Rational Fools : A Critique Of The Behavioral Foundations Of Economic Theory

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Rational Fools: A Critique of the Behavioral Foundations of Economic Theory written by economist, Amartya Sen, takes a look at behavioral self-interest and its relation to behavioral economics. At the time that this paper was written, behavioral economics was becoming a popular area to explore and economists were trying to figure out how they could apply their research to encourage human flourishing. Sen begins this paper by critiquing the work of Edgeworth, who claimed that the 1st principle of economics was that every agent is motivated by self- interest and that most people are egoists or at least mixed utilitarians. Even though this viewpoint is persistently used in economic models, ironically Edgeworth himself did not even believe the first principle of economics to be completely true. So Zen raises the question as to why he spent so much time pushing this assertion and how Rational Choice Theory, in general, may be flawed in several ways. Edgeworth eventually developed a method using economic calculus to better understand and quantify self-interest. As it turns out, he did not think the 1st principle of economics was a very good assumption except in the cases of war and contract. While this restricts the model a lot, it does provide us with a decent amount of information. Zen proceeds to explain what Edgeworth meant by this conclusion. Basically, he thought egoism, and not utilitarianism, was the best way to determine what actual human behavior was. Rejecting the

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