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John B. Davis, Individuals and Identity in Economics

Roberta Muramatsu
p. 237-243
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John B. Davis, Individuals and Identity in Economics, Cambridge University Press 2011, 260 pages, ISBN: 978-0-521-17353-7.

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Crédits : Cambridge University Press

1Following his 2003 book The Theory of Individuals in Economics, John Davis goes on to examine recent trends in economic theorizing and explanation of individuals and their identity. His point of departure is the idea that economics needs a refined representation of individuals because agents are objects of important normative concerns, such as human rights, justice, well-being, democracy and so forth (16).

2This book is much more than a survey that appeals to two identity criteria—individuation and the re-identification—to guide Davis´ critical analysis of available individual conceptions in economics and his search for a satisfactory approach that puts human agents at center stage. The individuation criterion inspires an analysis of whether or not a particular conception under study represents agents as distinct and independent beings. The re-identification criterion in its turn, serves to assess whether an individual conception that takes agents as independent and unique individuals (rather than multiple selves) is able to re-identify agents in the same way after some changes that happen to themselves and others (5).

3The book is organized in three parts and falls into 10 chapters. The first part discusses theorizing strategies that are still committed to an atomistic view of individual. Part 2 discusses approaches that give room for a social interactionist perspective on individuals. The third part discusses recent trends in theorizing that take individuals and their identity as socially embedded.

4Chapter 1 explains his argument strategy and the pluralist tone of his narrative. He puts forth an interesting relationship between rationality and individuality. To him, contemporary rethinking about rationality also requires us to rethink individuals and individuality in economics. Davis suggests that the informational structure of the world or the task environment shapes human rationality and behavior just like social embeddedness influences individuals´ personal identities (9). This is a bold claim on which he tries to elaborate throughout the subsequent chapters. Yet it is not clear whether most economists would agree to rethink their individual conceptions because of normative considerations. The economics profession is still having a difficult time to deal with the debatable positive-normative dichotomy in economics (Hands 2011, Davis 2013). To complicate matters, it seems that some research agendas like behavioral economics and decision research do not concentrate on an explanatory account of individuals and their identity. Rather, they focus on uncovering mental processes that explain better individual judgment and decision-making.

5Chapter 2 starts with a brief discussion of two origins of contemporary behavioral decision research—Amos Tversky and Daniel Kahneman´s heuristics and biases approach and Sarah Lichtenstein and Paul Slovic´s preference construction perspective. Davis draws attention to the fact that such approaches also differ in their interpretations of the critique of rationality and the nature of individuality. He examines critically the heuristics and biases approach as well as the prospect theory that significantly influenced contemporary moves in behavioral economics. Davis complains that just like standard economics, behavioral economic research also endorses (even though not explicitly) an atomistic conception of individuals and keeps rationality and individuality as separate issues. However, it remains doubtful whether the greatest challenges put to new behavioral economics refer to its silence about the complex issue of individuality. Perhaps, the incremental type of theorizing that characterizes contemporary behavioral economics and decision research simply reveals that researchers´ decisions are also sensitive to loss and ambiguity aversion, endowment effect among other judgment and decision errors (Davis 2013). Furthermore, behavioral economists and behavioral decision researchers are not exactly committed to developing an explanatory account of individuals and individuality properly speaking. Rather, most behavioral models focus on uncovering processes, mechanisms and cognitive errors underlying judgment and decision-making behaviors including anomalies. Davis should have devoted more time to explain why and how the foregoing behavioral accounts constrain our understanding of economically relevant phenomena. Appealing to the individuation and re-identification criteria may not be enough to convince some readers.

