Title: The Analysis of Individual Behavior in Recent Economics: Ethical and

Biological Concerns

Introduction:
In recent years, the status of individual preferences in economic theory has been
modified. Up until the 1990s, standard economic theory would assume, roughly, that
individuals act moved by preferences, so as to satisfy their wants. Following as!"ollel,
#hinston and $reen %199&', the usual way to analy(e how these wants are transformed into
behavior is either I' by assuming that individuals satisfy these wants in a rational way
1
so
that it is necessary to impose rationality a)ioms %li*e transitivity and completeness' that tell
us how a rational individual is supposed to ma*e choices+ or ii' by empirically verifying if
the individual behaves according to some concept of consistency %in ,amuleson-s .revealed
preference/ %1901' approach'. Usually, the issue of how preferences were formed and how
they developed was not a sub2ect that economists should be concerned about. 3s ilton
Friedman put it bac* in 1945,
.6espite 7ualifications, economic theory proceeds largely to ta*e wants as fi)ed. 8his is primarily a case of
division of labor. 8he economist has little to say about the formation of wants+ this is the province of the
psychologist. 8he economist9s tas* is to trace the conse7uences of any given set of wants/ %p. 4'.
8his situation has changed in the 1990-s with the introduction of the idea of
.endogenous preferences/ %:owles, 199;'. 8hough this paper basically analy(es how the
economic environment affects individual preferences, :owles puts forth the idea that
individual preferences change according to the culture and the genetic endowment of the
individual.
5
#e are now interested in how tastes appear and how they change, depending
on culture and genetic endowment of people. From roughly the 19&0-s
0
until the 1990-s,
however, preferences were seen as .e)ogenous/, that is, it was not studied how preferences
changed and originated.
1
3 .rational/ behavior can be represented by the ma)imi(ation of a utility function, but need not be< see the
e)ample of le)icographic preferences, which are not representable by a utility function.
5
3n idea that is further e)amined and detailed in $intis %5004'.
0
#e can mar* the publication of =aul ,amuelson-s .=rinciples of >conomics/, in 19?1, as the starting point
of the modern e)ogenous preferences approach.
1
8he sub2ect of endogenous preferences is very thorny, and one might 7uestion its
relevance to economic theory. ,o, it is first necessary to point out to the very importance of
individual preferences in mainstream economic theory. It is also useful to put into historical
perspective the differences and similarities we can identify regarding the issue of individual
behavior in >conomics. @istory of economic thought will suggest that economic theory has
permanently studied human behavior mainly in two ways< as a behavior which is
.endogenous/ to social, cultural and biological influences and as a behavior which is
.e)ogenous/ to those influences. ,o, this change observed in the 1990-s is not new in
economic thought. Anly after this historical introduction can we start to as* for the reasons
and conundrums economists face when they depict individual behavior in today-s
mainstream economics. 8his historical account will suggest that there are roughly three
periods in the history of economic though which deal with the problem of how to model
human behavior< the first period is when preferences are seen basically as endogenous to
their economic, cultural and social environments+ a second period where these preferences
are seen as e)ogenous, roughly until the 1990-s, and today, when they are seen again as
endogenous to economic, cultural and social environments.
8he ob2ective of the paper is to show that this move towards an .endogenous
preferences/ approach regarding individual behavior in >conomics reintroduces ethical
themes
?
in economic discourse. 8his reintroduction is due to the fact that the modern idea
of .man/ ma*es him a simultaneous empirical ob2ect of in7uiry and transcendental sub2ect
of *nowledge, irreducibly. 3s we will hopefully be able to show, this dual character of
.man/ calls for a reintroduction of ethical sub2ects in >conomics.
,o, this paper is structured in the following way< in the first section, we briefly
comment on the importance of the concept of .preferences/ in modern economic theory.
3fter that, we present an overview of how economists have analy(ed human behavior, from
roughly 11&0 up until the 1990-s, showing that not only ac7uisition of material wealth, but
also ethical concerns were chief among the interests of former economists. It is important to
notice, though, that this history must be limited< we have not focused on the $erman
?
#e are going to use the term .>thics/ as meaning the study of the values a person or a community hold.
3long the paper, we will see that people-s ethical concerns can have either I' biological origins, in the sense
that our ideas of responsibility, and of what is right and wrong originate in the structure of our brains and
body+ or ii) a transcendental origin, meaning that it is impossible to reduce our concepts of right, wrong and
responsibility to any biological substrate.
5
@istorical ,chool, 3ustrian ,chool or Ald 3merican Institutionalism, because we do not
have space for that. #e have focused mainly on the classical %meaning ,mith, Bicardo and
althus, with a brief commentary on ar)' and neoclassical >nglish tradition of economic
thought. 3 third section will try to identify the two main defining types of human behavior
which this tradition identifies, and will also propose some e)planations for this duality.
,ection ? will try to e)plain the duality in the treatment of preferences in economic thought
using Foucault-s ideas about the dual characteristic of .man/ as a simultaneous
transcendental sub2ect and empirical ob2ect of *nowledge. ,ection & will show how a
particular strand of modern economic theory associated with the ,anta Fe Institute deals
with this duality and tries to solve the epistemological problem of the dual .man/. ,ection
4 presents the novelty of our approach< a new way to reintroduce ethical themes in
economic theory based on the indeterminacy of the concept of .human behavior/ in
>conomics. ,ection 1 concludes the paper.
1. Importance of the notion of individual preferences for mainstream economic
theory:
odern economic theory uses methodological individualism to address economic
problems. 8his means that the preferable way to describe and e)plain social phenomena is
by starting from the behavior of the individuals that participate in the phenomena in
7uestion. 8his behavior, in turn, must be primarily e)plained and described in reference to
the individuals- intentions and motivations. ,o, for economic science, it is of utmost
importance to understand how individuals act, but their intentions and motivations are
ta*en as given, and should be studied by psychologists, and not economists.
6uring the past decades, there have been many variants and criticisms of
methodological individualism %see, for e)ample, Butherford %5000'', but its basic tenet C
the importance of individual behavior to understand social phenomena C remained central
in mainstream economic theory. ,ince individual behavior is the basic building bloc* of
modern economic science, we may say that the more certain we are about the relevant
economic aspects of human behavior C that is, about the constancy of the individual
preferences through time, and about the material, social, cultural and biological constraints
imposed on them are !!, the more solid our theories will be. An the other hand, the capacity
0
of our theories to e)plain and describe economic activities will be limited by our appraisal
of the aforementioned aspects of human behavior.
In sum, individual behavior demarcates to us what economic theory can and cannot
e)plain and describe. In modern economic theory, individuals are depicted as consisting of
a set of preferences over bundles of goods and services, constrained only by prices and
income. 8his means that there is an e)plicit lin* between the conception of individuals and
their preferences in mainstream economics. If one defines individuals in an alternative way,
it is probable that our theories will li*ewise change. 8his is why it is crucial to study
individual preferences in nowadays- economics.
5. What have economists said aout individual preferences throughout the
history of economic thought!
It is also important for us to ta*e a 7uic* loo* at the history of economic thought to
see how individual behavior has been seen in the past. 8his is a necessary step in our
in7uiry, because this shows how economists of the past have dealt with the problem, and
how we have arrived at our present situation.
Aur ob2ective with this section is to show that ethical concerns were part of the
economist-s concern most of the time within the history of our discipline. It is important to
say as well that this ethical concern changes as we move to the notion of .self!interest/ of
,mith, Bicardo, althus, ill and ar) C meaning interest only in ac7uiring material
wealth C to the Bobbinsonian .self!interest/, which means ma)imi(ing a utility function,
and e)changing goods at the margin. For Bobbins, .self!interest/ does not necessarily mean
acting moved by the desire to ac7uire material wealth, but ma)imi(ing a utility function.
8he arguments of this utility function can or cannot be material. #e will sort this issue out
as we move along.
