Social Choice, Social Sustainability, and Why the Neoclassical Approach Fails to See the Difference
DOI:
https://doi.org/10.15678/ZP.2019.50.4.05Keywords:
public policy, social norms, social preferences, social sustainabilityAbstract
Objectives: The neoclassical economic framework is a dominant approach in both theoretical and applied fields, such as public policy design. Despite the substantial amount of criticism towards the neoclassical assumptions of rational choice and obstacles related to preference aggregation, there is a minor concern regarding the underlying philosophy of the mainstream public policy design, namely static social utility maximisation under exogenously given social preferences.This paper analyses the inherent biases of the public policy based on the neoclassical background, attempting to prove that although such an approach can theoretically lead to the socially optimal outcome, it is hardly in line with the long-run social survival and development objectives. Other than this, the paper attempts to explore how incorporating alternative approaches towards individual and collective rationality into the theory of social choice can allow for designing a more sustainable public policy.
Research Design & Methods: The paper presents the review of the relevant literature alongside the theoretical inquiry into the underlying logic and philosophy of the neoclassical approach towards the public policy design as well as the most relevant non-mainstream theories.
Findings: It is demonstrated that the assumptions behind the neoclassical framework are inconsistent with the notions of social evolution and social sustainability.
Implications / Recommendation: The persistent idea that public policymakers should attempt to maximise social utility implies artificial limitations for public policy as well as ill-designed goals and objectives. There is a strong need to reconsider the appropriateness of using the neoclassical analytical framework in public policy design.
Contribution / Value added: The framework discussed in this article serves as the ground for more sustainable public policy design principles.
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References
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Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioural economics. American Economic Review, 93, 1449–1475.
Katsikopoulos, K.V., Schooler, L.J., & Hertwig, R. (2010). The robust beauty of ordinary information. Psy chological Review, 117(4), 1259–1266.
Kroll, Y., & Davidovitz, L. (2003). Inequality aversion versus risk aversion. Economica, 70, 19–29.
Lawson, T. (2003). Reorienting Economics. London – New York: Routledge.
Lind, A., & Tyler, T. (1988). The Social Psychology of Procedural Justice. New York – London: Plenum Press.
List, J., & Cherry, T. (2000). Examining the Role of Fairness in Bargaining Games. Tucson: University of Arizona.
Marsh, B. (2002). Heuristics as social tools. New Ideas in Psychology, 20(1), 49–57.
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Mueller, D. (1979). Public Choice. London: Cambridge University Press.
North, D.C., & Thomas, R.P. (1973). The rise of the Western world: A new economic history. Cambridge: Cambridge University Press.
Parks, R. (1976). An impossibility theorem for fixed preferences: A dictatorial Bergson Samuelson welfare function. The Review of Economic Studies, 43(1976), 447–450.
Piketty, T., & Goldhammer, A. (2014). Capital in the Twenty-First Century. Cambridge, MA: Harvard University Press.
Plott, C.R. (1973). Path Independence, Rationality, and Social Choice. Econometrica, 41(6), 1075–1091.
Rachlin, H. (2002). Altruism and selfishness. Behavioral and Brain Sciences, 25(2002), 239–296.
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Simon, H. (1990). Invariants of human behaviour. Annual Review of Psychology, 41(1990), 1–19.
Simon, H.A. (1978). Rationality as process and as product of thought. The American Economic Review, 68, 1–16.
Simon, H.A. (1996). The Sciences of the Artificial. Cambridge, MA: MIT Press.
Smith, A. (1761). The Theory of Moral Sentiments. Strand – Edinburgh: A. Millar, A. Kincaid & J. Bell.
Smith, V.L. (2003). Constructivist and ecological rationality in economics. The American Economic Review, 93, 465–508.
Smith, V.L. (2009). Rationality in Economics: Constructivist and Ecological Forms. Cambridge: Cambridge University Press.
Smith, V.L., & Wilson, B.J. (2019). Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century. Cambridge: Cambridge University Press.
Stark, O. (1995). Altruism and Beyond. An Economic Analysis of Transfers and Exchanges Within Families and Groups. Cambridge: Cambridge University Press.
Thompson, R.E. (1875). Social Science and National Economy. Philadelphia: Porter and Coates.
Tversky, A., & Kahneman, D. (1974). Heuristics and Biases. Science, New Series, 185(4157), 1124–1131.
Vickrey, W. (1960). Utility, Strategy, and Social Decision Rules. The Quarterly Journal of Economics, 74(4), 507–535.
Wells, A.S., & Crain, R.L. (1994). Perpetuation theory and the long-term effects of school desegregation. Review of Educational Research, 64(4), 531–555.
