Economics – Psychology’s Neglected Branch
“It is impossible to describe any human action if one does not refer to the meaning the actor sees in the stimulus as well as in the end his response is aiming at.”
Ludwig von Mises
Economics – to the great dismay of economists – is merely a branch of psychology. It deals with individual behaviour and with mass behaviour. Many of its practitioners sought to disguise its nature as a social science by applying complex mathematics where common sense and direct experimentation would have yielded far better results.
The outcome has been an embarrassing divorce between economic theory and its subjects.
The economic actor is assumed to be constantly engaged in the rational pursuit of self interest. This is not a realistic model – merely a useful approximation. According to this latter day – rational – version of the dismal science, people refrain from repeating their mistakes systematically. They seek to optimize their preferences. Altruism can be such a preference, as well.
Still, many people are non-rational or only nearly rational in certain situations. And the definition of “self-interest” as the pursuit of the fulfillment of preferences is a tautology.
Dr. John Grohol is the CEO and founder of Psych Central. He is an author, researcher and expert in mental health online, and has been writing about online behavior, mental health and psychology issues -- as well as the intersection of technology and human behavior -- since 1992. Dr. Grohol sits on the editorial board of the journal Cyberpsychology, Behavior and Social Networking and is a founding board member and treasurer of the Society for Participatory Medicine.Like this author?
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Last reviewed: By John M. Grohol, Psy.D. on 25 May 2005
Published on PsychCentral.com. All rights reserved.
Grohol, J. (2005). Economics – Psychology’s Neglected Branch. Psych Central. Retrieved on May 25, 2012, from http://psychcentral.com/blog/archives/2005/05/25/economics-psychologys-neglected-branch/