6Chapter 3 scrutinizes how behavioral economics deals with temporal choice and some of its normative ramifications. Davis is particularly interested in analyzing the problems behavioral economists face when their accounts remain committed to an atomistic conception of individuals. He concentrates on examining behavioral economists´ strategies to incorporate self-control problems in their explanations of choice over time. Based on a careful review of the literature, Davis argues that behavioral economics does not really succeed in replacing the Homo œconomicus conception with a Homo sapiens representation of the individual. He goes on to discuss why behavioral models inspire the debate over libertarian paternalistic interventions called nudge. To some extent, Davis´ account of nudge paternalism is very generous and draws on a debatable premise that experts or policymakers are benevolent. It is not clear at all why exactly benevolence is the driving force behind the design of particular choice architectures and certain regulatory schemes. It is not obvious whether, why and how some choice architectures and regulatory measures like automatic enrollment in 401(k) retirement savings accounts depend on policy makers´ or experts´ benevolence or their higher degree of rationality. Even though it is possible to legitimate nudges by appealing to a welfare criterion, it is important to assess critically how default rules change, who the experts or choice architects are and what they aim to achieve. There are doubts about whether experts really serve as “surrogates” and help individuals to overcome their weakness of will in a way that intentions and actions fit well together. In addition, there are many reasons for asking whether policy makers or experts can overcome their fragmented knowledge to help people to choose what it is in their own best interests without any harm at all to their learning capabilities and autonomy or freedom of choice (Glaeser 2006, Rizzo and Whitman 2009, White 2013). Perhaps paternalism “aims at constructing individuals by causing their fragmented selves to act as if they were single individuals” (61). Davis is very correct when he diagnoses that “Thaler and Sunstein fail to show that the individual that rational experts construct is a single unit” (62). He emphasizes that many normative implications of behavioral economics require researchers to come up with a systematic account of how “social interaction underlies individual identity” (ibid). There is no doubt that Davis aims to pursue the above explanatory task. Yet, it remains unclear whether contemporary behavioral economists share his philosophical and theoretical concerns.

7Furthermore, Davis investigates intersections and complementarities between Benabou and Tirole´s account of how agents address bounded willpower and Thaler and Sunstein´s nudge proposals in order to understand better the payoffs of a non-atomistic representation of individuals. In the third chapter, he goes on to address the issue of consumer sovereignty. It seems that some paternalistic interventions, which draws on more or less subtle manipulations of choice architecture to nudge people towards their optimal behaviors, can conflict with consumer sovereignty and freedom. It would have been nice if he had tackled this controversial issue more thoroughly.

8Chapter 4 examines economic accounts that incorporate social interaction. Davis concentrates on scrutinizing George Akerlof and Rachel Kranton´s model of social identity and the behavioral economic literature on social preferences. To him, both cannot really provide explanations that uncover mechanisms that are causally relevant to actual behavior. Neither do they satisfy his identity and re-identification criteria.

9Davis is right when he claims that an explanatory account of sociality requires a representation of socially embedded individuals, which cannot fit very well with the preference (utility) approach. In order to give support to his claims, he embarks on a careful critique of some circular behavioral economic accounts of prosocial behavior in terms of reciprocity, fairness and aversion to unequality.

10Chapter 5 analyzes what potential Game Theory has to develop a refined conception of the individual. In a sense, game theory offers an improved account to the extent that it represents social interaction quite explicitly. Despite the accomplishments of John Nash-Robert Aumann´s program (and its promise of dealing better with the task of embedding individuality into sociality), Davis shows that standard game theory is committed to the utility framework and fails to provide a representation of individuals in tune with individuation (and re-identification) criterion (104). He goes on to assess the possibility of using experimental research in game theory to “endogenize” effectively the individual conception and to represent the role of social interaction in determining what individuals are (107). His careful analysis allows for the conclusion that experimental research in game theory cannot deal very well with the complex issues of personal identity. The troubling question is whether economic game theorists are willing to provide an explanation of the socially embedded nature of individuals.

11In chapter 6, Davis searches for alternatives to the atomistic approach that provide a relational conception of the individual. He examines Bacharach´s view of individual as a team and Don Ross´ neuroeconomic account in terms of neural selves. Both perspectives seem to meet the individuation criterion in the sense that they succeed in explaining multiple selves underlying single individuals.

