Lin-AZ Simulation Listening Exam 04 – Level B2
Prof. Peter Cullen
Text
May/2014
All theorizing in the social sciences builds implicitly or explicitly on conceptions of
human behaviour. Some of the approaches rest on the expected utility assumption in
economic theory or the extension of that behavioural assumption into other social science
disciplines, loosely termed rational choice theory. Other approaches raise some quite
fundamental questions about the tradition economic approach. Although I know of very few
economists who really believe that the behavioural assumptions of economics accurately
reflect human behaviour, they do generally believe that such assumptions are useful for
building models of market behaviour in economics and, though less useful, are still the
best way to study politics and the other social sciences.
I believe that these traditional behavioural assumptions have prevented economists
from understanding some very fundamental issues and that a modification of these
assumptions is essential to further progress in the social sciences. The motivation of the
actors is more complicated and their preferences less stable than assumed in standard
theory. More controversial and less well understood among the behavioural assumptions
is the implicit assumption that actors possess cognitive systems that provide true models
of the worlds about which they make choices, or at the very least, that the actors receive
information that leads to convergence of divergent initial models. This is completely wrong
for most of the interesting problems with which we are concerned. Individuals make
choices based on subjectively derived models that diverge among individuals and the
information the actors receive is so incomplete that in most cases these divergent
subjective models show no tendency to converge. Only when we can understand these
modifications in the behaviour of the actors can we make sense out of the existence and
structure of institutions and explain the direction of institutional change. I examine
expected utility theory, then explore issues of motivation and the relationship between the
complexity of the environment and the subjective models of reality that the actors posses,
and finally tie in the observations to explain the existence of institutions.
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LAZ Simulation Listening Exam 04 – Level B2
May/2014
Prof. Peter Cullen
___________________________________________
Name, Date, and Registration Number
Questions: Answer all 5 of the following questions. SIMPLE AND CORRECT IS
BETTER THAN COMPLICATED AND WRONG. USE SHORT PHRASES AND
SENTENCES.
This exam requires interpretation and analysis. It is designed to test your ability to
apply what you hear to possible discussion areas.
1. How does economic theory connect with other social sciences?
2. What do most economists believe about the behavioural assumptions of economic
theories?
3. What does the speaker believe about economic theory?
4. What is the mistaken assumption about what human cognitive systems have to do
with economic behaviour?
5. How do individuals make choices, according to the speaker?
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LAZ Simulation Listening Exam 04 – Level B2
Prof. Peter Cullen
May/2014
Answer Sheet
1. How does economic theory connect with other social sciences?
Economic theory provides the expected utility function or “rational choice”.
2. What do most economists believe about the behavioural assumptions of economic
theories?
While they don’t accurately reflect behaviour, they do make useful tools for building
models of market behaviour in economics and, though less useful, are still the best way to
study politics and the other social sciences
3. What does the speaker believe about economic theory?
I believe that these traditional behavioural assumptions have prevented economists from
understanding some very fundamental issues and that a modification of these
assumptions is essential to further progress in the social sciences.
4. What is the mistaken assumption about what human cognitive systems have to do
with economic behaviour?
actors possess cognitive systems that provide true models of the worlds about which they
make choices, or at the very least, that the actors receive information that leads to
convergence of divergent initial models
5. How do individuals make choices, according to the speaker?
Individuals make choices based on subjectively derived models that diverge among
individuals and the information the actors receive is so incomplete that in most cases
these divergent subjective models show no tendency to converge.
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