Opportunities, Barriers, Policy and Practice
Edited by Shane Fudge, Michael Peters, Steven M. Hoffman and Walter Wehrmeyer
Chapter 3: Economic and non-economic factors driving household expenditure: methodological reflections on an econometric analysis
As part of the Economic and Social Research Council (ESRC) Research group on Lifestyles, Values and Environment (RESOLVE), an econometric analysis of UK household expenditure was carried out. The analysis estimated the relative contribution of income, price and ‘other effects’ driving expenditure, without seeking to identify much less quantify those other effects. In this chapter, a series of methodological issues are considered in relation to the original study and to any subsequent enquiry regarding the underlying factors driving household expenditure. To frame the discussion, the theory of rational choice and its key criticisms are outlined. Those criticisms include concerns about the boundedness of actual decision making, the role of habits and emotions in impeding rationality and the conflict between the notion of self-interest and apparently altruistic behaviour. The insistence upon the individual as the unit of analysis has also been challenged, and alternative approaches that give consideration to the role of social structures are discussed. To explain how the rational individual came to dominate in mainstream economics, a short history of economic methodology is provided. While the classical economists treated the basic postulates of economics as a priori truths, the influence of logical positivism and falsificationism gave rise to concerns about the testability of assumptions.
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