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date: 02 December 2020

Abstract and Keywords

The neoclassical view of human behavior emphasizes the rational pursuit of self-interest, aptly described as Max-U by Deirdre McCloskey. Most economists today are not aware that leading thinkers in the classical period had a very different view of decision-making. In the classical view most behavior is driven by people doing what they think they are supposed to do under various circumstances. This chapter proposes a framework that captures the spirit of the classical approach to decision-making. This framework is then used to explore how behavior that is better described by Max-U likely evolved in response to the continuing development of the market economy and the evolution of prevailing moral beliefs. Employing ideas from cognitive science, this exercise sheds new light on several persistent puzzles in experimental economics, most notably several shortcomings of expected utility theory. It also explains how new habits of mind increased both creativity and individuality.

Keywords: ethics, rationality, behavioral economics, experimental economics, expected utility hypothesis, market evolution, cognitive science, creativity, individuality, libertarianism

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