Beyond the Realism of Mainstream Economic Theory. Phenomenology in Economics.

Abstract

Since it evolved into its current form, mainstream economics relies strongly on mathematical tools and methods. Although using ideal types (as Max Weber used the term) is not the only way of exploring and studying the real world, economic theory has not paid considerable attention to those phenomenological methods that generated a renewal of sociology, mainly in the United States, decades ago. In this paper, some specialties of phenomenology as a method of social sciences are reviewed that make it suitable for being the foundation of a research program in economics to complement results we already have. In Section 1 a general introduction is given in which the mathematical approach of economics and its shortcomings are reviewed. The main emphasis is on the evident realization that 'homo oeconomicus' cannot help us to understand real economic agents' behavior and their motives. In Section 2 phenomenology is suggested as a general end comprehensive way of studying and understanding socio-economic reality. Some of Husserl's main ideas are surveyed that are important from the point of view of phenomenological sociology, that is, our guide in questioning economic life. The main concept of Section 3 is 'Life World'. Husserl described our life world as the unquestioned basis our everyday life and knowledge. Following the way that phenomenological sociology has already walked we get to the general strategy of people by which they make real world surrounding them understandable. Types as the fundamental navigation instrument stand in the center of our attention in Section 4. All the elements and agents of our life world are directed under types by which people can make anticipations on the behavior of their fellow-men. In Section 5 we get to experimental economics, referring to the famous and well-known experiments of Vernon L. Smith on market bubbles. Economists know that market bubbles disappear after 2 or 3 experiments done with the same agents - by that time rules and patterns of other players' actions get known to all the agents participating in the game. Phenomenology can offer new aspects to consider: as agents get into a new milieu that laboratory makes they have to abandon the validity of their types of cognition. As more and more turns are taken in the game, these types regain their validity and they can become available when it comes to direct actions in the laboratory again.