Assumptions in Economics

Jean Tirole
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Jean Tirole: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Any scientific discipline—any theory, formal or informal—rests on assumptions. These assumptions matter, and in the case of social sciences, they influence our vision of society and our policy recommendations. This chapter reviews and comments on assumptions most commonly made by economists—methodological individualism versus socially determined preferences, consequentialism, and utility comparisons—and discusses their attitudes toward the market and ethical choices. Economics combines positive and normative dimensions, seeking to describe behaviors while evaluating policies. Often adhering to utilitarian principles, economists emphasize preferences, including reconciling short- and long-term interests. They employ the "veil of ignorance" to assess policy fairness, acknowledging challenges in compensating policy losers. Consequentialism, central to economic analysis, evaluates actions based on outcomes. Economists also explore market failures—externalities, information asymmetries, and power dynamics—advocating for smart regulation to address ethical concerns while leveraging market incentives. Finally, methodological individualism underpins economic analysis, acknowledging social influences on preferences without attributing them entirely to social construction. Economists aim to balance theoretical assumptions with empirical data, ensuring robust, adaptable frameworks for understanding and improving societal outcomes.

Keywords: assumptions in economics; utilitarianism and consequentialism; construction of preferences; intentions; ethics and markets (search for similar items in EconPapers)
Date: 2025-05
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Published in Core Assumptions in Business Theory, Oxford University Press, pp.59-70, 2025, 9780198944218. ⟨10.1093/9780198944249.003.0004⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05183864

DOI: 10.1093/9780198944249.003.0004

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