The axioms are like the foundations of a building. No matter how carefully the [social scientist] constructs the walls and the rest of the structure, if the foundations are unsound, the entire structure may collapse. One false axiom, and everything that follows may be wrong or meaningless. (Keith Devlin, 1998) INTRODUCTION We argued in our ﬁrst chapter that, to understand complex social phenomena, we must logically reduce those phenomena into models, and those models should build on a parsimonious set of ‘self-evident’ truths. In doing so, however, we must not make our simpliﬁcations simplistic – that is, our assumptions must aid tractability without trivializing the question of interest. We push forward in the present chapter by arguing that building models on the assumption of ‘maximizing-behavior’ fulﬁlls this requirement. Although (and perhaps because) it is extremely simple, this assumption can facilitate deep insight to human sociality in general, and thus phenomena associated with money and banking in particular. Absent such an assumption, and a consistent logic for deducing insights from it, understanding what truly motivates these phenomena would be diﬃcult, if not impossible. AN AXIOMATIC APPROACH The heart of the economic approach, according to Gary Becker (1976b), is its relentless exploitation of the assumptions that agents optimally choose actions subject to a set of stable preferences. So deﬁned, this approach should appear familiar to those with an intermediate training in mathematics – that is, social scientists employ the ‘economic approach’ in much the same way that mathematicians employ axiomatic...
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