Williamson, J. (1990). What Washington Means by Policy Reform. In: J. Williamson (Ed.), Latin American Readjustment: How Much Has Happened (pp. 7–40).
Washington, DC: Peterson Institute for International Economics.
Andreoni, J., & Miller, J. (2002). Giving according to GARP. Econometrica, 70(2), 737–753.
Andreoni, J., & Varian, H. (1999). Preplay contracting in the prisoners’ dilemma. Proceedings of the National Academy of Sciences, 96, 10933–10938.
Arrow, K. (1983). Social Choice and Justice. Cambridge, MA: The Belknap Press of Harvard University Press.
Arrow, K. (1986). Rationality of Self and Others in an Economic System. The Journal of Business, 59(4), Part 2: The Behavioural Foundations of Economic Theory, 385–399.
Arrow, K.J. (1963). Social Choice and Individual Values. New York: Wiley.
Axelrod, R. (1984). The Evolution of Cooperation. New York: Basic Books.
Becker, G.S. (1974). A Theory of Social Interactions. Journal of Political Economy, 82(6), 1063–1093.
Bauer, M.W., & Knill, C. (2012). Understanding Policy Dismantling: An Analytical Framework. In: Bauer, W., Jordan, A., Green-Pedersen, A., & He ritier, A. (Eds.), Dismantling Public Policy: Pre ferences, Strategies, and Effects (pp. 203–225), Oxford: Oxford University Press.
Bénabou, R., & Ok, E. (2001). Social mobility and the demand for redistribution: The POUM hypothesis. Quarterly Journal of Economics, 116, 447–487.
Berg, N. (2014). The consistency and ecological rationality approaches to normative bounded rationality. Journal of Economic Methodology, 2014, 1–21. http://dx.doi.org/10.1080/1350178X.2014.969910.
Berg, N., & Gigerenzer, G. (2010). As-if behavioural economics: Neoclassical economics in disguise? MPRA Paper No. 26586. Available at https://mpra.ub.uni-muenchen.de/26586/1/MPRA_paper_26586.pdf, accessed: 5.02.2020.
Bowles, S., & Gintis, H. (2000). Reciprocity, self-interest, and the welfare state. Nordic Journal of Political Economy, 26, 33–53.
Brennan, G., González, L.G., Werner, G., & Vittoria, M.V. (2008). Attitudes toward private and collective risk in individual and strategic choice situations. Journal of Economic Behaviour and Organization, 67, 253–262.
Buchanan, J., & Tullock, G., (1965). The Calculus of Consent: Logical Foundations of Constitutional Democracy. Ann Arbor, MI: University of Michigan Press.
Camerer, C.F., Loewenstein, G., & Rabin, M. (2004). Advances in Behavioural Economics. Princeton, NJ: Princeton University Press.
Caporael, L.R., Dawes, R.M., Orbell, J.M., & van de Kragt, A.J.C. (1989). Selfishness examined: Cooperation in the absence of egoistic incentives. Behavioural and Brain Sciences, 12(4), 683–699.
Carey, H.C. (1865). Principles of Social Science. Philadelphia: J. B. Lippincott & Co.
Congleton, R. (2002). The Future of Public Choice. The Sixth International Conference in Public Choice, Japan, 21 July 2002.
Dawes, C.T., Fowlers, J.H., Johnson, T., McElreath, R., & Smirnov, O. (2007). Egalitarian motives in humans. Nature, 446, 794–796.
Etzioni, A. (1990). The Moral Dimension: Toward a New Economics. New York: Simon and Schuster.
Friedman, L. (2002). The Microeconomics of Public Policy Analysis. Princeton: Princeton University Press.
Geanakoplos, J. (2005). Three brief proofs of Arrow’s impossibility theorem. Economic Theory, 26(1), 211–215.
Gigerenzer, G. (2000). Adaptive Thinking: Rationality in the Real World. Oxford: Oxford University Press.
Gigerenzer, G. (2007). Gut Feelings: The Intelligence of the Unconscious. New York: Viking.
Gigerenzer, G. (2008a). Rationality for Mortals: How People Cope with Uncertainty. Oxford: Oxford University Press.
Gigerenzer, G. (2015). Simply Rational: Decision Making in the Real World. Oxford: Oxford University Press.
Gigerenzer, G. (2008b). Why heuristics work. Perspectives on Psychological Science, 3(1), 20–29.
Guttman, J.M. (1996). Rational actors, tit-for-tat types, and the evolution of cooperation. Journal of Economic Behaviour and Organization, 29(1), 27–56.
Hammond, P. (1976). Why Ethical Measures of Inequality Need Interpersonal Comparisons. Theory and Decision, 7(1976), 263–274.