First off, it is worth noting that even before .political economy/ e)isted as a
separate field of *nowledge, >uropean political thin*ers of the DEII and DEIII centuries
generally focused on the study of the passions (or affections) that guided individual
behavior. 8heir idea was to be able to infer what form of government %for e)ample, an
absolute monarchy, a representative democracy or a participative democracy' could be best
for the whole society, given that humans are moved primarily not by reason but by
?
emotions. 8his does not mean that humans were mainly irrational, but, rather, that their
reason was passive to the impulses of the body %li*e hunger, thirst and the li*e C the so!
called passions of the body', and the impulses of imagination %li*e love, hate and envy C the
passions of the imagination'. It is good to notice that this vision is 7uite different from that
of Friedman, presented 2ust above, for they wished to *now precisely how a plethora of
sentiments %and not 2ust fi)ed wants' that were present in every man and woman could not
only e)plain the actions of men, but also suggest the most favorable conditions to improve
human-s lives. 8hat was the case, for e)ample, of three of the most important contractualist
thin*ers of those centuries, @obbes, Foc*e and Bousseau.
8hough their views regarding the status of different passions in human nature
differed greatly, every political and moral philosopher considered of vital importance to
*now how emotions influenced human behavior and to what e)tent they could be used to
build a better, peaceful polity. @irschman %1911' presented the intellectual history of how
this discussion about different passions converged to the idea that self!interest C that is, the
7uest for material goods with careful planning C could lead to the advent of a peaceful and
prosperous society.
#e can here observe that this discussion about which passions compel humans to
action infiltrated the then nascent economic discourse.
&
8oday, when economists loo* for
the origins of their discipline, the starting point is usually the ,cottish moral philosopher
3dam ,mith, who, before the .#ealth of Gations/, published the first edition of .8he
8heory of oral ,entiments/, in 11&9. 8his boo* is important to show not only ,mith-s
insertion in the discussion about what motivates human action, but also to show how he
came to conceive a good society in the form of individuals whose main motivation was the
ac7uisition of material goods in a system of mar*et competition %or, in his words, .the
simple and perfect system of natural liberty/'. ,mith was aware of the multiple motives and
proclivities of the human mind, but he, nonetheless, conceded that if everyone was moved
primarily by his or her self!interest, a prosperous society could flourish. Fess mentioned is
the fact that ,mith-s mar*et society could wor* properly only if the great ma2ority of people
pursued material wealth in a virtuous way, that is, acting with prudence, benevolence,
2ustice and self!command. #ithout these characteristics, it would be very difficult to
&
For a deeper discussion of how individual behavior was first incorporated in early economic discourse, see
@irschman %1911', Bosanvallon %5004' and 6umont %1911'.
&
develop long!term trust between business partners, repeated interactions, and have
competitive e)change without the imminent possibility of violence due to different interests
in the transaction.
4
:esides, ,mith was also conscious of the fact that the emulation of the rich by the
poor could be good for the individuals and for society %if some ethical principles were
observed', but it could also lead to the .the corruption of our moral sentiments- by the
disposition to admire the rich and the great/, as the title of one chapter of .8he 8heory of
the oral ,entiments/ reminds us.
8he essential point to *eep in mind here is this< the birth of .=olitical >conomy/ as
the study of the production, distribution and e)change of goods and services between free
individuals %that is, ideally constrained only by law, but free to pursue their self!interest' in
a mar*et regime assumed not only self!interest but also certain ethical principles on the part
of individuals. It could be e)pected that morally constrained and self!interested individuals
could %but not necessarily would' build a prosperous society, that is, a society that would
see its gross national product grow every year. 3ll other motivations of individuals and
discussions about ethical principles from then on could be considered secondary to
economic matters.
8he separation between >thics and >conomics was not easy to accomplish, though.
In the beginning of the DID century, althus and Bicardo debated about the status of
.=olitical >conomy/ arguing about its position as a mathematical or a moral science. #hat
does this mean for the treatment of the individual in our scienceH #hereas for Bicardo the
pursuit of self!interest in a mar*et regime is the starting point to analy(e the different
outcomes that arise when people ma*e economic transactions, for althus things are not so
simple. >)ploring the possible negative conse7uences of a mar*et!propelled society,
althus pointed out that the 7uest for economic growth could lead to .unhealthiness and
immorality/ among the population. Bicardo ruled out this type of reasoning because his
analysis did not encompass the development of the economy dynamically, as it changed
people-s preferences and its institutional structure with the passage of time. "onse7uently,
he did not admit that human motivations to action could change, as the economic system
changes. @e implicitly assumed that humans had fi)ed motivations regarding their material
4
8here has been a slew of literature about ,mith-s ethical concerns. For recent views of this ethical side in
,mith-s economic thought, see Ierstenet(*y %500&' and "er7ueira %5004'.
4
well!being, that is, people would be willing to ma*e as much money as possible, and were
constrained by law. 8his should implicitly hold for every society in the world. 8oday,
Bicardo-s approach could be said to involve .e)ogenous preferences/
1
althus, on the other hand, e)plored the dynamics of the economic system, trying
to understand how people could change as the economy changes. 8hat is, people moved
solely by the desire to accumulate wealth could, depending on the circumstances, lead to a
social outcome that could change people-s motivations. For e)ample, pollution and
overpopulation, brought by economic growth could ma*e individuals so unhealthy and
miserable that they would not have the capacity to strive to .better their condition/
anymore. 8he individuals in slums and other very poor areas are e)amples of people who
might lose the .capacity to aspire/ for better material conditions. althus could today be
identified with an .endogenous preferences/ approach to human behavior.
From then on, there were many attempts to bridge the gap between individuals who
were moved mainly by the desire to .better their condition/ and individuals who might
e)perience preference changes due to social, cultural and biological influences. @ow could
we separate actions that were motivated solely by the desire to ac7uire pecuniary wealth
from other *inds of actionH 8o answer this 7uestion was part of the tas* ta*en up by John
,tuart ill in the middle of the DID century.
ill-s %1;??' way to solve the problem was to treat .=olitical >conomy/ as an
abstract deductive science, related to the prediction of tendencies of economic aggregates.
8he agent who populated this science was .@omo >conomicus/, which was a
simplification %and, in a certain way, a caricature' of a human being whose sole motivation
was the desire to ma)imi(e his wealth. It was necessary to build this .@omo >conomicus/
because, in ill-s view, real economic agents were moved by a myriad of beliefs and
motivations, in an incredibly large number of transactions. It was necessary to separate the
desire for wealth from all other motivations %which, ideally, should remain e7ual', so that
we could deduce logical propositions in =olitical >conomy. @owever, ill also recogni(ed
that this procedure would restrain the field of applicability of =olitical >conomy.
@e also believed that, for practical economic matters, economists should have a
wide *nowledge of other disciplines. :esides, he believed that =olitical >conomy could not
1
8his discussion and references about the althus!Bicardo debate can be found in 3lvey %1999'.
1
be mi)ed to >thics, but the two disciplines were related. In fact, in his .=rinciples of
=olitical >conomy/, ill adds to his deductive analysis of economic processes many real
world e)amples to show how the idea of an .@omo >conomicus/ is limited
;
, and how the
real character and motivations of people depend on their culture and society.
>ven with the end of the classical period of .=olitical >conomy/ the discussion
regarding the ethical principles that influence human conduct and how this is related to the
scope of the discipline of =olitical >conomy lingered on. 3uthors that dealt with economic
issues, li*e ,idgwic* and >dgeworth were also both concerned about solving problems of
utilitarian philosophy with advanced calculus, building a theory of what .ought to/ which
could be rationally based. 8his involved the discussion of sub2ects li*e .the capacity for
pleasure/ of people %>dgeworth' and .the relation between %self'!interest and duty/
%,idgwic*'. John Geville Ieynes %1;90' wrote the first methodological treatise trying to
overcome the gap that separated the >nglish and the $erman ,chools of =olitical >conomy.
