Hierarchical choice in economics

Journal of The History of Economic Thought, 2004

In the standard theory of choice, complete substitutability of preferences is assumed. For instance, in mainstream consumer theory a loss of some units of one consumption bundle can always be compensated by a gain of some unit of another commodity. The alternative to this approach where limited substitutability exists, is the basis of hierarchical behaviour. The basis of this idea can be found in pre-classical economic thought and also in the works of classical and marginalist economists. In spite of its long historical presence, current orthodox economic thinking has generally overlooked this idea (although it has been used in other social sciences). The purpose of this paper is to review the development of this idea in the history of economic thought. Furthermore, the paper will concentrate on the possible reasons for its current status in the economic literature.

Journal of Economic Theory, 1988

This paper considers the consistency of Arrow's axioms in the choice-theoretic version of his impossibility theorem when natural economic restrictions are placed on individual preferences and on the admissible feasible sets. Both pure public goods and pure private goods environments are considered. It is demonstrated that a social choice correspondence exists that satisfies weak Pareto. independence of infeasible alternatives, nondictatorship, and Arrow's choice axiom on these restricted domains. However, a strengthened version of the independence axiom is shown to result in impossibility theorems. Journal of Economic Literature Classification Number: 025. (1988 Academic Press. Inc * We are indebted to many scholars for their help in clarifying our thoughts on the issues discussed in this paper.

The Great Recession has called into question many tenets of Neo-classical Microeconomics. Neo-classical theory allows each agent only one fixed type, homo economicus, while not denying other possible types as in adverse selection. We propose that economic agents not only choose their market basket but also their types. Agents are members of groups and each group has social norms to which the agent more or less conforms. His/her market behavior trades off private well being which responds to prices but also social well being which responds to norms. We show how deviation from norms are determined. We also discuss other anomalies in the light of this model.

American Economic Review, 2001

This Nobel lecture discusses the microeconometric analysis of choice behavior of consumers who face discrete economic alternatives. Before the 1960's, economists used consumer theory mostly as a logical tool, to explore conceptually the properties of alternative market organizations and economic policies. When the theory was applied empirically, it was to market-level or national-accounts-level data. In these applications, the theory was usually developed in terms of a representative agent, with market-level behavior given by the representative agent's behavior writ large. When observations deviated from those implied by the representative agent theory, these differences were swept into an additive disturbance and attributed to data measurement errors, rather than to unobserved factors within or across individual agents. In statistical language, traditional consumer theory placed structural restrictions on mean behavior, but the distribution of responses about their mean was not tied to the theory. In the 1960's, rapidly increasing availability of survey data on individual behavior, and the advent of digital computers that could analyze these data, focused attention on the variations in demand across individuals. It became important to explain and model these variations as part of consumer theory, rather than as ad hoc disturbances. This was particularly obvious for discrete choices, such as transportation mode or occupation. The solution to this problem has led to the tools we have today for microeconometric analysis of choice behavior. I will first give a brief history of the development of this subject, and place my own contributions in context. After that, I will discuss in some detail more recent developments in the economic theory of choice, and modifications to this theory that are being forced by experimental evidence from cognitive psychology. I will close with a survey of statistical methods that have developed as part of the research program on economic choice behavior. Science is a cooperative enterprise, and my work on choice behavior reflects not only my own ideas, but the results of exchange and collaboration with many other scholars. 1 First, of course, is my co-laureate James Heckman, who among his many contributions pioneered the important area of dynamic discrete choice analysis. Nine other individuals who played a major role in channeling microeconometrics and choice theory toward their modern forms, and had a particularly important influence on my own work, are Zvi Griliches, L.

Evolutionary and Institutional Economics Review, 2010

The paper reviews the main directions of research in evolutionary economics related to the analysis of multilevel selection processes, where multilevel selection refers to the operation of the natural selection at individual and group level. The study reviews the history and the applications of multilevel selection approach and summarizes the main findings with respect to the role of the group in evolutionary dynamics. It also describes how the aggregate evolutionary dynamics could be decomposed into innovation and selection effects using famous George Price's decomposition developed for the analysis of biological evolution .

2009

Mathematical Economics is closely related with Social Choice Theory. In this paper, an attempt has been made to show this relation by introducing utility functions, preference relations and Arrow's impossibility theorem with easier mathematical calculations. The paper begins with some definitions which are easy but will be helpful to those who are new in this field. The preference relations will give idea in individual's and social choices according to their budget. Economists want to create maximum utility in society and the paper indicates how the maximum utility can be obtained. Arrow's theorem indicates that the aggregate of individuals' preferences will not satisfy transitivity, indifference to irrelevant alternatives and non-dictatorship simultaneously so that one of the individuals becomes a dictator. The Combinatorial and Geometrical approach facilitate understanding of Arrow's theorem in an elegant manner.

European Journal of Political Economy, 1991

Journal of Consumer Research - J CONSUM RES, 1988

The member's account, and its associated self-evident method, have great instinctive appeal; the social forces that protect and sustain them are powerful. The member who poses awkward questions about "what everybody knows" in the shared culture runs a real risk of being dealt with as a troublemaker or an idiot. Indeed, there are few more reliable ways of being expelled from a culture than continuing seriously to query its taken-for-granted intellectual framework. … We need to play the stranger, not to be the stranger. A genuine stranger is simply ignorant. We wish to adopt a calculated and informed suspension of our taken-for-granted perceptions of … practice and its products. By playing the stranger we hope to move away from self-evidence.