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Context : OnEconomics

Quora Answer : What evidence is there that argue against the claim that "free markets are driven by greed"?

Nov 4, 2019

Well, experimental economics of the kind done by Daniel Kahneman and Amos Tversky shows that in practice people don't make the kinds of decisions consistent with them acting as little utility maximizers.

The utility maximizer simplification of homo economicus is deeply flawed.

And if you think utility maximization is the polite name for "greed". Or that "greed" is a derogatory term for "utility maximization" then clearly Kahnemann and Tversky are showing that "greed" is not the (only) principle operating in markets.

Now this kind of economics is still kind of utilitarian. And some smart-arse always comes along and says "ah, but if I decide to give money to the beggar because it makes me feel good, then I'm still being "selfish" or "greedy". I'm still maximizing my hedonic utility"

But, of course, this is doing dramatic violence to our everyday notions of "greed" and "selfishness". If you go down this route, towards a "hedonic" model of economics, you basically dissolve economics into human psychology. Where economic claims become tautologies.

People do stuff to "feel good about themselves". But basically "feel good about themselves" is synonymous with "whatever motivates them to do stuff".

And by the time your theory is "people do stuff because of the things that motivate them to do stuff" notions like "greed" and "utility" are redundant. They've been squeezed out of the explanation.

Of course, the above (collapsing utility and want) is what AustrianEconomics people and libertarians do as a cheap trick to win arguments. I'm not impressed though.

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