8his also involved a discussion, already on the first chapter of his boo* %after the
.Introductory/', .on the relation of =olitical >conomy to orality and =ractice/. @is
discussion is reminiscent of that of J. ,. ill, and Geville Ieynes also reached the
conclusion that, although it is possible and desirable to separate the normative and positive
domains in =olitical >conomy, these domains were, anyway, related. 8he positive domain
could describe economic uniformities, that is, economic events that could be put in a
relation of cause and effect and did not change with the passage of time. @e also
commented on an .intimate connection/ between this positive domain and the domain of
what he termed .=olitical >conomy ethics/, which should deal with .economic ideals/, that
is, what our economic ob2ectives should be.
#alras was another economist worried about the many domains that economic
discourse should encompass, including a domain of >thics, in a similar vein as that of
Geville Ieynes. ,ays Ioppl %199&'<
.#alras is famous mostly for his >lements of =ure >conomics K19&?L. :ut he also wrote ,tudies in
3pplied >conomics K1;9;L and ,tudies in ,ocial >conomics K1904L. 8hese three te)ts lay out an entire
system of political economy consisting of three branches< pure, applied and social. =ure economics, general!
e7uilibrium theory, is science. 3pplied economics, a practical matter of what is more or less useful to us in
our industrial pursuits, is not science but art. ,ocial economics, a matter of what is more or less 2ust in our
;
,ee his .=rinciples/ %1;?;', for instance.
;
relations with each other, is ethics. =olitical economy has three branches< one for science, one for art, and
one for ethics./ %p. 1'
3nd #alras was not the only one< because he believed that >conomics is partly
the study of man, and that people .carrKyL KtheirL higher nature with KthemL into business+
and, there as elsewhere, Kthey areL influenced by KtheirL personal affections, by KtheirL
conceptions of duty and KtheirL reverence for high ideals/ %:oo* I, "hapter II', 3lfred
arshall-s %1;90' >conomics should be concerned with ethical issues as well. Fi*e ill
and #alras, he believed that >thics is a separate domain of *nowledge, but any economist
should *eep ethical problems in mind when theori(ing.
In order to definetely separate the domains of >thics and >conomics, =areto insisted
on the fact that utilities between people were incomparable, and this led him to postulate his
criterium of optimality, which was used in the formulation of 19&1 3rrow and 6ebreu-s
two fundamental theorems of welfare. 8hese theorems also be7ueathed to posterity the
ethical criterium for the best allocation of resources in society< as :laug %5004, p. 0'
describes the first fundamental theorem,
.social welfare is ma)imised by an allocation of resources that meets with unanimous approval, meaning that
it is then impossible to reassign inputs and outputs so as to ma*e any individual strictly better off %in hisMher
own 2udgement' without ma*ing at least one other individual worse off/.
3fter the ,econd #orld #ar and the demise of the Ald 3merican Institutional
,chool, mainstream >conomics put the discussion of ethical issues aside, together with the
notion that real individuals are, in fact, very different from the .@omo >conomicus/ which
populated economic theory. =areto had already set the ethical standard that could be used in
>conomics. #ith Fionel Bobbins %1905', >conomics turned out to be .the science which
studies human behavior as a relationship between given ends and scarce means which have
alternative uses/ %p. 14'. 3s we will see in the ne)t sections, if we ta*e the word .human/
out of the previous sentence, the distinction between human behavior and non!human
behavior becomes fu((y. =eople might have values that influence their decisions, but the
origin and change of those values should not be part of the field of in7uiry of >conomics
9
.
9
I mention this because it is possible for an agent to have altruistic preferences, according to Bobbins %p. 9?'.
,o there is a possibility of concern with other people-s well!being, even if indirectly. 8his idea is also present
9
#ith notable e)ceptions
10
, >conomics turned out to be a formal discipline which based its
models on the hypotheses that individuals were wealth or utility ma)imi(ers. >thics and
motivations still entered the analysis, but only implicitly, as an argument in the agent-s
utility function. @owever, we must remember that, from Bobbins on, .self!interest/ does
not mean that we only care about ourselves and about monetary gains< people might act
with reciprocal altruism %altruistic behavior with e)pectation of future reward for oneself'
or indirect altruism %altruistic behavior that benefits those who have benefitted others+ e.g.,
I give money as a reward to someone who has saved my son-s life in a car accident'. ,o,
self-interest does not mean that I disconsider other people+ it does not mean that I do not
ta*e others into consideration in my utility function. Bobbins %1905' has already remar*ed
that, and :ec*er %1994' suggests that seeing human behavior as only self!interested is an
unnecessary limitation of the theory.
11
3nd that was the history %though brief and certainly incomplete' until the 1990-s<
3uthors who studied >conomics %or =olitical >conomy' were fre7uently worried about the
scope of their discipline and how to fit comple) humans and human interactions within it.
#hat the ma2ority of the authors above, li*e ,mith, althus, ill and arshall have in
common is the fact that, as they approached real!life economic problems C which involved
real!people in their multiple characteristics !! the fiction of .@omo >conomicus/ should
disappear to ma*e room for the empirical study of a more comple) human being,
influenced by ethical, social and cultural factors. If we consider the French physiocrats the
first economistes %as they called themselves', the history of a discipline which has roughly
5&0 years analysed most of the time the following problems< how can we ma*e sound
theory dealing with an ob2ect of in7uiry !! .man/ !! which should be modulated between
the fiction of .@omo >conomicus/ and the real!life peopleH @ow do ethical problems relate
to >conomics, if the scope of >conomics does not e)plicitly encompass itH
#hat history of economic thought has suggested so far is that the post!war period
ascent of general e7uilibrium neoclassical theory is rather an e)ception than a rule
regarding the problem of how >conomics must model individual behavior. 8he recent
in 3rrow %19&1'.
10
,ee @arsanyi %19&&', yrdal %1949' and ,en %19;1', before the 1990-s. :uchanan-s .=ublic "hoice
8heory/ %1945' has also a normative branch derived from it, but its analysis starts from isolated, self!
interested individuals.
11
Ierstenet(*y %500&, p. 511!5' points to the difficulties in understanding e)pressions li*e .altruism %related
to others' which is present in my self!interest/, since one e)pression logically e)cludes the other.
10
attempts to endogenei(e human behavior to the social, cultural and biological influences
that condition it is, in fact, a recurring idea in the history of economic theory.
0. "o# can #e assess the different treatments of preferences in economic theory!
,o far, we have proposed that contemporary economic theory conflates human
behavior with satisfaction of preferences. :ut, as our short history has shown, there has not
been a single way to analy(e individual preferences within the realm of >conomics C in
fact, not even a tendency towards a single way to analy(e preferences. Boughly, there have
been two ma2or ways to deal with the issue of preferences in the history of economic
thought<
1. individuals are solely motivated by self!interest, not matter if this .self!interest/
involves only ac7uistion of material wealth or regard for other people. @owever, it
does not matter where their preferences came from, or how they developed them.
#hat matters is that their preferences can be represented by a function that can be
ma)imi(ed, su2ect to material and informational constraints. odernly, we can call
this an .e)ogenous preferences/ approach+
5. Individuals- motivations are not only due to self!interest, but are conditioned by
social, cultural and biological factors. ,o, it is important to understand how their
preferences form and change in regard to those factors. It is possible, but not
guaranteed, to put these factors in a function which represents the individual-s
preferences, so as to ma)imi(e this function as well. odernly, it is the
.endogenous preferences/ approach.
"ontrary to what may appear, the crucial difference between the positions above
is not simply .amoral people who act selfishly/ versus .moral people who care about
others/. 3s we have seen, the idea of .self!interest/ can incorporate regard for others.
"onversely, an individualist culture can influence people-s behavior so that they start
behaving egotistically. #hat distinguishes position 1 from position 5 has to do with the
origin and changes in the structure of preferences of the individual and groups. 8he
difference lies not in individuals- self!interested behavior, but, rather, in the cultural,
11
biological and social factors that can change the behavior of an individual, be it self!
interested or not.
