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Article
Publication date: 15 February 2008

Jon‐Arild Johannessen and Johan Olaisen

This paper seeks to use systemic thinking for the purpose of criticizing neoclassical utility theory.

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1111

Abstract

Purpose

This paper seeks to use systemic thinking for the purpose of criticizing neoclassical utility theory.

Design/methodology/approach

First, the systemic‐theoretical ontology, epistemology and methodology are presented. Then the basis for the utility theory, and later spin‐offs, the decision theory and game theory, for which among others Jon Elster is a main agent, are criticized.

Findings

The psychological hypothesis, on which the utility theory is based, is rejected as untrue.

Originality/value

The fact that a theory can be explained in simple mathematical terms may make it popular, but this will hardly make it more scientific, despite its display of numerous mathematical terms. This paper's contribution has been to provide a critique of this concept.

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Kybernetes, vol. 37 no. 2
Type: Research Article
ISSN: 0368-492X

Keywords

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Book part
Publication date: 20 November 2018

Dorian Jullien

This chapter conducts a systematic comparison of behavioral economics’s challenges to the standard accounts of economic behaviors within three dimensions: under risk, over…

Abstract

This chapter conducts a systematic comparison of behavioral economics’s challenges to the standard accounts of economic behaviors within three dimensions: under risk, over time, and regarding other people. A new perspective on two underlying methodological issues, i.e., inter-disciplinarity and the positive/normative distinction, is proposed by following the entanglement thesis of Hilary Putnam, Vivian Walsh, and Amartya Sen. This thesis holds that facts, values, and conventions have inter-dependent meanings in science which can be understood by scrutinizing formal and ordinary language uses. The goal is to provide a broad and self-contained picture of how behavioral economics is changing the mainstream of economics.

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Book part
Publication date: 3 June 2008

James C. Cox and Vjollca Sadiraj

Much of the literature on theories of decision making under risk has emphasized differences between theories. One enduring theme has been the attempt to develop a…

Abstract

Much of the literature on theories of decision making under risk has emphasized differences between theories. One enduring theme has been the attempt to develop a distinction between “normative” and “descriptive” theories of choice. Bernoulli (1738) introduced log utility because expected value theory was alleged to have descriptively incorrect predictions for behavior in St. Petersburg games. Much later, Kahneman and Tversky (1979) introduced prospect theory because of the alleged descriptive failure of expected utility (EU) theory (von Neumann & Morgenstern, 1947).

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Risk Aversion in Experiments
Type: Book
ISBN: 978-1-84950-547-5

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Article
Publication date: 5 August 2014

Evgeniya Lukinova, Mikhail Myagkov and Pavel Shishkin

This paper aims to study the value of sociality. Recent experimental evidence has brought to light that the assumptions of the Prospect Theory by Kahneman and Tversky do…

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6799

Abstract

Purpose

This paper aims to study the value of sociality. Recent experimental evidence has brought to light that the assumptions of the Prospect Theory by Kahneman and Tversky do not hold in the proposed substantive domain of “sociality”. In particular, the desire to be a part of the social environment, i.e. the environment where individuals make decisions among their peers, is not contingent on the framing. Evolutionary psychologists suggest that humans are “social animals” for adaptive reasons. However, entering a social relationship is inherently risky. Therefore, it is extremely important to know how much people value “sociality”, when the social outcomes are valued more than material outcomes and what kinds of adaptations people use.

Design/methodology/approach

We develop a new theory and propose the general utility function that features “sociality” component. We test the theory in the laboratory experiments carried out in several countries.

Findings

Our results suggest that when stakes are low the theory of “sociality” is successful in predicting individual decisions: on average, people do value “sociality” and it surpasses the monetary loss.

Originality/value

The main contribution of this paper is the breakdown of the risk attitudes under low stakes and individual level of decision-making. Another advancement is the ability to formalize the social utility or the theory of “sociality” in an economic model; we use general utility function that we define both on the outcomes and on the process of the decision-making itself and test in laboratory studies.

Details

Foresight, vol. 16 no. 4
Type: Research Article
ISSN: 1463-6689

Keywords

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Book part
Publication date: 3 June 2008

Nathaniel T. Wilcox

Choice under risk has a large stochastic (unpredictable) component. This chapter examines five stochastic models for binary discrete choice under risk and how they combine…

Abstract

Choice under risk has a large stochastic (unpredictable) component. This chapter examines five stochastic models for binary discrete choice under risk and how they combine with “structural” theories of choice under risk. Stochastic models are substantive theoretical hypotheses that are frequently testable in and of themselves, and also identifying restrictions for hypothesis tests, estimation and prediction. Econometric comparisons suggest that for the purpose of prediction (as opposed to explanation), choices of stochastic models may be far more consequential than choices of structures such as expected utility or rank-dependent utility.

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Risk Aversion in Experiments
Type: Book
ISBN: 978-1-84950-547-5

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Article
Publication date: 1 June 1985

John M. Gowdy

Neo‐classical utility theory has withstood several decades of sustained criticism. Its success has been due (1) to the ability of the theory to represent an essentially…

Abstract

Neo‐classical utility theory has withstood several decades of sustained criticism. Its success has been due (1) to the ability of the theory to represent an essentially non‐analytical process by analytical methods, and (2) to the fact that the theory was developed for, and applied to, advanced market economies where the simplifying assumptions are most appropriate. It is argued below that the neo‐classical formulation is inappropriate in societies where agrarian traditions predominate and that, consequently, economic policies based on such an approach have frequently been misdirected.

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International Journal of Social Economics, vol. 12 no. 6/7
Type: Research Article
ISSN: 0306-8293

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Abstract

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Histories of Economic Thought
Type: Book
ISBN: 978-0-76230-997-9

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Book part
Publication date: 3 June 2008

Glenn W. Harrison and E. Elisabet Rutström

We review the experimental evidence on risk aversion in controlled laboratory settings. We review the strengths and weaknesses of alternative elicitation procedures, the…

Abstract

We review the experimental evidence on risk aversion in controlled laboratory settings. We review the strengths and weaknesses of alternative elicitation procedures, the strengths and weaknesses of alternative estimation procedures, and finally the effect of controlling for risk attitudes on inferences in experiments.

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Risk Aversion in Experiments
Type: Book
ISBN: 978-1-84950-547-5

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Article
Publication date: 1 March 1985

Tomas Riha

Nobody concerned with political economy can neglect the history of economic doctrines. Structural changes in the economy and society influence economic thinking and…

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1326

Abstract

Nobody concerned with political economy can neglect the history of economic doctrines. Structural changes in the economy and society influence economic thinking and, conversely, innovative thought structures and attitudes have almost always forced economic institutions and modes of behaviour to adjust. We learn from the history of economic doctrines how a particular theory emerged and whether, and in which environment, it could take root. We can see how a school evolves out of a common methodological perception and similar techniques of analysis, and how it has to establish itself. The interaction between unresolved problems on the one hand, and the search for better solutions or explanations on the other, leads to a change in paradigma and to the formation of new lines of reasoning. As long as the real world is subject to progress and change scientific search for explanation must out of necessity continue.

Details

International Journal of Social Economics, vol. 12 no. 3/4/5
Type: Research Article
ISSN: 0306-8293

Abstract

Details

Documents on and from the History of Economic Thought and Methodology
Type: Book
ISBN: 978-1-84663-909-8

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