Bringing the patient back in: behavioral decision-making and choice in medical economics

We explore the behavioral methodology and “revolution” in economics through the lens of medical economics. We address two questions: (1) Are mainstream economic assumptions of utility-maximization realistic approximations of people’s actual behavior? (2) Do people maximize subjective expected utility, particularly in choosing from among the available options? In doing so, we illustrate–in terms of a hypothetical experimental sample of patients with dry eye diagnosis—why and how utility in pharmacoeconomic assessments might be valued differently by patients when subjective psychological, social, cognitive, and emotional factors are considered. While experimentally-observed or surveyed behavior yields stated (rather than revealed) preferences, behaviorism offers a robust toolset in understanding drug, medical device, and treatment-related decisions compared to the optimizing calculus assumed by mainstream economists. It might also do so more perilously than economists have previously understood, in light of the intractable uncertainties, information asymmetries, insulated third-party agents, entry barriers, and externalities that characterize healthcare. Behavioral work has been carried out in many sub-fields of economics. Only recently has it been extended to healthcare. This offers medical economists both the challenge and opportunity of balancing efficiency presumptions with relatively autonomous patient choices, notwithstanding their predictable, yet seemingly consistent, irrationality. Despite its comparative youth and limitations, the scientific contributions of behaviorism are secure and its future in medical economics appears to be promising.     

Neuroeconomics: Infeasible and Underdetermined

Advocates of neuroeconomics claim to offer the prospect of creating a “unified behavioral theory” by drawing upon the techniques of neuroscience and psychology and combining them with economic theory. Ostensibly, through the “direct measurement” of our thoughts, economics and social science will be “revolutionized.” Such claims have been subject to critique from mainstream and non-mainstream economists alike. Many of these criticisms relate to measurability, relevance, and coherence. In this article, we seek to contribute to this critical examination by investigating the potential of underdetermination, such as the statement that testing involves the conjunction of auxiliary assumptions, and that consequently it may not be possible to isolate the effect of any given hypothesis. We argue that neuroeconomics is especially sensitive to issues of underdetermination. Institutional economists should be cautious of neuroeconomists’ zeal as they appear to over-interpret experimental findings and, therefore, neuroeconomics may provide a false prospectus seeking to reinforce the nostrums of homo economicus.     

The Social Economics of Work Time: Introduction

How do social economists conceptualize and analyze time, particularly time spent in paid employment? In this symposium regarding this quite “timely”" issue, it is evident that social economics views work time as something more than its presentation in neoclassical economics. For neoclassical economists, time is a scarce resource that, when commodified as labor, serves as a factor of production and means to the end of consumption for optimizing firms, individuals, and families. It is also more than the radical political economics understanding of time as the yardstick measuring the value created by labor. Instead, time spent on the job is all at once a source of income, personal identity, and relative status within society, the workplace and household, and a constraint on individuals' ability to pursue self-directed activities and social reproduction. Work time is determined within a complex web of evolving culture and social relations, as well as traditionally conceived market, technological, and macroeconomic forces and institutions such as collective bargaining and government policy.     

Epistemology and the tasks of feminist economics

This paper examines the implications of current epistemological debates for the work of feminist economists. Feminist economists must acknowledge (in accordance with recent developments in the study of science) that (a) inquirers can never be certain whether claims about the world are true; (b) scientific inquiry is permeated with “internal” and “external” values; and (c) beliefs are affected by inquirers' social locations. But feminists should not, it argues, embrace the “relativist” stance of some postmodern thinkers, or reject the ideal of “truth,” or argue that beliefs are strictly determined by inquirers' identities and interests. It seeks to outline an epistemological “middle ground” for feminist economics, between the extremes of exaggerated claims of certainty and a disempowering relativism.     

Development Processes Seen Through Non-Marginalist Lenses with Considerations of Complementarities

Marginalism has deeply shaped neoclassical concepts and analytical tools that are applied to development economics. With a static notion of efficiency defined for a state of competitive equilibrium, neoclassical economists study development in equilibrium frameworks, regarding underdevelopment as the consequence of market failures. How might one, who is not equipped with marginalist lenses, look at development processes as they unfold in history? Prior to the emergence of marginalism such observations abounded in the works of the so-called “protectionists,” where ever-evolving production complementarities figure prominently, and there were considerations of indivisibility. In the postwar era, this is present in the works of some early development economists, especially Albert Hirschman in his employment of backward and forward production linkages to characterize development processes, which are viewed as unfolding series of disequilibria. Historical sequences of events reflect path-dependence and they feedback on each other to exhibit circular and cumulative causation. One thing leads to another, or some things lead to others and so on, including institutional changes. However, the activation of linkages could encounter obstacles, with “technological strangeness” being one, in which case sequential policy intervention could be warranted. This article briefly considers differences with the neoclassical approach in generating policy recommendations.     

