Workshop: “The Economic Model of Human Behaviour”

By Gebhard Kirchgässner

Fellowdetail

Workshop "Das ökonomische Menschenbild"

This workshop took place on 8/9 May 2014 at the Berlin Institute for Advanced Study at Wallotstrasse 19 in Berlin. It was undertaken by the Institute for Advanced Study in cooperation with the National Academy of Sciences Leopoldina. It was conceived as the first in a series of workshops planned by Leopoldina, entitled “Conceptions of Human Nature in the Sciences and Humanities.” The organisers of this series wanted to devote one of the workshops to the economic model of human nature – homo economicus – because it has found wide acceptance not only in economics but also in other social sciences today. The goal of the workshop was to show and critically examine its role in these disciplines. The event was held at the Berlin Institute for Advanced Study because I was a fellow there during the past academic year and the institute was willing to organise it.

Focus
The specific focus of the workshop was chosen because the economic model of human behaviour – which in its most general version corresponds to Max Weber’s concept of an “interpretive [or ‘understanding’] sociology” – is not only the basis of modern economics, but is also widely used in a variety of forms in the other social sciences, where it is termed the rational choice approach. At the same time, though, it has met with strong opposition. Understandably, this opposition is strongest where, as in parts of sociological research, the social sciences are seen as a branch of the humanities, and comparatively weak in other areas in which empirical work is performed with the help of statistical methods. Of course, even in these latter fields, a number of assumptions that are commonly used in economic models have been subjected to criticism, some of it quite pointed. This is particularly true of the assumption of (strict) rationality and self-interest. In view of this situation, the workshop sought to show how this model can be used in these other social sciences while also taking into account its possible limitations.
 

Implementation
In order to achieve these objectives – after a general introduction to this approach – representatives of the various disciplines were invited to demonstrate its potential and limitations. A key requirement was that they know of this approach, ideally apply it themselves and also be familiar with the criticism from their own disciplines. Wherever possible, the comments on these presentations were delivered by economists familiar with these areas or by colleagues from the discipline in question. The disciplines under consideration were: (i) sociology, which due to its focus on comprehensive theories of society might be seen as a fundamental discipline in the social sciences; (ii) political science, which (after economics) was probably the first social science to put the model to widespread use; (iii) law, in which the model has also been widely applied, especially in the United States (“law and economics”); (iv) psychology, with which the model has long had close links, as seen by the emergence of a new sub-discipline (“behavioural economics”) and by the fact that two psychologists have so far received the Nobel Prize in Economics; and, most recently, (v) the educational sciences, which as empirical sciences studying socialisation and educational processes have faced competition in recent years from the development of the field of the economics of education.

The individual presentations
After a general introduction to the economic model of behaviour by Gebhard Kirchgässner, Horst Esser took a look at the situation from a sociological perspective. After asking “What is sociology?” and emphasizing the “explanatory” role of science, he showed in a very general way what the model had achieved, what its limitations were and what alternatives existed. One idea came up here that ran through all the presentations. Discussing the situation in political science after Horst Esser, Reinhard Zintl expressed this idea as follows: “If we claim that homo economicus in the narrowest sense is the only correct model and that it is applicable everywhere, this could be a form of economic imperialism. In this case, the model would not be useful for other disciplines. It would also have an internal weakness in that it is too narrowly defined. On the other hand, if we carefully consider its foundations and distinctions, it can be a particularly powerful approach for all social sciences.”

Two questions were central to these discussions: (i) what can be considered as being “rational” and, in particular, (ii) how important is the assumption of self-interest? In his comment, for example, Andreas Diekmann showed that reciprocal behaviour that is only partially compatible with short- or long-term self-interest can be observed in field experiments. On the other hand, Kai Maaz explained that traditional economic arguments, among others, play an important role in the decisions parents make concerning the schools they send their children to. These remarks make clear that educational scholars and economists have much in common, at least with respect to their empirical work. To the extent that significant differences do exist, they are likely to be related to the question which variables receive special consideration and which statistical econometric methods are used – though this latter point is becoming increasingly less important.

Jörg Rieskamp addressed such methods in his presentation. He described the methods that can be used most effectively to model individual decisions involving multiple alternatives. He came to the conclusion that the “multialternative decision field theory” did a better job than the “random utility models” employed by most economists. Such studies are interesting not only in themselves, but also because psychologists and economists have long debated which rules are used by individuals and whether and in what situations simple rules based on relatively little information lead to better results than do complex rules that process more information.

In the last talk, which was devoted to the economic approach in law, FRANZISKA WEBER showed how different versions of the economic model have influenced and are still influencing consumer protection law. The German Civil Code has traditionally been based on the principle of a mature autonomous individual, which is also the basis of the traditional economic model. Over the last few decades, though, consumer protection law in Germany has evolved in such a way that it is now more closely aligned with behavioural law and economics. In other words, it is generally accepted that individuals are subject to behavioural anomalies and that they do not always make decisions in the “fully rational” manner assumed by the traditional neoclassical model. Due to influences from the European Union, the traditional view now appears to be gaining renewed importance in case law and legislation, which is leading to lower levels of protection.

Final evaluation
This last talk was the only one to discuss normative aspects. It is obvious that the discipline of law is better suited to do so than other social sciences that are generally seen as “explanatory sciences.” This of course does not mean that such discourses cannot take place or are not taking place in these other disciplines as well. But the discussions at the workshop focused almost exclusively on the model’s application, limitations and potential – in other words, on the perspective of positive theory. In order to address the normative dimensions in greater detail, it probably would have made sense to invite a philosopher to give a talk.

At the same time, almost no one expressed fundamental doubts as to the usefulness of the model. There was a broad consensus that it is an important tool for analysing problems in the social sciences. Most of the discussions and questions revolved around its scope. Terminological differences also became evident. Some participants wanted to define the model of homo economicus quite narrowly, meaning in particular that they considered the assumption of individual behaviour that is directed (exclusively) by self-interest to be one of its central features. Others used the term to describe a broader model in which individuals can pursue various goals, including non-material ones. In this case, altruism is also compatible with the approach. It is unclear to what extent such terminological differences affect research behaviour.

The lack of fundamental criticism was perhaps due to the fact that practitioners of the qualitative and narrative approaches to the social sciences did not take part in the discussions.

Overall, the event can be regarded as a success. I received only positive feedback from the speakers and the audience, including from staff members of the Berlin Institute for Advanced Study and other guests. The workshop attracted forty-seven external guests, which was quite high compared to similar events. Roughly half were professors from a wide variety of disciplines (including medicine and musicology). As one participant noted, one exemplary aspect of the workshop was that an interdisciplinary discussion came about quite naturally because the topic was examined from the perspective of various social sciences.

Whether all of this will lead to a publication is still an open question. A few matters need to be settled first.

In conclusion, I would like to extend my thanks to Leopoldina and the Berlin Institute for Advanced Studies for making the event possible. Special thanks also go to the staff responsible for carrying out the workshop. As the speakers and I noted with great satisfaction, everything was organised perfectly.

Berlin, July 2014
Gebhard Kirchgässner