Erik Lundestad: Economics and human motivation: On the «neo-classical» paradigm and its critics

In current mainstream economic theory human motivation is characterized in very narrow terms. Yet it seems clear that, as for instance Amartya Sen has pointed out, we act out of all sort of reasons, including practical-political ones. So why doesn’t the representatives of mainstream economic theory just recognize that they have been mistaken? Why do they insist on upholding their narrow characterization of human motivation? Critics of mainstream economics tend to treat these questions as rhetorical questions. In this paper, however, it is argued that whereas there are some very good reasons to criticize the established view, there are also some very good reasons to uphold it. The reason as to why this is so, it is argued, is that whereas mainstream economic theory is based on methodological individualism, its critics, on the other hand, base their points of view on methodological collectivism. This implies that just as the critics can argue that the methodological individualism of mainstream economic theory is mistaken empirically (i.e. that our interests, desires and needs are not «ours» but the result, rather, of external, social structures) the representatives of mainstream economic theory can, with equally much right, argue that it simply isn’t possible to account for social phenomena as such without presupposing the individual’s own, distinct point of view.

Keywords: Methodological individualism, methodological holism, economics, motivation, ethics