Aur 7uestion then is, why does economic science historically *eep on moving
bac* and forth between these two conceptionsH Is there a .right/ way to deal with the
problem of preferences in economic theory, or does the .right/ way to model human
preferences depend on the economic problem we have at handH
Ane possible answer for this movement is to say that >conomics is a social
science which is pervasive to ideological influences, following ar) %see his .$erman
Ideology/'. ,o, for e)ample, an individualistic and idealist view of humans would be
characteristic of a burgeois and ideological .science/ , while a more realist view of humans
would characteri(e a revolutionary %and properly called' science. Af course these influences
e)ist, but the problem is that we cannot associate any of these two positions with class
interests or political beliefs. ,ocialist economists of the 19?0-s, li*e 3bba Ferner, followed
the precepts of walrasian general e7uilibrium theory. 3t the same time, an 3ustrian
economist li*e @aye*, who is politically conservative, does not accept the idea that
individuals are to be studied apart from society.
3nother possible answer is to point to the methodological barriers to the
formali(ation of position 5 above and so, to decide to stic* to position 1, which, besides
being simpler, can assure more rigorous analyses.
8his is certainly true for economists li*e =igou, who found it very difficult to
formali(e the interaction and influence individuals have on each other bac* in the 1900-s
%see @odgson %5001''. :ut this is not a problem we have nowadays, since we possess
computational capacity and mathematical ability to ma*e models that use multidimensinal
individuals performing many economic transactions dynamically. 8he problem is that many
of these models give us macro results with multiple and unstable e7uilibria %see
:einhoc*er, 5004', which, as with the previous models based only on self!interested
individuals, have little relationship to real!world economic events.
Finally, we can also say that in certain economic environments %li*e the stoc*
e)change', people really act based solely on their self!interest, and so, it would not be very
useful to scrutini(e the social and cultural factors which can change the agent-s behavior.
15
8his is also true, but we can again as*, how will we correctly specify which environments
should preferably model people as in position 1 or in position 5H >)tensive research on
>conomic ,ociology
15
suggests that even in environments li*e the stoc* e)change the
social ties are very important to e)plain people-s behavior. >vidence li*e that ma*es the
decision about which model to use even harder for economists.
,o, our three possible answers to the problem of the permanent change in the
status of preferences in the history of economic thought are either invalid or leave us,
maybe ironically, with a problem of choice. In other words< how can we choose a model of
human behavior that ma)imi(es our *nowledge, sub2ect to informational constraints about
the correctness of the model we specifiedH aybe a deeper answer could lie not in the
domain of >conomics itself, but in =hilosophy.
$% &oucault's analysis of man as an o(ect of scientific in)uiry
Instead of 2ustifying the permanent difficulty in analy(ing human behavior
between positions 1 and 5 on page 11 above with 7uestions related to ideology or
computational ability, we may as* what .man/ is from the end of the DEIII century on, in
western culture. #e have already pointed out that political philosophers li*e @obbes, Foc*e
and Bousseau have deeply mulled over .human nature/, trying to understand it in a
scientific way. @owever, they did not understand that man was, at the same time, an
empirical ob2ect of in7uiry and a transcendental sub2ect of *nowledge. In the words of
Foucault %1944', .man/, from the end of the DEIII century on, in >uropean culture, was
both an empirical ob2ect and a transcendental sub2ect, irreducibly. 8his transcendental
sub2ect is e7uipped with %universal' mental structures that allow him to *now the ob2ects of
the world, among which there is the empirical .man/. 8his means that the logical structures
presented in the mind of the sub2ect .man/ could study the empirical ob2ect of .man/ in its
physical, biological, social and cultural characteristics. It is important to notice that this
sub2ect is called .transcendental/ precisely because, in the words of :lumen %500&', it
.precedes all empirical e)perience, all physiological determination or effect, all cultural
and historical determination. It represents only the necessary preconditions for a thin*ing
15
,ee, for e)ample, i(ruchi and ,terns %5001'+ U((i %1999'+ aurer %500&'+ acIen(ie and illo %5000'+
a*ler %199;'+ among others.
10
being/.
10
8his dual character mar*s the epistemological status of .man/ in modernity, and
without this dual character, there is no man as well. 8his means that the idea of Af
course, if this dual character ceases to e)ist, the very human sciences would conse7uently
cease to e)ist, since there would be no epistemological idea of .man/ anymore.
8he concept of a .transcendental sub2ect/ C which appears for the first time in
Iant-s ."riti7ue of =ure Beason/ %11;1' !! is very important, because it lays the basic
foundations for modern ideas li*e universal human rights. It also assumes that every person
has the ability to thin* rationally and is free to choose his or her own destiny, acting
ethically according to rational and universal -- precepts. 8hat is, despite the fact that
human beings are compelled to action by social, cultural and biological factors, they are
also free to renege these impulses and say .no/ to an action that is ethically not acceptable.
For e)ample, someone might s*ip the chance to ta*e some money that belongs to someone
else, even if she could not be caught in any way. 8he reason for her not ta*ing the money
would supposedly lie on an ethical commitment to the rightness of the action, which
involves not giving in to the indiscriminate guidance of our impulses C be they of biological
or social nature. For Iant, to act rationally means also to act ethically.
6oes this dual character of .man/ appear in economic scienceH Nes, and from its
very inception< the idea of the .impartial spectator/ put forth by 3dam ,mith in .8he
8heory of the oral ,entiments/ plays the part of a moral 2udge who can help us tell good
actions from bad ones. @umans are moved by passions, and we can understand one
another-s actions by the feeling of sympathy %that is, the ability to put yourself in other
people-s shoes'. @owever, to assess the moral character of an action we cannot simply
sympathi(e with others< there must be an .impartial spectator/ who is able to 2udge an
action as independently as possible from the actual circumstances of the action. In other
words, we should have the ability to detach ourselves from the particular social ties and the
biological impulses that motivated the action. @owever, the .impartial spectator/ is
different from the *antian .transcendental sub2ect/ C since ,mith, as an heir of the >nglish
empiricist tradition, sees individual conscience arising from social ties and from public
opinion. 8hat is, ,mith-s .impartial spectator/ is much closer to the social world than
Iant-s transcendental sub2ect. :ut, anyway, the fact that we can use our imagination to
10
3vailable at< http<MMwww.werple.net.auMOandyMwor*sM*ant.htm. 3ccess on 59M0&M5001.
1?
distance ourselves from a given situation, so as to be able to 2udge its value is a sign that,
although there are natural impulses in humans, this does not 2ustify all actions that are
propelled by these impulses. In sum, for ,mith, humans are social beings moved primarily
by passions, but their actions might be judged in a moral dimension that was not reducible
to the biological, cultural or particular social dimensions that motivated the action It is
necessary to *now if it is possible to wor* with both the empirical and the transcendental
sides of .man/ to try to understand his action in society.
8he fiction of the illian .@omo >conomicus/ and the structure of =olitical
>conomy as a deductive science by 6avid Bicardo show that economic science faced a
difficult time dealing with both the empirical and transcendental sides of .man/. From the
empirical side, what happened is that economic science subsumed all *inds of passions and
impulses under the lead of self!interest, which was to be the main propulsor of individual
economic action
1?
. ,ocial, cultural and biological influences on people-s behavior should be
counted out of economic science, and left for other disciplines to investigate. 8his
limitation on the scope of economic science drastically reduces the empirical applicability
of the theory, since we may *now that one of the reasons for men to act in the real world is
to satisfy their wants, but how can we distinguish, in people-s actual behavior, the self!
interest from other motivesH 8he lac* of empirical content in .economic man/ has been a
constant complaint of schools of thought in economic science li*e the $erman @istorical
,chool and Ald 3merican Institutionalism. Becently, .economic man/ has come under
severe attac* even by economists, e)actly because it had not been sub2ect to empirical tests.
,ee, for e)ample, the paper by :owles et al, %500&'.
3s for the transcendental side of .man/ in the history of economic thought, it
appears to have rested in the concept of rationality.
