- Elgar original reference
Edited by Richard Arena, Agnès Festré and Nathalie Lazaric
Salvatore Rizzello and Anna Spada 7.1 INTRODUCTION The central role of knowledge for economics was already manifest during the 1930s, but it was during the 1950s that it became especially evident. The 1950s are mainly characterized by a confrontation between the economists defending rational choice theory and those who intend to develop new tools, which will constitute the grounds for a psychologybased theory of decision. The confrontation revolves around the issue of uncertainty in decision making, which also emerged during the 1950s as an unintended consequence of expected utility theory (von Neumann and Morgenstern, 1944). Those economists who were trying to keep rational choice theory alive pursued their goal at two different levels: first, at the analytical level, with the attempt to make the neoclassical assumptions of rationality explicit, in order to reduce the psychological distortions which generated deviations from the expected utility model (Savage, 1954). The attempt was also pursued at the epistemological level, with the evolutionary foundation of rationality (Friedman, 1953). The major goal of this defence of rational choice, at both levels, is to free economic models from uncertainty. During the same period, however, there were several contributions that took another direction and tried to elaborate a descriptive theory of decisionmaking, including uncertainty as one of its unavoidable characteristics. During the 1950s, therefore, uncertainty was the central problem for economists, and the relevance of knowledge was mainly related to the role that this concept could play as an instrument to face uncertainty in decision making. We can...
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