Nss Exploring Economics Book 5 Answer

[Karlotta Neifert]

Asa first approximation, ontology is the study of "what is". Ontological statements are answers to questions about whether or not something fundamentally exists (e.g. numbers, institutions, or causal relations). Perhaps the most classical ontological question is the following: "Is there a God?" Ontological questions and assumptions are often determined prior to empirical research. They therefore represent a set of beliefs about the nature of the world and so to a certain extent they influence the questions researchers ask as well as the ways in which they practice science.

Uncertainty: Additionally, uncertainty is a factor in behavioural economics. Persons do not operate using rational calculation in uncertain decision-making situations. Instead they make use of certain decision heuristics.

Micro: The axiom of methodological individualism implies that processes on the macro-level are exclusively derived from actions of individuals on the micro-level. Therefore, all economic phenomena can be explained and described on the basis of individual action.

Micro: The assumptions of a strong subjectivism not only implies a methodological but also an ontological individualism. Subjectivism means that the only existent world is that perceived by individuals. Even though aggregates or institutions might be discussed, they can always be reduced to individuals.

Meso: Several actors form a population. The macro level is composed of many rules and several populations, but is defined by the self-organization of populations and structures at the meso level. Hence, processes on the macro-level can only be explained by reference to the meso-level, i.e. the analysis of populations instead of individual actors.

Meso: The focus is on gender relations and their interaction with production regimes, (non-)markets as well as formal and informal institutions (laws, social norms). Hence, the analysis is primarily conducted on the meso-level.

Meso: Post Keynesians reject the idea that social structures or macroeconomic phenomena can be reduced to the behaviour of individuals. On the contrary, individuals always act in a certain institutional context which itself shapes their beliefs and actions, and connects different classes of agents or types of economic units with each other.

Meso: The smallest parts of complex systems are agents. Economic agents can be human beings or institutions such as firms, banks or governments. Their interactions are shaped by the decisions of other agents as well as institutions such as the rule of law, culture, and markets.

Macro: Together, institutions and individuals form a complex system. At the same time, the system shapes the institutional structure and human decisions. These elements on their own cannot explain economic phenomena. Economics is more than the sum of its parts

Meso: The following issues are emphasized: institutions, power relations, uncertainty and ignorance. In this context, interactions between the economy, society and the environment are analysed.

Insights from behavioural science and cognitive and social psychology are included in the analyses. There is scepticism about the assumption that human beings have predefined preferences even over complex environmental problems. Rather, preferences have to be formed within deliberative, social processes.

Agents are only boundedly rational. Their rationality is limited by the tractability of the decision problem, the cognitive limitations of their minds, and the time available to make the decision. Agents generally do not optimize in the standard sense. Rather, people engage in cognitive processes such as social comparison, imitation and repetitive behavior (habits) so as to efficiently use their limited cognitive resources.

Inside a certain mode of production there are powerful material and social structures, such as competition, that induce people to behave accordingly. Therefore, humans are not necessarily competitive or collaborative but human behavior is affected by the historically specific mode of production.

Individuals cannot be separated from their social and economic contexts, which determine decisions and actions. Hence, humans neither behave autonomously nor necessarily rationally or in a utility maximizing fashion.

Due to psychological reasons and fundamental uncertainty, individuals compare themselves to others and build their decisions partly on rules of thumb and habits. Furthermore, individuals always act in a certain institutional context which shapes their beliefs and actions, and links different classes of agents or types of economic units.

Humans are social beings that derive preferences and value-orientations from the social context they are embedded in as well as from direct interactions with other people. Those interactions are not restricted to the market, such as relations between producers and consumers, but also comprise personal, political and further social relations.

Humans and their preferences are relatively autonomous and independent of external influences. Actors try to reach their goals, i.e. the maximization of their utility, according to their preferences as efficiently as possible.

Both the analytic concept of the simplistically constructed homo economicus and the related concepts of instrumental rationalism, utility maximization and perfect information exist alongside conceptions of human beings including social elements such as institutions, power and social context.

Atomistic: Only individuals know what is best for the individual. This view rejects the influence or valuation by external institutions such as religion. This can on the one hand be interpreted as an ontological focus on the individual, meaning that there is a rejection of economic phenomena and structures which can not be reduced to the individual. On the other hand, this can be understood methodologically. In this case, social phenomena can only be explained with reference to individuals.

Middle: There is neither a mere methodological individualism nor a solely methodological collectivism. Instead there are selection mechanisms both on the level of individuals and on the level of superordinate entities.

Contextual: Interactions are shaped by the decisions of other agents as well as institutions such as the rule of law, culture, and markets. They are also bounded by environmental constraints. Together, institutions and individuals form a complex system. At the same time, the system shapes the institutional structure and human decisions. These elements on their own cannot explain economic phenomena. Economics is more than the sum of its parts.

Contextual: The view of the world is holistic. Collectives and systems are not simply sums of their parts, they are complex entities with their own characteristics and behavioural properties.

Contextual: Actors are embedded in a social and economic context. Hence, economic phenomena cannot be considered as isolated entities. Spheres that are often conceived as being separate, such as the public and the private, the reproductive and the productive, the social and the economic sphere, are logically connected.

Contextual: The world is not made out of particulars that can be isolated for the purpose of analysis. Instead entities like classes, firms, states, and institutions exist within a context, which is essential to their existence.

Middle: The economy is a dynamic system that is subject to constant changes. Yet, static situations can be identified and are considered to be useful for scientific findings. Analyses are therefore conducted with comparative-statics as well as dynamic methods.

Dynamic: Economic phenomena are processes situated in time and space. Although institutions are by their very nature understood as (more or less) durable and thus stable over time, understanding change and the processes by which change occurs is a central preoccupation.

Middle: Time is often explicitly modeled using discrete time, often the case in computational models, or continuous time, often the case in analytical models. Time plays an important role due to path-dependence. The present and past states of economic systems rely on its past. The economy becomes a system that evolves procedurally in a series of events, it becomes algorithmic.

Dynamic: Both uncertainty and variable preferences imply a dynamic conception of time. It is assumed that people's decisions today directly influence the future. Humans make plans based on present knowledge and expectations about the future.

Defined narrowly, epistemology is the study of knowledge and justified belief. As the study of knowledge, epistemology is largely concerned with questions like: What are the necessary and sufficient conditions of knowledge? What are its sources? What is its structure, and what are its limits? Put differently, epistemology addresses what we can know and how we can arrive at knowledge. The way in which researchers answer these and other epistemological questions determines which assumptions they make regarding the nature of their knowledge claims about the world and the confidence they assign to these statements.

Realism: Neoclassical economics is preoccupied with the scientifically neutral extraction of real causalities. This implies a subscription to a positivist worldview, in which the economic reality can be observed and modelled.

Realism: Due to the inherently interdisciplinary focus, with heavy influences from biology, climate science, physics and other natural sciences, there is a strong orientation towards the empirical testing of theories and hypotheses.

Middle: The assumption of fundamental uncertainty entails that knowledge can always turn out to be an absence of knowledge, which means that statements are always hypothetical. According to this epistemology, there is at least one reality that is independent from humans. This reality does have a structure in which causal relations are existent and can at least partially be understood.

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