Andrew M. Yuengert has recently published online a working paper entitled “The Space between Choice and Our Models of It: Practical Wisdom and Normative Economics“.
Abstract: The gap between the economic theory of action and the practical reality of choice (analyzed in the Aristotelian practical wisdom tradition) cannot be bridged through the development of more complex models. This poses a challenge for the use of economic models for policy analysis: they cannot help but leave out of their formal analysis aspects of actual decision making (practical wisdom) which are crucial to the operation of the economy. Insights from three different treatments of the gap between the formal analysis of choice and the reality of human behavior (Suchman’s studies of human-machine interaction, Scott’s analysis of metis, and Vernon Smith’s studies of ecological rationality) offer guidance for how economists might modify the insights of their models of choice when offering policy advice.
Keywords: rational choice, practical wisdom, Aristotle, situated action, metis, ecological rationality.
JEL Classification: A12, A13, D10.