Heffetz, O., & Frank, R. (2011). Preferences for status: Evidence and economic implications. In: Handbook of Social Economic, vol. 1 (pp. 69–91).
Heise, A. (2012). When the facts change, I change my mind… Some developments in the economic, scientific community and the situation in Germany. Real-world Economics Review, 62, 83–97.
Hirshleifer, D., & Rasmusen, E. (1989). Cooperation in a repeated prisoners’ dilemma with ostracism. Journal of Economic Behaviour and Organization, 12(1), 87–106.
Huppatz, D.J., (2015). Revisiting Herbert Simon’s “Science of Design”. Massachusetts Institute of Technology, Design Issues, 31(2), 29–40.
Kahneman, D. (2003). Maps of bounded rationality: Psychology for behavioural economics. American Economic Review, 93, 1449–1475.
Katsikopoulos, K.V., Schooler, L.J., & Hertwig, R. (2010). The robust beauty of ordinary information. Psy chological Review, 117(4), 1259–1266.
Kroll, Y., & Davidovitz, L. (2003). Inequality aversion versus risk aversion. Economica, 70, 19–29.
Lawson, T. (2003). Reorienting Economics. London – New York: Routledge.
Lind, A., & Tyler, T. (1988). The Social Psychology of Procedural Justice. New York – London: Plenum Press.
List, J., & Cherry, T. (2000). Examining the Role of Fairness in Bargaining Games. Tucson: University of Arizona.
Marsh, B. (2002). Heuristics as social tools. New Ideas in Psychology, 20(1), 49–57.
Morawetz, D.E., Atia, G., Bin-Nun, L., Felous, Y., Gariplerden, E., Harris, S., Soustiel, G., Tombros, & Zarfaty, Y. (1977). Income distribution and selfrated happiness: Some empirical evidence. The Economic Journal, 87, 511–522.
Mueller, D. (1979). Public Choice. London: Cambridge University Press.
North, D.C., & Thomas, R.P. (1973). The rise of the Western world: A new economic history. Cambridge: Cambridge University Press.
Parks, R. (1976). An impossibility theorem for fixed preferences: A dictatorial Bergson Samuelson welfare function. The Review of Economic Studies, 43(1976), 447–450.
Piketty, T., & Goldhammer, A. (2014). Capital in the Twenty-First Century. Cambridge, MA: Harvard University Press.
Plott, C.R. (1973). Path Independence, Rationality, and Social Choice. Econometrica, 41(6), 1075–1091.
Rachlin, H. (2002). Altruism and selfishness. Behavioral and Brain Sciences, 25(2002), 239–296.
Rothstein, R. (2014). Modern Segregation. Retrieved 15 February 2020. http://atlanticlive.theatlantic.com/Richard_Rothstein_Presentation.pdf.
Simon, H. (1990). Invariants of human behaviour. Annual Review of Psychology, 41(1990), 1–19.
Simon, H.A. (1978). Rationality as process and as product of thought. The American Economic Review, 68, 1–16.
Simon, H.A. (1996). The Sciences of the Artificial. Cambridge, MA: MIT Press.
Smith, A. (1761). The Theory of Moral Sentiments. Strand – Edinburgh: A. Millar, A. Kincaid & J. Bell.
Smith, V.L. (2003). Constructivist and ecological rationality in economics. The American Economic Review, 93, 465–508.
Smith, V.L. (2009). Rationality in Economics: Constructivist and Ecological Forms. Cambridge: Cambridge University Press.
Smith, V.L., & Wilson, B.J. (2019). Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century. Cambridge: Cambridge University Press.
Stark, O. (1995). Altruism and Beyond. An Economic Analysis of Transfers and Exchanges Within Families and Groups. Cambridge: Cambridge University Press.
Thompson, R.E. (1875). Social Science and National Economy. Philadelphia: Porter and Coates.
Tversky, A., & Kahneman, D. (1974). Heuristics and Biases. Science, New Series, 185(4157), 1124–1131.
Vickrey, W. (1960). Utility, Strategy, and Social Decision Rules. The Quarterly Journal of Economics, 74(4), 507–535.
Wells, A.S., & Crain, R.L. (1994). Perpetuation theory and the long-term effects of school desegregation. Review of Educational Research, 64(4), 531–555.
Williamson, J. (1990). What Washington Means by Policy Reform. In: J. Williamson (Ed.), Latin American Readjustment: How Much Has Happened (pp. 7–40).
Washington, DC: Peterson Institute for International Economics.
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Published
2020-02-28
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How to Cite
Okhrimenko, I. (2020). Social Choice, Social Sustainability, and Why the Neoclassical Approach Fails to See the Difference. Journal of Public Governance, 50(4), 54-62. https://doi.org/10.15678/ZP.2019.50.4.05