1&
#hat separates man from other living
species is precisely the idea that we are rational. 8hroughout the history of economic
thought, rationality wor*s as a postulate, as a starting point from where we can theori(e
and, hopefully, reach valuable conclusions to economic problems. 8his concept cannot be
put into test, unless it is wea*ened to the point of being applied not only to homo sapiens,
but to other species of animals as well. #hen I say, .wea*ened/, I am specifically referring
1?
3ccording to ,chabas %500&', a propulsor of biological nature. @owever, it was not part of the study of
=olitical >conomy to in7uire into the organic characteristics of this propulsor.
1&
8here is an abundant literature concerning the concept of rationality in >conomics. 3 relatively recent
survey about the many concepts of rationality can be found in $errard %1990'.
1&
to the idea of rationality as only consistency of observable behavior. If rationality is to
mean more than consistency of observable behavior, it cannot be tested< for e)ample, Iant
stated that to be rational meant, above all, to act according to universal principles which
were not, in principle, attached to self!interest.
14
@ow shall we *now if someone is really
acting ethically, observing universal principles %e.g., if someone does not commit a crime
even if there is a motivation for such action and no chance of being caughtH'. 8he observed
behavior %P no crime' might be due to a lot of motivations, li*e an imaginary fear of being
caught. Anly the very person might *now if she is acting ethically in Iant-s terms.
@owever, for economists the concept of rationality is radically different< it wor*s
as a means to assure that men are able to pursue their self!interest in a thought!out, planned,
coherent and free way, characteristics which are primarily human. Ar, in other words< the
*nowledge that self!interest engages men in action is not enough for the study of human
economic action, for we still do not *now if people will actually act according to their self!
interest. :esides, animals are also moved so as to satisfy their wants. #hat could
differentiate the behavior of humans from non!humansH It is e)actly the postulate that
people act rationally, that is, that they can actually ma*e choices that will better suit their
self!interest on average %for ,mith, Bicardo and ar)', or that will ma)imi(e their utility or
e)pected utility %for mainstream economics nowadays'. 8his means that not only people
*now what their self!interest is, but also that they are able to find a way that will most
li*ely satisfy it. 3nimals, on the other hand, would not be able to act in a thought!out,
planned, free and coherent way C at least not in the same way as men do.
3lthough the concept of rationality changed when we passed from the "lassical
period of ,mith, Bicardo and ar) to the arginalist >ra, it remained central for many
economists %see Fagueu) %1991''. 8his concept is still crucial to modern microeconomic
theory, which states that to act rationally means to ma*e consistent choices among every
two possible ob2ects of choice in a given set.
8he concept of rationality of the agents also carries an implicit moral
commitment< to act rationally is, naturally, to act in the right way. :ecause irrationality is
associated with madness or stupidity, everyone should act in a rational way, lest they
should be considered dumb or cra(y.
14
,en also says that consistency is too wea* a notion to characteri(e rationality. ,ee p. 5; and ff.
14
#hat do the rationality concepts of Iant and of economists have in commonH 3t
first sight, we may say it is their transcendental and moral 7uality C to act rationally is to act
in the right way. Anly men, after all, are rational. 8he main difference is that Iant imagined
that men had a transcendental side that could not be *nown empirically, and, therefore,
could not be tested. 8his incapacity to *now the transcendental side of .man/, however,
could be mortal for economists, as =aul ,amuelson put it, in his 1910-s Gobel =ri(e Fecture
speech<
.=rior to the mid!1900-s, utility theory showed signs of degenerating into a sterile tautology. =sychic utility or
satisfaction could scarcely be defined, let alone be measured. 3ustrian economists would insist that people
acted to ma)imi(e their utility, but when challenged as to what that was, they found themselves replying
circularly that however people behaved, they would presumably not have done so unless it ma)imi(ed their
satisfaction. Just as we can cancel two from the ratio of even numbers, so one could use Accam-s Ba(or to cut
utility completely from the argument, ending one up with the fatuity< people do what they do./ %pp. 49!10'.
>conomics has a commitment to being empirical, so, it has permanently had to
fight this non!testable, transcendental side of .man/< if a rational action %that is,
transcendental' is an action that ma)imi(es utility, then we should *now how to measure
this utility empirically. If we do not *now how to do it, any action could be rational, and the
term .rational/ would lose its meaning. Up until the 1990-s, >conomics as a discipline
ended up refusing to embrace aspects of the empirical side of .man/ %that is, the whole
range of biological, social and cultural influences' that went beyond self!interest. 3t the
same time, the transcendental principle of action that specifically characteri(ed human
action %and not other other animal-s actions' was based on the idea of rationality. 8he
definition of .man/ as a rational representative agent has also been constantly critici(ed
throughout the history of economic thought< when ar), for e)ample, demanded that
individual behavior should be analy(ed also in light of the influence society has on that
behavior, he was re7uiring that =olitical >conomy investigations should also be more
realist
11
. #hen men got to be aware, by means of science and reason, of the alienation
11
I do not say .empirical/ because I believe there is an ontological C and not only epistemological !!
commitment in ar) with the notion of reality. It would not be safe to say that .the empirical/ and .the real/
is the same for ar). ,ee also Fawson %1991'.
11
produced by the social system of production called capitalism, they could brea* free and
become unalienated men.
,o far, we have seen that economic science carried a transcendental side to
.man/, mirrored in his rationality, and an empirical side, based on self!interested behavior.
8he problem we have, then, is the following< if we follow ,amuelson-s advice and try to
study man-s behavior empirically, with the whole myriad of motives and emotions that
influence this behavior, our concept of rationality must become somewhat more general, so
as to accommodate an idea of rationality full of e)ceptions, li*e non!transitive choices and
incompleteness. 3s a conse7uence, we find more similarities between the behavior of
humans and non!humans, and the line between what could properly be called a .human
behavior/ becomes blurred. For e)ample, we *now that chimpan(ees can play games that
involve logical reasoning and behave altruistically in groups. ,o, is capacity for logical
reasoning characteristically humanH 8o what e)tentH 6oes altruistic behavior ma*e
chimpan(ees moral creaturesH
An the other hand, if we have a concept of rationality that is too much attached to
universal principles C that is, rooted in the Iantian transcendental sense !! then we cannot
*now, empirically, if people are really acting rationally. Fi*e in the crime e)ample above, if
we do not cheat someone when we have the chance to, does that ma*e my action moralH It
depends< if we try to follow an abstract ma)im that should be valid for everyone,
everywhere, at all times, then we are rational %I am following Iant-s concept of rationality
here'. :ut if we act li*e that because we are afraid of getting caught, then I am 2ust thin*ing
about my well!being, not considering universal moral princples. 8his does not ma*e my
action rational, in a Iantian sense
1;
. 3nyway, I am the only one who *nows if I am being
rational or not. It is difficult to prove ob2ectively, empirically, that my action involved the
use of reason, since I may be not cheating due to an imaginary fear of being caught,
because I am afraid of $od-s punishment, or 2ust for inertial behavior. 8his type of problem
with testing the rationality of an action has also led the study of behavior in >conomics, as
,amuelson put it, to a tautology< I can always insert arguments in my utility function that
ma*es whatever action I perform rational %that is, an action that ma)imi(es my utility
function, sub2ect to material and informational constraints', no matter how stupid or cra(y it
1;
8hough it is rational in an economic sense.
1;
might loo*. 8hough different, Iantian and economic notions of .rationality/ are
transcendental, in the sense that they are not verifiable empirically and suppose that all men
can %and should' behave rationally, everywhere, at all times.
