The passage below is accompanied by four questions. Based on the passage,
choose the best answer for each question.
Oftentimes, when economists cross
borders, they are less interested in learning from others than in invading their garden
plots. Gary Becker, for instance, pioneered the idea of human capital. To do so, he famously
tackled topics like crime and domesticity, applying methods honed in the study of markets to
domains of nonmarket life. He projected economics outward into new realms: for example, by
revealing the extent to which humans calculate marginal utilities when choosing their
spouses or stealing from neighbors. At the same time, he did not let other ways of thinking
enter his own economic realm: for example, he did not borrow from anthropology or history or
let observations of nonmarket economics inform his homo economicus. Becker was a picture of
the imperial economist in the heyday of the discipline's bravura.
Times have
changed for the once almighty discipline. Economics has been taken to task, within and
beyond its ramparts. Some economists have reached out, imported, borrowed, and
collaborated—been less imperial, more open. Consider Thomas Piketty and his outreach to
historians. The booming field of behavioral economics—the fusion of economics and social
psychology—is another case. Having spawned active subfields, like judgment, decision-making
and a turn to experimentation, the field aims to go beyond the caricature of Rational Man to
explain how humans make decisions….
It is important to underscore how this flips
the way we think about economics. For generations, economists have presumed that people have
interests—"preferences," in the neoclassical argot—that get revealed in the course of
peoples' choices. Interests come before actions and determine them. If you are hungry, you
buy lunch; if you are cold, you get a sweater. If you only have so much money and can't
afford to deal with both your growling stomach and your shivering, which need you choose to
meet using your scarce savings reveals your preference.
Psychologists take one
look at this simple formulation and shake their heads. Increasingly, even some mainstream
economists have to admit that homo economicus doesn't always behave like the textbook
maximizer; irrational behavior can't simply be waved away as extra-economic expressions of
passions over interests, and thus the domain of other disciplines…. This is one place where
the humanist can help the economist. If narrative economics is going to help us understand
how rivals duke it out, who wins and who loses, we are going to need much more than lessons
from epidemiological studies of viruses or intracranial stimuli.
Above all, we
need politics and institutions. Shiller [the Nobel prize winning economist] connects
perceptions of narratives to changes in behavior and thence to social outcomes. He completes
a circle that was key to behavioral economics and brings in storytelling to make sense of
how perceptions get framed. This cycle (perception to behavior to society) was once mediated
or dominated by institutions: the political parties, lobby groups, and media organizations
that played a vital role in legitimating, representing, and excluding interests. Yet
institutions have been stripped from Shiller's account, to reveal a bare dynamic of emotions
and economics, without the intermediating place of politics.
The author critiques Schiller's approach to behavioural economics for