Comments on John Roemer’s first welfare theorem of market socialism*

Abstract

In this comment on John Roemer’s “theory of cooperation with an application to market socialism”, I extend Roemer’s first welfare theorem of market socialism in two directions. First, I prove a version of the theorem that deals with non-linear taxation. Second, I offer a connection between the theorem and welfare equality. I then argue that the models and questions that Roemer contribute to bring to welfare economics raise questions that go much beyond the research on socialist ethics. In particular, I introduce a positive model of moral behavior that yields different predictions from Roemer’s Kantian model. I conclude that individual morality should become a central concern of welfare economists.     

An evolutionary theory of household consumption behavior

Evolutionary economics badly needs a behavioral theory of household consumption behavior, but to date only limited progress has been made on that front. Partly because Schumpeter’s own writings were focused there, and partly because this has been the focus of most of the more recent empirical work on technological change, modern evolutionary economists have focused on the “supply side”. However, because a significant portion of the innovation going on in capitalist countries has been in the form of new consumer goods and services, it should be obvious that dealing coherently with the Schumpeterian agenda requires a theory which treats in a realistic way how consumers respond to new goods and services. The purpose of this essay is to map out a broad alternative to the neoclassical theory of consumer behavior.     

The Impossibility of Entrepreneurship Under the Neoclassical Framework: Open vs. Closed-Ended Processes

In spite of its use to explain market processes, neoclassical economics still has not integrated entrepreneurship into its analyses. This explanatory gap is the consequence of the analytical closed-endedness of the “market” processes described by the neoclassical framework, where social interactions do not result in new unpredictable information. However, entrepreneurship as profit-seeking under uncertainty is an open-ended process characterized by a creatively reflexive and emergent interactive behavior in society. This open-endedness involves the generation of novel, complex, and extensive future information that is not what anyone intended it to be. Neoclassical economics, with its predetermined assumptions on economic behavior, cannot really account for the fundamental uncertainty of open-ended processes because it cannot explain reflexivity or emergence. Therefore, it cannot explain entrepreneurship as either an innovatively cohesive or disruptive behavior that converges toward future market situations.     

Social Provisioning as a Starting Point for Feminist Economics

The past decade has seen a proliferation of writing by feminist economists. Feminist economists are not identified with one particular economic paradigm, yet some common methodological points seem to be emerging. I propose making these starting points more explicit so that they can be examined, critiqued, and built upon. I use the term “social provisioning” to describe this emerging methodology. Its five main components are: incorporation of caring and unpaid labor as fundamental economic activities; use of well-being as a measure of economic success; analysis of economic, political, and social processes and power relations; inclusion of ethical goals and values as an intrinsic part of the analysis; and interrogation of differences by class, race-ethnicity, and other factors. The paper then provides brief illustrations of the use of this methodology in analyses of US welfare reform, gender and development, and feminist ecological economics.     

Assessing the Role of Business Schools in the Market for New Economics Ph.D.'s

The projected oversupply of new economics Ph.D.'s and its implications for college and university programs are explored. The authors discuss under-graduate enrollments, the emergence of business schools as a growth market for economists, relative salary movements, “field switching,” and shifts in the kinds of doctoral degrees that faculties have. Their findings are important both to those planning to earn Ph.D.'s in economics and to universities that train economists.     

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.     

To value or not to value? That is not the question

Should we reject money when we value nature? Like most environmentalists, ecological economists are increasingly divided on this question. Synthesizing political ecology with ecological economics, we argue that this way of framing the question is limited. We propose a reformulation of the question into “when and how to value with money?” and “under what conditions?” We recommend four criteria for a sound choice: environmental improvement; distributive justice and equality; maintenance of plural value-articulating institutions; and, confronting commodification under neo-liberalism. We call for due attention to the socio-political context within which a valuation is placed and the political goals it serves. The relevance of this framework is demonstrated by applying it to three practical cases: pollution damages, water pricing and payments for ecosystem services.     