,o, the e)amples above show why it is impossible to give up either on the
empirical or on the transcendental side of .man/. If we do that, we cannot thin* of .man/
epistemologically. 8his duality in .man/ might be an alternative way to e)plain why
economic science has permanently ta*en turns between positions 1 and 5 on page 11 above
concerning human behavior. In position 1, we *now that we are dealing with .man/
because he acts rationally in a self!interested way. @owever, this .man/ has very little
contact with real people in the world. An the other hand, in position 5, we move to the
empirical side of .man/, with an instrumental and loose notion of rationality. 8his implies a
reassessment of the difference between humans and non!humans. >ven if the idea of .man/
does not disappear, it has to undergo, at least, some change as we redefine the boundaries
between what is human and what is not. !his reassessment probably involves an ethical
discussion about the status of man in relation to other animals "gain, we seem to move
to position #, and the cycle goes on and on #e can understand .ethical discussion/ here in
two ways<
1. .ethical discussion/ meaning the search for a collection of values for humans that
are biologically!based and do not contradict our biological nature. For e)ample, if
biologists discover that we are poligamous by nature, it would be useless to impose
laws against poligamy, since that would be part of our nature, and we would engage
in poligamous activities inevitably. In this sense, biological *nowledge would give
us constraints on what would and what woud not be feasible for human norms and
cultures to be. :ut what does .our biological nature/ mean, if there is no clear
demarcation between what human and non!human is anymoreH
19
#e will have to
find some criterium to demarcate this, and this criterium involves, inevitably, an
19
8his discussion might sound outlandish, but has practical conse7uences< ,ilver %5004, p. ;9' remar*s that
6arwin himself drew no clear line between humans and non!humans. 8he fact that we are genetically close to,
for e)ample, chimpan(ees, led a woman as* ,ilver himself %5004, p. ;&' if she could get pregnant of a
mon*ey, since this is genetically possible. 8he case of @iasl, an 3ustrian mon*ey who is pleading to ac7uire
human status is another case that shows that the line between human and non!human gets blurred whenever
we leave the .transcendental side/ of man out of our *nowledge of .man/. ,ee<
http<MMwww.scaredmon*eys.comM5001M0&M0&Me7ual!rights!for!mon*eys!hiasl!mon*eys!are!people!tooM for
further information.
19
appeal to searching %universalH' principles about humanity. #hich biological
characteristics must separate us from other animals, and whyH 8his is a typical
transcendental discussion, because we cannot answer those 7uestions empirically.
5. .ethical discussion/ meaning the search for ethical principles that should guide
.man/-s action, either in a Iantian or in an economic way. For e)ample, we can
propose that a good ma)im to follow is to act as if we were ma)imi(ing our own
well!being, sub2ect to social, cultural and legal constraints. 3gain, how do we *now
if people are really acting that wayH If observe people-s actual behavior, this is very
difficult to show. >ven very loose notions of rationality %e.g., consistency', do not
always hold in real!life situations.
50
Ane more time, in >conomics 2argon, we end up with a problem of how to
ma)imi(e our *nowledge of .man/, constrained by the fact that he must be, at the same
time, an empirical ob2ect and a transcendental sub2ect. ,o, there is a parado) in the
epistemological concept of .man/+ a parado) that we cannot seem to get rid of without
giving up on the idea of .man/ altogether.
51
It seems that, if economists still want to deal
with .man/ as their ob2ect of study, they have to learn how to balance between the
empirical and the transcendental sides of .man/ C and also to *now how to balance
between positions 1 and 5 regarding human behavior. 8his means a call to ta*e ethical
discussions to the center stage again in economic discourse, because we do not *now how
we can model properly human behavior C there is no transcendental principle telling us
how humans should ma*e choices and, without this principle, we do not *now what human
behavior is. #hat is the best way to model human behaviorH @ow does contemporary
>conomics deal with this demandH
*% +intis's Current ,roposal of The -nification of Behavioral .ciences
8he more general pro2ect of the unification of the sciences is certainly not new in
modern thought. 3uguste "omte was the first one to propose such endeavor, in his ."ourse
of =ositive =hilosophy/, published between 1;00 and 1;?5. If, as time went on, such an
ambitious tas* was not abandoned Cdespite heavy criticisms !! it underwent some changes<
50
$intis %5004' gives an overview of the sub2ect.
51
8his Idea was first formulated by Foucault %1944'.
50
for e)ample, in the DD century scientists fre7uently tal*ed about the unification of physical
sciences %li*e physics, astronomy and chemistry' under the principles of physics+ and
>dward #ilson-s .,ociobiology/ %191&' suggested that all social behavior should be
studied and based on biological processes. ,o, the pro2ect of uniting all sciences became
more modest, trying to first unify certain fields of *nowledge. In time, those fields could be
brought together under some unifying principle. Ultimately, all %material' reality could be
e)plained and described by physicists, if they were able to find a unified field theory of
strong, wea*, electromagnetic and gravitational forces. :ased on a material reality, living
beings could appear, and, among those living beings, there would be men, who could
develop abstract theories and create imaginary worlds. 8hey could also systematically
in7uiry into their own origins and about the wor*ings of the world they lived on.
@erbert $intis does research that aims to understand how individual preferences are
formed, and where they come from. @e is a member of the ,anta Fe Institute, an
organi(ation that .emphasi(KesL multi!disciplinary collaboration in pursuit of understanding
the common themes that arise in natural, artificial, and social systems/ %my emphasis'
55
.
$intis-s own pro2ect is to help unify a specific set of sciences, which he names :ehavioral
,ciences. @e defines<
.8he behavioral sciences include economics, biology, anthropology, sociology, psychology, and political
science, as well as their subdisciplines, including neuroscience, archaeology and paleontology, and to a lesser
e)tent, such related disciplines as history, legal studies, and philosophy./ %p.1'
In his definition, he conflates disciplines that are usually called .human sciences/
%li*e >conomics, 3nthropology, ,ociology, =sychology and =olitical ,cience' with
.natural sciences/ %li*e neuroscience, archaeology, and paleontology'. @e concedes,
though, that biology .straddles the natural and behavioral sciences/. %5004, p. 1'. An the
other hand, even =hilosophy could be seen, even to a lesser e)tent, as a :ehavioral ,cience.
In the field of >conomics, what are the tools which we have to perform the tas* of
unifying the :ehavioral ,ciencesH 3s we have seen, up until the 1990-s, .@omo
>conomicus/ was not a sufficiently empirical epistemological ob2ect, because there had
been no tests to see if real people behaved according to the hypotheses of .@omo
55
From the homepage of the ,anta Fe Institute. ,ee www.santafe.edu. 3ccess on 59M0&M5001.
51
>conomicus/. 8he subdiscipline of :ehavioral >conomics came to remedy that fact,
showing that real men, in game!setting situations behaved in a very different way from
.@omo >conomicus/. 8ogether with :ehavioral >conomics, Geuroeconomics helps
identify in the human brain the neurological and biochemical basis for human behavior.
:asically, Geuroeconomics studies how individuals- choices are related to the functioning
of some areas of the brain. Ultimately, human decision!ma*ing can be rooted in the
configuration of electrical impulses that go through our neurons in some parts of our brains
whenever we ma*e decisions. Geuroeconomics and :ehavioral >conomics finally e7uip us
to investigate the e)tent to which human behavior could be e)plained by the hypotheses of
.@omo >conomicus/.
It is important to remar* that when $intis %5004' says that he is proposing a model
to unify all behavioral sciences, he is not implying that we should do away with all
behavioral disciplines to erect 2ust one that could e)plain everything about human behavior.
@e is not implying that his model e)plains behavior, but, rather, can only describe it %p. 01'.
#hat he says is that, although different disciplines have different perspectives on their
respective ob2ects, they should ma*e use of the same scientific tools when their areas of
investigation overlap. For e)ample, it would be impossible to analy(e problems li*e
ine7uality or crime without ma*ing reference to both economics, sociology and, maybe,
psychology. If those disciplines model human behavior differently, different policy
recommendations might arise. ,o, he is not saying that disciplines are going to disappear,
but rather, that they must have a single unifying principle.
