The Space Between Choice and Our Models of It
The Space Between Choice and Our Models of It
Practical Wisdom and Normative Economics
The gap between the economic theory of action and the practical reality of choice (analyzed in the Aristotelian practical wisdom tradition) cannot be bridged through the development of more complex models. This poses a challenge for the use of economic models for policy analysis: they cannot help but leave out of their formal analysis certain aspects of actual decision-making (such as practical wisdom) which are crucial to the operation of the economy. Insights from three different treatments of the gap between the formal analysis of choice and the reality of human behavior—Lucy Suchman’s studies of plans and situated action, James Scott’s analysis of mētis, and Vernon Smith’s studies of ecological rationality—offer guidance for how economists might modify the insights of their models of choice when offering policy advice.
Keywords: practical wisdom, ecological rationality, situated action, rationality, Friedrich Hayek, Lucy Suchman, James Scott, Vernon Smith
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