12Davis discovers that Bacharach´s account cannot deal very well with the relationship between social embeddedness and personal (re)identification. Is this what Bacharach tried to accomplish? It is not clear to me. In his careful assessment of Ross´ neuroeconomic account, Davis also identifies a relational conception of the individual who has no explicit aim to provide the type of explanation of individuals and socially embedded identity that satisfy individuation and re-identification standards. Perhaps part of the difficulty has to do with the different unit of analysis of a neurocellular economics. Ross´ explanation of neural structures as agents that act in an optimizing fashion is interesting just like his account of intra and interpersonal interaction in terms of people´s capacity to produce narratives. Yet the connection between the dynamics of language and its role in determining a socially embedded representation of the individual is not obvious and explicit.

13Chapter 7 appeals to an evolutionary approach in order to examine the nature of individuals as self-organizing systems. Davis scrutinizes first Herbert Simon´s interpretation of boundedly rational behavior as a pair of scissors whose two blades are an agent’s computational facilities (Simon 1990, 7). This view presupposes that decision-makers are able to adjust and adapt to situations, but it is not clear the role of social interaction in that. In order to fill such explanatory gap, Davis examines Vernon Smith´s notion of ecological rationality that depends on his market experimental approach. He stresses that both contributions are important to an evolutionary conception of the individual but they fail to provide understanding of how interaction with others relates to individual´s autonomy. This blank suggests that Simon´s and Smith´s accounts do not fit with the individuation and re-identification criteria. With this in mind, he opts for Binmore´s evolutionary approach that sheds light on that fact that agents are “continually able to adapt and adjust in a reflective way” (158). This is because individuals have two important capacities, which are learning and empathy. Davis appreciates Binmore´s evolutionary approach because it provides a self-organizing and relational individual conception. Inspired by Jack Vromen´s perspective on evolutionary processes and Douglas North´s objections to Binmore´s evolutionary account in terms of ultimate (rather than proximate) causes of behavior, Davis investigates whether Brian Arthur´s approach to complex systems can improve a relational conception in which there is room for co-evolution of individuals and their various forms of interaction.

14Davis´ effort to develop a (non-atomistic) individual conception that takes individuation and re-identification seriously is very explicit in chapter 8. He puts forth the idea that a complexity theory-evolutionary account of behavior may allow for a richer understanding of how individuals account for changes in their self-concepts over time. He goes on to argue that a more satisfactory individual conception requires us to incorporate more explicitly the view of agents as a bunch of capabilities including the capacity of managing their own personal´s identity (64). Such conjecture leads Davis to write the third part of his book about some prospects and implications of a socially embedded individual conception.

15In chapter 8, Davis discusses Amartya Sen´s capability approach that motivates him to regard individuals as a bunch of capabilities. He also appeals to Livet´s account of individual and identity in terms of capability development. In addition he briefly discusses Schechtman´s account of personal identity and Dennett´s perspective on narrative identity. Inspired by their accounts, Davis presents his own individual conception that depends on a particular type of capability that remains implicit in previous approaches, which is “a capability for maintaining and developing an account of oneself in changing interaction with others” (188). Furthermore, he goes on to claim that his ideas are in tune with the historical development of economics. This is a bold statement in need of further clarification.

16In chapter 9, Davis tries to wrap some important issues up and explain his objection to standard economics of identity and his proposed alternative to it. To him, the problem is that Akerlof and Kranton´s account still takes preferences as exogenous (though individuals´ choices are socially embedded) and therefore cannot add to our understanding of how individuals and groups interact to change their identities over time. Davis also detects some limitations of Horst et al.´s strategy related to multiple selves and analytical tractability problems. He tries to explain his capabilities conception of individuals, which purports to put personal and social identities very well together. In a nutshell, what Davis pursues is a non-static account of individuals. This is partly so because he aims to explain the evolving (complex) nature of economic life (190).

17Davis seems very skeptical about the possibility of addressing important normative issues with the standard view of individuals. His conception of socially embedded individuals is very insightful. However, he could have given more details about how his capabilities conception can bridge some explanatory gaps in the study of actual judgment, decision-making, prosocial behavior, development programs and so forth.

