Explaining patterns, not details: reevaluating rational choice models in light of their explananda

Abstract

It has been argued persistently that economic models frequently suffer from poor empirical performance because they rely upon empirically inadequate behavioral foundations, i.e. theories of rational choice. In this paper, I argue that much of this criticism misses the point: it assumes that economics is about explaining human behavior when in fact, since Adam Smith, economists have been more interested in explaining patterns that emerge from social interaction. While some minimal account of human behavior is needed for explaining such phenomena, a full-fledged psychological or neurobiological theory of individual behavior might not be. The more pressing yet under-researched challenge for economic models is to arrive at an adequate description of social interaction processes that connect individual choices on the micro-level and robust patterns on the macro-level.