the wealth of individual economic agents can be measured by the progress function (PF). PF is a function of goods and money under straightforward assumptions, notably the ‘no-loss’ rule for transactions. We derive explicit formulae for wealth from the PF. We also show how the compatibility of the PF and the neoclassical economics deriving the conventional utility functions from the PF.     

Exchange and evolution

This paper offers an extension of the distinction of [Kohn, Cato Journal, 24:303–339 (2004)] between the two paradigms of modern economic theory—value and exchange—as derived from the generic–operant framework of [Dopfer and Potts, The general theory of economic evolution, Routledge, London, (2007)]. I argue that Austrian and evolutionary economics can be analytically unified about a general framework of rule coordination and change that I shall call the generic value paradigm. This is an analytic generalization of Kohn’s “exchange paradigm” that will allow us to redefine his conception of the “value paradigm” as the operational value paradigm in terms of the economics of known and fully exploited opportunities. The generic value paradigm, in turn, underpins the economics of the growth of knowledge and the evolution of the economic order as an open-system process due to the origination, adoption, and retention of novel generic rules. Austrian economics is then circumscribed as a special case of the more general “generic” analysis of the coordination and evolution of economic rules.      

The history of economics as economics?

Abstract

This paper critically evaluates the current decline of the relationship between economics and the history of economics, and proposes a framework called the panorama-cum-scenario model for the practice of the history of economics. Starting with the Hegelian thesis that the history of economics is economics itself, the paper argues that such a relationship is necessary but not sufficient because the history of economics is a metatheory addressed to economic theory. The history of economics needs a panoramic view of the subject and a scenario for the construction, interpretation, and evaluation of the system of economics. The panorama-cum-scenario model enables us to work on the history of economics not only by historical and rational reconstruction but also by global reconstruction. Nietzsche's anti-Hegelian viewpoint and Heidegger's hermeneutical standpoint are useful for identifying the role of historical research in developing economic knowledge based on the panorama-cum-scenario model. Several approaches to the history of economics are examined in light of the panorama-cum-scenario model. Schumpeter's history of economics is interpreted as an example of the panorama-cum-scenario model.     

Bringing them alive

Abstract

This paper continues an ongoing reflection on the ways we do the history of economic thought, marked some decades ago by Mark Blaug. It offers a non-canonical typology comprising three alternative approaches, distinguished on the basis of the way they conceive of the link between statements, old and contemporary: the extensive, the retrospective, and the intensive approaches. It shows that the latter potentially challenges contemporary knowledge by introducing statements which do not belong to it. Despite its being a heuristic, it appears as a privileged route by which the history of economic thought can begin to engage with economic theory.     

From Labour Market Institutions to an Alternative Model of Labour Markets

This post-disciplinary article goes beyond orthodox labour economics and combines insights from the ‘socio-economics of labour markets’ (SELM), and critical realism (CR), to develop a SELM^CR perspective, which is then used to create an alternative conception of labour market institutions and an alternative model of labour markets, i.e. the SELM^CR model.     

Emergence versus neoclassical reductions in economics

ABSTRACT

Many epistemic anomalies of the neoclassical research programme originate from its ontologically reductionist meta-axioms, which predicate how economic macro-systems are constituted from their micro-entities and how the latter behave – namely atomistic aggregativity, normative equilibration and global instrumental rationality. This paper explores the metaphysical foundations of the premise of emergence and argues that it can be a remedy to the ills of neoclassical reductions, and a foundational epistemic principle in a progressive systemic research programme in economics, which would bridge existing streams of ‘heterodox’ economic theory.     

Presidential Address: Antitrust restrictions on single-firm strategies

Abstract This article offers an overview of selected developments in the law and economics of antitrust regulation of single‐firm strategies. The strategy generating the most cases historically is resale price maintenance. Here, the law has moved sharply in both Canada and the U.S. towards more solid economic foundations. Yet a gap between the law and economics remains. The economics of resale price maintenance is reviewed within a framework that is much simpler and more general than the existing literature. The law on a second strategy, predatory pricing, represents in my view a success story for the influence of economic theory in spite of the absence of a single accepted theory of predatory pricing. The remaining single‐firm strategies are concerned largely with the exclusion by a dominant firm of rivals from a market. I review, with application to cases, the two most basic questions concerning exclusionary strategies. Are exclusionary, anticompetitive contracts ever entered into voluntarily by market participants? On the other hand, is complete or substantial foreclosure of a market through exclusionary strategies necessarily anticompetitive?     

Using Psychology to Improve Economic Policy

In this Australian Treasury seminar, I discuss the contributions that psychology could make to public policy formation via a new field: public policy psychology. Behavioural economics provides a precedent for my new field of public policy psychology. Unlike economics, psychology provides a solid scientific model of how individuals make decisions. I discuss shortcomings of economics in policy formation: model blindness, the focus on evidence supporting theories, the focus on markets, plus the importance of elements left out of conventional economic models (for example, irrational decision‐makers). I end by discussing two Treasury case studies: the mining tax and government responses to the Global Financial Crisis.     

Sociology of economics or sociology of economy? theoretical-methodological arguments for sociological economics

This paper makes a proposal for reintroducing sociological or social economics into contemporary economic science. Such a reintroduction is proposed to be substantive, by analyzing the social structuring of the economy, and formal, by including sociological/social economics in the current (JEL) classification system of economic disciplines (code A.15). Both epistemological and ontological arguments can be presented to support the proposal. Epistemological arguments invoke the presence of essential components of sociological economics in the development of economic thought, and ontological arguments stress the role of social factors in economic life. In this paper I present primarily epistemological (theoretical-methodological) arguments for sociological economics, and secondarily ontological ones. I show that the present designation, sociology of economics, is something different from sociological or social economics in that the former refers to economic epistemology (knowledge) and the latter to economic ontology (reality). I conclude that, in addition to a sociology of economic science, we need a sociology of economic life. There is nothing surprising in the habit of economists to invade the sociological field. A major part of their work—practically the whole of what they have to say on institutions and on the…[social] forces which shape economic behavior—inevitably overlaps the sociologist’s preserves. In consequence, a no man’s land or everyman’s land has developed that might conveniently be called economic sociology … [or sociological economics] (Schumpeter 1956:134). The author is grateful to two anonymous referees for their constructive comments on an earlier version of this article.