18In chapter 10, Davis elaborates on his notion of relational account of individual that can guide a new normative basis for policy, democracy and justice. He is not satisfied with standard moves in economic theorizing that incorporate normative concerns into economics in a very implicit way, which he dubs a back door strategy (216). This is because Davis is interested in better understanding the connection between explanation and recommendation in economics (ibid).

19Davis´s capabilities account goes beyond the strong separation between the positive and the normative in economics. In addition, it calls for a type of policy recommendation that promotes human rights, trust, responsibility and dignity in a deliberative view of democracy. The question is whether the foregoing philosophical preoccupations are sufficient to convince economists to reform their theorizing strategies more drastically and even to rethink some of their commitments to mathematically tractable utility models and equilibrium.

20Moreover, Davis´ conception of individuals as a complex network of capabilities reveals his views about the intimate relationship between equality in participation and capability development. Martha Nussbaum´s interpretation of the capability approach could have been useful to give support to some of his bold interesting claims (Nussbaum 2000, Robeyns 2005, Alkire and Deneulin 2009). In the last paragraph of his book, Davis signals his hope that readers will be convinced of the seriousness of the issues he addressed. Did he succeed in his task?

21Davis might convince many readers, who regard economics as a science with various explanatory goals other than the analytical determination of the economic equilibrium and therefore never took at face value Pareto´s famous advice “the individual can disappear, provided he leaves us this photograph of his tastes” (Pareto, [1906] 1972, 120). Unfortunately, it is debatable whether this group may be representative of the members of the economics profession. It seems that he could have persuaded many others if he had presented and analyzed empirically economic relevant applications of the capabilities conception of socially embedded individuals.

22To end up, Davis wrote an inspiring philosophy of economics book that invites everyone to weigh the pros and cons of reorienting economics to the study of man as he is and the complex economic system as it actually exists (Coase, 2012).

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Bibliographie

Alkire, Sabina and Séverine Deneulin. 2009. The Human Development and Capability Approach. In Deneulin, S. and L. Shahani (eds), An Introduction to Human Development and Capability Approach. Routledge, 22-48.

Coase, Ronald. 2012. Saving Economics from the Economists. Harvard Business Review, 05/12/2012.

Davis, John. 2013. Economists’ Odd Stand on the Positive-Normative Distinction: A Behavioral Economics View’. Marquette University, Department of Economics Working Paper, March 2013.

Glaeser, Edward. 2006. Paternalism and Psychology. University of Chicago Law Review, 73(1): 133-156.

Hands, D. Wade. 2011. The Positive-Normative Dichotomy and Economics. In Philosophy of Economics, U. Mäki (ed.), Vol. 13 of D. Gabbay, P. Thagard and J. Woods (eds.), Handbook of the Philosophy of Science. Amsterdam: Elsevier, 219-39.

Nussbaum, Martha. 2000. Women and Human Development: The Capabilities Approach. Cambridge: Cambridge University Press.

Rizzo, Maril J. and Douglas G. Whitman. 2009. The Knowledge Problem of New Paternalism. BYU Law Review, 2009(4): 905-968.

Robeyns, Ingrid. 2005. The Capability Approach: A Theoretical Survey. Journal of Human Development, 6(1): 93–114.

Simon, Herbert A. 1990. Invariants of Human Behavior. Annual Review of Psychology, 41: 1-19.

White, Mark D. 2013. The Manipulation of Choice: Ethics and Libertarian Paternalism. Palgrave Macmillan.

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Roberta Muramatsu, « John B. Davis, Individuals and Identity in Economics », Œconomia, 5-2 | 2015, 237-243.

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Roberta Muramatsu, « John B. Davis, Individuals and Identity in Economics », Œconomia [En ligne], 5-2 | 2015, mis en ligne le 01 juin 2015, consulté le 23 juin 2017. URL : http://oeconomia.revues.org/1479

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Roberta Muramatsu

Mackenzie Presbyterian University, Sâo Paulo and Insper Business School, Sâo Paulo

roberta.muramatsu@mackenzie.br

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