Scientific misconduct and research ethics in economics: an introduction

Abstract

Since the screening of Inside Job in movie theatres around the world in 2010, research integrity in economics has been questioned by scholars and public intellectuals. Prestigious economists and policy makers are accused of conflicts of interest while prominent economists are charged with plagiarism and self-plagiarism. Some of these economists replied to accusations about themselves while many others have preferred not to respond at all. These days, economists hear the following question more often than before: “what is wrong with economics?”     

Values and the Economics Principles Courses

Every economics teacher has probably wrestled with the problem of how to deal with values, and because of recent student demands for relevance this problem has become more troublesome. Professor Horton believes that economists should teach “only what we believe has been scientifically established” and “should not promote particular values or particular social decisions….” He asserts that values and goals should be considered in economic classes, however, and in this article he suggests a procedure for teaching a unit on values and goals.     

Contributions of German and American jesuits to economics: The last 100 years

This article focuses on the contributions of six economists schooled in the Jesuit tradition. Four are Jesuit priests: Heinrich Pesch and Oswald von Nell-Breuning who are German, and Bernard Dempsey and Joseph Becker who are American. Two others, Goetz Briefs and William Waters, are lay persons who are referred to as “Jesuits without collars.” Five have direct ties to one another. Von Nell Breuning was a student of Pesch, as was Briefs. Waters was a student of Briefs, and Dempsey was influenced by Pesch and von Nell-Breuning. All five are solidarist economists who think about economics and economic affairs in a distinct way which originates with Pesch. Today they would be called personalist economists. The distinctive work of these six Jesuits is barely visible in the ranks of academic economists. Their contributions should be highlighted before they are lost forever to those who sense there is something inadequate about mainstream economics.     

Behavioral Factors Affecting the Home Bias Phenomenon: Experimental Tests

Although international portfolio theory states that an optimal portfolio should be well diversified, in practice, investors tend to invest excessively in domestic assets. This tendency, which is commonly referred to in the finance literature as “home bias” (HB), has puzzled economists for many decades. This research develops and presents experiments designed to test the behavioral factors related to HB discussed in the literature. In particular, these experiments test whether the factors of “familiarity” and “fluency” (ease of pronunciation) affect HB. In addition, using a method of controlled experiments, we examine the willingness to take risk as a basic source of HB. We also examine HB under three different market conditions (normal, bear and bull markets). Results indicate that subjects tended to take less risk with foreign, unfamiliar and nonfluent (difficult to pronounce) assets compared with local, familiar and fluent assets. This tendency increased significantly when the three factors were present together (foreign, unfamiliar and nonfluent assets) compared with when only one of the three factors was present. The results also revealed that HB increased during bear market periods.     

Why Need is “A Word We Cannot Do Without” in Economics

Economists in the neoclassical tradition do their best to avoid using the word “need.” Social economists have traditionally been more open to discussions of need. Philosophic discussions of need are also scarce but nevertheless helpful. This essay will argue that need is “a word we cannot do without” in economics, and not only in social economics. Need is objective, satiable, and absolute, by contrast with want or preference as it is defined in neoclassical economics. With this clarification, 1) it is reasonable that public policy should consider need as well as want and aim to satisfy some needs, and 2) for some purposes, such as the economics of health care, conventional demand cannot be understood without the concept of need. Thus, even the narrower purposes of neoclassical economics cannot be achieved without clarifying and using the concept of need, in addition to the more usual motivational assumptions of neoclassical economics.     

Marxism and economic determination: clarification and defence of an “old-fashioned” principle

This paper clarifies and defends economic determination as a defining principle of explanation of Marxist political economy and state theory. Economic determination is a principle of causation or explanation which involves the claim that “politics” is “explained” by “economics” in a relevant sense of those three terms. This principle is refined by clarifying the meaning of each of these terms, particularly focusing on “determination.” A defense is mounted on theoretical grounds by showing that Jessop’s critique of “reductionism” and related argument for “contingency” does not succeed. Economic determination is defined as a strong tendency but consistent with a notion of the relative autonomy of the state.     

On the Econ within

This essay examines the critique of behavioral economics that Infante, Lecouteaux and Sugden (ILS) offer in:"Preference Purification and the Inner Rational Agent.” It identifies and questions three main criticisms that ILS make: (i) a methodological criticism, alleging that there is no psychological basis for the attribution of purified preferences, (ii) an epistemological criticism, alleging that there is little evidence for claims about purified preferences, and (iii) a normative criticism, arguing that policies should aim to facilitate people’s choices rather than to satisfy purified preferences. The essay also distinguishes the view of welfare economics defended in Preference, Value, Choice, and Welfare from the claims of behavioral economists ILS criticize.