>conomics has often been said to be the .7ueen of social sciences/ because it is
more amenable to formali(ation, which, in turn, would ma*e it resemble the hard sciences,
increasing its credibility as rigorous *nowledge. ,o, the need to formali(e the behavioral
sciences means not only the use of the tools deployed by economists, but also a certain
perspective on what dimensions of human behavior should be considered in the analysis. It
is possible to list a tentative set of principles that could base $intis-s proposal<
1. Evolutionary ,erspective< because homo sapiens is a species li*e any
other, biological principles should inform the behavioral sciences %2ust li*e physics inform
the natural sciences'+
55
5. The Brain as a /ecision 0a1ing 2rgan< 8he capacity to improve the
fitness when deciding among many possible outcomes renders the organisms which possess
a central nervous system %"G,' fitter, that is, more able to survive. ,o, based on biological
principles, it is the capacity to decide that characteri(es all organisms who detain a "G,.
0. The B,C 3elief4 preferences and constraints5 model 3formerly
1no#n as the rational actor model5< :oth in biology and economics living organisms
can be modeled as agents who ma)imi(e a preference function sub2ect to material and
informational constraints.
?. +ene6Culture Co evolution< 8his means that the preference an
individual has evolves through time following both genetic and cultural influences. #e can
only understand the process by which people ma*e decisions by referring to their biological
endowment and cultural environment. 3s a conse7uence, humans not only internali(e
social and cultural norms, but also have visceral emotions %li*e fear and anger' and instincts
that shape their preferences.
&. Evolutionary +ame Theory< It is possible to model the strategic
interaction between different individuals using a model where the agents choose best
responses to each other-s actions dynamically. 8hat would be evolutionary game theory.

It is important to notice that these principles partially undermine the idea that
>conomics is concerned only with human action that is strictly rational and isolated from
social influences. In $intis-s model, the idea that social interactions are important, and that
humans are rule!followers who also ma*e decisions based on emotions is present. 8his
mar*s a departure from the idea of the .@omo >conomicus/ which is still prevalent in the
so!called .standard neoclassical economics/. 8he modifications incorporated by the
behavioral scientist in the .rational economic man/ model are results of the e)periments
carried out by behavioral scientists throughout the world. 8hese e)periments corroborated
the permanent criticisms raised by other human sciences against .@omo >conomicus/
during the last decades.
50
8he similarity that we spot with previous models of economic
50
$intis-s %5004, p. 54 and ss. ' shows that people are faulty logicians+ that they react differently to a problem
depending on how this problem is framed for them+ that they overdiscount the future %hyperbolic
discounting'+ that they do not ma*e choices according to e)pected utility theorems %see the >llsberg and
3llais parado)es' and so forth. ,o, real human behavior usually does not follow the consistency re7uirements
of the theory.
50
behavior is in the use of a preference %or fitness' function, which should be ma)imi(ed
sub2ect to some constraints. 8here is also use of $ame 8heory, which is present in
traditional models of human behavior in >conomics.
@owever, it is interesting to notice that $intis-s move involves an appeal to the
biological foundations of animal behavior that would underlie our behavior as a species.
#e could tentatively say that the .passions/ and moral behavior of the first economic
thin*ers are returning as arguments in a utility function and can be e)plained by studying
our natural, biological side. $intis-s move is, in fact, not totally new in >conomics< it is
identifiable in prominent economists li*e 3lfred arshall %19;5 K1;90L', and the already
mentioned biologist >dward #ilson %199;'. #hat we have never had until recently is a
formal economic model based on ideas derived from biology used to e)plain human
behavior. 8his is $intis-s novelty.
"learly, we are witnessing an attempt to understand .man/ in an empirical slant.
8his movement means that >conomics is trying to found the transcendental side of .man/
on the empirical nowadays. Ultimately, this means to base human behavior -- including
moral and ethical concerns -- on the neurological and biochemical processes of the brain
that propel the action of the human body. :ecause many other species share similar
biochemical and neurological processes with human beings, human and non!human
behaviors can now be compared and studied together, and primatologists may say, for
e)ample, that chimpan(ees can also be moral creatures %6e #aal, 5004'. It is no wonder
that $intis renames the old .rational actor model/ with the new .:=" model/ tag< the idea
of rationality has become confusing, because it is too loose and could be used to study other
animal-s behavior. 8he fact the $intis defines the :ehavioral ,ciences as encompassing
human and natural sciences is another sign of the conflation between natural and human
sciences.
,o, even though we definitely cannot say that ethical behavior of humans are out of
the :ehavioral >conomics approach, it is, however, set on a totally different basis as that of
Iant-s and the >nlightenment and also that of traditional economic rationality. 8he reason
for that is that, in the end, the transcendental side of .man/ is reduced to his empirical
dimension. If philosophers want to tal* about >thics from now on, they should start their
5?
thin*ing from ideas developed in $ame 8heory and >volutionary :iology %see Iitcher,
19;&', that is, from the empirical side of man
#e can see here that we can even try to found the empirical side of .man/ in the
transcendental %as the possibility conditions that allow us to understand the empirical side
of .man/' or, alternatively, to found the transcendental side of .man/ on the empirical
%saying that the way we understand the world is rooted in our biology'. :oth ways suggest
that, for us to have the figure of .man/, we must have both the empirical and transcendental
sides of .man/ together, even if it is impossible for us to effectively found it on each
dimension.
8he idea of unifying the behavioral sciences can also suggest that other human
sciences could contribute to enrich the discussions about .man/ in >conomics. 3fter all, the
suggestion that cultural and social influences are important to understand economic
behavior shows not only that >conomics- methods have entered ,ociology and
3nthropology, but also that ,ociology and 3nthropology have both made an impact on
economic thin*ing in the last decades. 6oes this impact not change economic
presuppositionsH "ertainly, and it is mainly concerned with the consistency of behavior.
5?
Questions regarding how the :=" model and >volutionary $ame 8heory incorporate all
the insights provided by 3nthropology and ,ociology, and how this incorporation modifies
what we understand by ,ociology or 3nthropology are relevant, but we do not have the
space to e)plore them here. Becent developments in those disciplines, however, suggest
that >conomics- methods and ideas are far more used in their fields of research than the
opposite. #hat we are left with, nowadays, is separate human disciplines which are
increasingly using the same methods and tools to do research,
5&
as $intis-s proposal clearly
shows. 3t the same time, all human sciences approach a unifying principle that suggests
that men-s behavior can be e)plained if we turn to their genetic endowment and cultural
environment.
5?
$intis %5004, p. 01' says< .!he $%& is an analytical tool that is useful do describe an organism %note that it
could be human or not+ my emphasis' that possesses an internal representation of its life-world and e'hibits
preference transitivity over some, possibly non-obvious, choice space. It is too general a tool to do any heavy
lifting without numerous auxiliary assumptions, and it does not deal with ultimate causality (how the
mechanisms evolved) at all.
5&
,ee, for e)ample, ontgomery %5000, 500&' as a sociologist, and Jean >nsminger %in :owles et al, 500&',
as an anthropologist.
5&
7% Ethical Themes in Economic Theory and "uman Behavior
,en %19;1' was the first one to reintroduce the sub2ect of >thics in >conomics again,
after ,amuelson. @e was followed in 1995 and 1990 by 6aniel @ausman and ichael
c=herson, who revised the literature, regarding how ethical standards can influence
economic model building and vice!versa ,oon afterwards, $roenwegen %1994' has
collected a series of papers by both philosophers, economists and political scientists to
discuss the historical relationship between >thics and >conomics and the different views
one might thin* about this relationship, whether it is seen from a philosopher or an
economist-s perspective. c"los*ey is another economist concerned with >thics, once
>conomics can be seen also as a rhetoric activity, which involves the act of convincing
people about the effectiveness, advantages and disadvantages of different economic models
%see :ala*, 5004'.
