What exactly is the difference between this and praxeology?
Are there false assumptions / is the theory ‘wrong’? Or does it simply use different terminology and methodology?
Cheers
Rational choice theory is heavily based on mathematics and it assumes that humans attempt to maximize their own utility with every action they take. Praxeology does not fall into these errors.
Some additional highlights from the linked Wikipedia article:
“Transitivity – if action a1 is preferred to a2, and action a2 is preferred to a3, then a1 is preferred to a3.”
Mises explicitly states in Human Action that this need not be so.
And when discussing some of the unrealistic assumptions that some of the models make:
“Also, with dynamic models that include decision-making over time, time inconsistency may affect an individual’s preferences.”
I see two problems with this: first, that some models do not include decision-making over time, and second, that even some models that include this apparently assume that subjective valuations never change (that’s how I read the sentence, at least).
“An individual has full or perfect information about exactly what will occur under any choice made. More complex models rely on probability to describe outcomes.”
Obviously both approaches are fallacious in Austrian economics.
This is an error?
So what? I think you need to expand on this a little. Just because a discipline relies heavily on math, it doesn’t mean it’s erroneous.
He was wrong yet again?
Rational choice utilizes the language of mathematics, but one should not fallaciously refer to it as being based on mathematics; in fact, it is an utterly wrong judgment. Rather, rational choice theory simply adopts the language of mathematics as its medium of expression.
Praxeology asserts the exact same fact: that individuals seek the ends that they value the most.
It seems that you know neither what rational choice theory, nor what praxeology assert.
Rational choice theory does not state that this always needs to be so, but rather takes transitivity to be a believable assumption.
So would I be right in saying, Rational Choice Theory is really.. just a way for the mainstream not to have to deal with Mises? lol
No.
And what’s the point of that?
Because…?
So again, what are the differences? You’ve so far implied it is the same thing, as far as I can tell, except it uses “mathematics as its medium of expression”.
I mean it doesn’t seem like any kind of advancement, yet Gary Becker got a Noble Prize for it in 1992. Where the hell was Mises’ one? : \
Because mathematics is the language of mainstream economics; its a simple fact.
Because the world is not a manichaean struggle between the light side of Austrian economics, and the dark side of Keynesian economics.
Feel free to pick up a book on neoclassical economics, or to go to an intermediate college course on microeconomic theory if you are so curious; I am not proficient enough in rational choice theory to explain it to laymen, and I’m willing to guarantee that you will not find a good summary of rational choice theory on this forum.
Can you read a basic sentence? All that I stated was that the idea in rational choice theory that individuals will always maximize their utility is stating the same thing as praxeology when it states individuals will always choose the ends they value the most; I stated no more, no less.
That is just a stupid question.
Yeah, so it’s praxeology for the mainstream then? Which goes back to the point earlier, so they can side step praxeology. What else would be the reason? There isn’t anything ground breaking about it. No? What are the differences besides the choice of expression?
Well what is it a struggle between?
So you don’t know the differences? Then maybe you should stop feigning an answer. Oh really? A book on neoclassical economics is going to have a comparison between rational choice theory and praxeology? Wow, show me the book.
I’m willing to guarantee that you will not find a good summary of praxeology in an “intermediate college course on microeconomic theory.” Let alone any kind of understanding of the Austrian School.
This is just a stupid answer. So why did Becker deserve the Nobel Prize?
There is a difference between “always maximizing their utility” and “choosing the ends they value the most”
Actually, it is.
No. He was arguing that preferences need not be diachronically consistent and thus that the assumption will not hold over time with regard to the same preferences.
Check Bob Murphy’s archives here, he has a lecture in mp3 and I think a transcript too where he compares the Austrian vs Neo Classical views on this issue. Put more from my point of view and you can find further information in this paper here, and the statements from that paper that really draw out the differences in the two very similar concepts are these: “Just as scarcity necessitates choice, uncertainty necessitates imagination.” and “[W]hen uncertainty is added to scarcity as a problem facing purposive agents, institutions must not only align incentives to settle disputes over interpersonal resource and rent allocation, but also must generate knowledge to coordinate the potentially divergent expectations of multitudinous agents.”
The value scales of Rational Choice Theory and their subsequent manipulation in Neo Classical models heavily imply they are a given, whereas in the Austrian view they are discovered, rediscovered, destroyed and remade, etc., every time a decision has to be made. It’s kind of like what Rational Choice Theory does is take a pedagocically useful construct that shows mechanically what’s happening and substitutes that for the reality. Similar to differing definitions of demand elasticity. To Austrians the real issue is the effect on total revenue which can’t be known, only discovered, while as described in Neo Classical books it’s the give in the demand schedule, or how many more or less units will be sold for a given price drop or increase respectively. Both are ‘right’, but the Neo Classical definition is also irrelevant because it takes demand schedules as given instead of something to be disovered on the market. In reality there is no demand schedule in a book somewhere, so ‘how much give’ there is in that schedule isn’t something that’s known. Just like actual value scales aren’t known or given, they are discovered at the moment of choice, and the attempt to systematize the concept removes a crucial real element: uncertainty, which is not the same as random by the way. In the end the attempted mathematization of the subject has taken a dynamic real process that occurs and the graphs and tools used to represent it, and morphed it into those very graphs and tools. Kind of like someone expecting to see a big star or dot and a city name written on the ground at a town center when they travel because they saw them on the map they used to plan their trip.