By: Russ Roberts

In: Econ Journal Watch, 11(2)

Date: May 2014

Key Quotes

• Role of individual in standard view of economic theory:
  • Human beings are integrated, consistent, maximizing, utility-seeking, calculating creatures.
  • Fundamentally self-interested.
  • Goal is to maximize utility through consumption.
  • Value of freedom is to increase utility via maximization of choice.
    • Knowledge maximizes utility and creates efficiency.
• Role of government in standard economic theory:
  • Maximize the size of the pie.
  • Distribute the pie in order to maximize more general concept of societal well-being.
  • Correct for various shortcomings in either personal or market decision-making.
    • Externalities, public goods, imperfect information, paternalistic regulation (behavioral errors)
• Individual in religion:
  • Human beings seek meaning, have conflicting goals and desires.
  • Fundamentally flawed and imperfect.
  • Tendency to pursue short-term pleasure at the expense of longer-term satisfaction.
    • Restriction of choices is (sometimes) beneficial.
  • Sacrifice and restrictions enhance well-being.
  • Power of community.
  • Importance of using skills and gifts to make the world a better place.
• Need to recognize limitations of standard economic theory…
• Passions within Reason – Robert Frank
  • Some behavior makes sense only as a product of moral emotions.

Evolution sometimes favors “strategically irrational” behavior – signaling.