It is not our purpose to recap their ideas and the many different ways ethical issues
infiltrate economic discourse. Aur point is, rather, to present a new light on this issue based
on the dual character of the epistemological figure of .man/. #hen we do not *now e)actly
what .man/ is, ethical discussions must enter economic discourse, so that we can properly
build models that reflect what .man/ we would li*e to represent in our models. From this
point of view, and as far as I can see, there are three ways ethical issues can enter economic
models and thought<
8he first way is by means of incorporating ethical concerns in an agents- utility
function. >vidence from :ehavioral >conomics points to the e)istence of a moral
dimension in humans, and this dimension can be incorporated in $intis-s :=" model and
also >volutionary $ames, for e)ample, by supposing that men are rule!followers or act
altruistically due to evolutionary reasons.
8he second way is by discussing the different macro results of economic models
and, from that point, to decide which possible result is better for society as a whole. 8his is
also regularly done by mainstream economics, mainly in the form of the different results of
public choice theory.
54
54
,uppose a model predicts that there is a trade!off between economic growth and level of inflation. #hat
level of unemployment and inflation will be desired by societyH =eople will not say that directly, but they can
vote for someone who can choose their preferable policy. For e)ample, voters could have elected a politician
who could then choose a desired level of unemployment or economic growth for the people who elected him.
54
8he third way is by discussing the ethical implications of the results of models in
which we have multiple possibilities to model human behavior. For e)ample, we could
suppose that an individual behavior I do not thin* this type of ethical discussion has been
incorporated in >conomics so far. Af course, modern philosophers %e.g., Boy :has*ar',
sociologists of science %e.g., Iuhn' and economists %e.g., $unnar yrdal' have repeatedly
observed that theories are value!laden, and that this should be e)plicit whenever we ma*e
theories. y point, however, is different< because >conomics starts its analysis at the
individual level, it should be concerned about the status of .man/. :ut, as we have seen by
the analysis presented above, there are no firm grounds to decide on one or another type of
.man/< a very empirical .man/ might not be very different from other living creatures,
whereas a hyperrational, transcendental .man/ is inaccessible to testing. #hat can we doH
8his is where our ethical debate begins because we can have many different models of
human behavior.
Ane e)ample might ma*e things clearer< suppose there is a problem in
>nvironmental >conomics where we want to clean a polluted resort, and assume that we
are going to use the method of willingness to pay %#8=' to assess people-s desire to clean
the resort. 8he usual way to proceed is by as*ing people how much they would be willing
to pay to clean the river, and see if the total amount offered is enough to do so.
@owever, if people in the area in 7uestion are uneducated and poor, they might not
have the capacity to aspire %in 3ppadurai-s %500?' terminology' a better life for themselves.
,o, instead of ta*ing their #8= face!value, we could build a model to estimate how much
they would pay had they had education and enough income to clean the river. 8his
.incapacity to aspire/ is pretty much what althus-s said it could happen to people-s tastes,
if they lived long enough in degrading situations ,en %19;1' also tal*ed about .cheap
preferences/ in this case< people-s preferences would become adapted to their social
environment, generating a vicious circle< people have low aspirations because their
environment is poor, and their environment is poor because they have low aspirations. In
the first procedure, we do not care about the origin or change in people-s preferences
whereas in the second case we admit that the social institution of school influences them.
3nyway, the politician-s ethical decision would theoretically represent the wish of the ma2ority of society
who elected him. 8his problem could be modeled using game theory and the usual assumptions of the rational
actor model %having, for e)ample, voters and politicians as agents, each one trying to ma)imi(e their e)pected
payoffs'.
51
,o, we have two possible ways to analy(e the preferences of the people, roughly along the
line of models 1 and 5 presented on page 11. #hich one is .better/H ore than 2ust
technical, this is an ethical discussion which stems from the fact that we do not have a fi)ed
model of human behavior, but are free to choose a series of models, each one dealing with
the transcendental and empirical sides that compound .man/. >thically, the point is< can
we, as economists, find a transcendental principle that might tell us why we should model
the real people in our e)ample as not!shaped by the institution of school, or should we do
otherwiseH "an we find a principle, which tell us which abstraction of human being is
.better/H
In sum< in every practical case, the economist should be concerned with the values,
of the specific group of people he is wor*ing with. 8his, plus an ethical bac*ground
%despite the fact that ethics is a very plural discipline', is the *nowledge he needs in order to
ma*e a model which appro)imates people-s reality as best as it can.
8% Conclusion:
#e have seen that the 1990-s turn toward a more social, empirical .man/ is no news
in the history of economic thought. #e found the reason for the constant changes in the
concept of human behavior in >conomics in the fact that .man/ is a parado)ical
epistemological concept that continuously has to find his balance between his
transcendental and empirical side.
@istorically, we can see how >conomics has analy(ed .man/ from roughly .8he
8heory of the oral ,entiments/ on<
&IR.T ,ERI2/ 3&rom .mith to 0arshall5
>ndogenous %,mith, althus' versus >)ogenous approach %Bicardo' to
human behavior
5;
Transcendental side of man
Bational actor model+ ma)imi(es a
utility function rationally %P transitive
and complete choices'
Transcendental side of man
Bationality principle R
>thics as a separate domain, but
Intimately related to >conomics

.EC29/ ,ERI2/ 3&rom Roins to the :;;<'s5
ainly e)ogenous approach to preferences
T"IR/ ,ERI2/ 3from :;;<'s on5
>ndogenous %,anta Fe Institute' versus >)ogenous preferences %traditional
neoclassical economics'
59
Empirical side of man
,elf!interested behavior %ma)imum
ac7uisition of material wealth'
Empirical side of man/
,elf!interested behavior+ ethical
concerns of people might implicitly
appear in utility function
Transcendental side of man
:=" model+ organism %not
necessarily human' ma)imi(es a
preference function over a limited
choice set+ consistency with
e)ceptions %very loose idea of
rationality'
Empirical side of man
,elf!interest behavior+ other!
regarding behavior+ process!
regarding behavior+ ethical behavior
biologically based e)plicitly
appears in agent-s preference
function
In the first period, whenever an author regarded preferences endogenous to the
person-s social and cultural environment, we would have ethical discussions of a
transcendental *ind related to economic activity. 3t the same time, the analysis was done
based empirically on the assumption that an agents- economic behavior was characteri(ed
by self!interest, meaning the desire to ac7uire monetary rewards.
In the second period, preferences were e)ogenous, without ethical discussion. 8his
could be done because there was no empirical assessment of .man/-s empirical side.
In the present third period, we start tal*ing about the .normative status of
preferences/ again %see :owles %500?', ch. 0'. :ut, this time, this ethical discussion is
based on the empirical side of .man/, in the biological wor*ings of his body and brain. In
the end, we argue that this calls for an transcendental reassessment of the division between
what is human and what is not human.
#ere >conomics not based on methodological individualism, all this discussion
would be of no interest. :ut, because our science begins with the study of individual
behavior, it is of paramount importance to understand how we can model it.
8he possibility of modeling .man/ in many different ways introduces a type of
ethical discussion which has not appeared in >conomics so far< it concerns the different
models of .man/ we may choose when theori(ing. 8his is the novelty I believe this paper
brings. It is necessary then to *now a little about the values of each human group an
economist is going to study. In the simple e)ample presented above, we were dealing with
people who have little education. 8his is a cultural characteristic of the group in 7uestion
that should be ta*en into consideration in our analysis. #hyH :ecause, from an ethical
point of view, I may believe, in a Iantian tradition, that universal education is a basic right,
and I *now that people change their preferences %and their income' as they get more
00
education. ,o, I assume that people-s #8= depends both on their income and education,
and estimate the results this model would give us if people had all the education they
should have by right C but in reality do not, because they are poor and there are no public
schools nearby.
3nother economist, however, might thin* it is not good to include education when
collecting people-s #8=, because he thin*s this distorts the results of the research and
forces us to ma*e decisions based on hypothetical characteristics of the population. 3 good
discussion involving maybe different ethical precepts could then arise. 3nd this discussion
would involve both an economic problem %ma)imi(ing people-s utility of cleaning the
resort given certain constraints' and a philosophical problem %the choice of which .man/ to
use when we apply this model, as well as to the *ind of transcendental principle we are
using'.

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