Coping with irrationality in orthodox economic theory

Abstract

Purpose The purpose of this paper is to critically assess the assumptions regarding human behaviour in orthodox neoclassical economic theory. The orthodox neoclassical economic theory prescribes rational models of human behaviour, but the strictness of the criteria, developed to promote theoretical consistency and conceptual elegance, commonly fails to fully accommodate all of the empirical material. To save the core of the orthodox neoclassical economic theory research program and to neutralize and mute criticism regarding its predictive failures, its proponents engage in expedient theorizing, the expansion of the initial theoretical framework by adding ad hoc hypotheses and/or including additional explanatory factors; in many cases, dismissed as “unnecessary complications” (as in the case of morality and ethics – two conspicuously “non-economic” concepts) in the initial formulation of theoretical propositions of the core theories. Design/methodology/approach The paper reviews a body of heterogeneous literature to introduce and examine the use of expedient theorizing in economic thinking. Findings In the present case, the hyperrationalist axiom regarding the efficacy of calculative practices to maximize individual utility is accompanied by moralist concerns (and, by implication, corrective and disciplinary action) regarding the failure to adhere to such prescriptions. Expedient theorizing, thus, becomes a key mechanism in the political economy of truth that currently grants orthodox neoclassical economic theory significant authority to inform policy-making in substantial ways and considerable prestige. Originality/value The orthodox neoclassical economic theory constitutes the blueprint for policy-making and institutional change, and, therefore, the key economic ideas being the constitutive elements of the contemporary economy demand scholarly attention. The paper thus points at theoretical inconsistencies in the orthodox neoclassical economic theory and introduces the concept of expedient theorizing as its remedy.