Economic Explanation Ambiguity and Its Normative Implications

Patricia Marino (University of Waterloo)

This paper explores the nature of a particular problem in economic explanation, situates that problem in a broader context, and explores some normative implications of resolving the problem in various ways. The problem arises in the context of analyzing potentially irrational behavior. In economic terms, people are irrational when they fail to maximize their own preference satisfaction, but in cases where we don't know a person's preferences, we do not know whether that person has behaved irrationally with respect to one set of preferences or irrationally with respect to another. That is, we cannot determine whether the person's behavior was rational or not. I call this the problem of economic explanation ambiguity. Though the problem has roots in the philosophy of social science broadly understood, it may be most familiar now in the debate over behavioral and classical approaches to economics. As Erik Angner points out, when we try to determine which interpretation of a person's behavior is best overall, we should ask which interpretation involves explanations that are less "artificial" or ad hoc. But as we know from standpoint theory, what we see as artificial or ad hoc is affected by how we are socially situated. As is often noted, different views about rationality are associated with different normative policy implications, such as the "nudging" of behavioralism and the more libertarian style of the classical approach. The problem about standpoint, and the entanglement of the descriptive and the normative, prompt the question of whether our theory choices are ideological in a problematic way. I draw on Heather Douglas's recent work on values in science in considering this question.