Symbiosis International Education Centre 2007 M.B.A SNAP TEST - Question Paper

2. the advancements made in the field of tissue engineering
3. intensive research by medical scientists.
4. all of the above.

Passage V

“ARE economists human?” is not a ques. that occurs to many practitioners of the dismal science, but it is 1 that springs to the minds of many non-economists exposed to conventional economic explanations. Economists have typically defined the thought processes of homo sapiens as more like that of Star Trek’s Mr. Spock — strictly logical, centered on a clearly described goal and free from the unsteady influences of emotion or irrationality — than the uncertain, error-prone groping with which most of us are familiar. Of course, a few human behavior does fit the rational trend so beloved of economists. But remember, Mr. Spock is a Vulcan, not a human.

Even economists are finally waking up to this fact. A wind of change is now blowing a few human spirit back into the ivory towers where economic theory is made. It is becoming increasingly fashionable for economists, especially the younger, more ambitious ones, to borrow insights from psychologists (and sometimes even biologists) to try to discuss drug addiction, the working habits of New York taxi-drivers, current sky-high American share prices and other kinds of behavior which seem to defy rationality.

Many economic rationalists still hold actual to their faith, and a few have fought back by devising rational explanations for the apparent irrationalities learned by the growing school of “behavioral economists”. Ironically, orthodox economists have been forced to fight this rearguard action against heretics in their own ranks just as their own approach has begun to be more widely applied in other social sciences such as the study of legal regulations and politics.

The golden age of rational economic man began in the 1940s. Famous earlier economists such as Adam Smith, Irving Fisher and John Maynard Keynes, had made use of irrationality and other aspects of psychology in their theories. But in the post-war years these aspects were mostly brushed aside by the new wave of rationalists. The dominance of rationality went hand-in-glove with the growing use in economics of mathematics, which also happened to be much easier to apply if humans were presumed to be rational.

Rational behavior was understood to have several components. At a minimum — so-called “narrow rationality” — homo economics was presumed to be trying always to maximize his general “happiness”, what John Stuart Mills, a 19th-century philosopher, called “utility”. In other words, provided a choice, he would take the choice with the highest “expected utility”. And he would be consistent in his choices: if he preferred apples to oranges, and oranges to pears, he also preferred apples to pears. In addition, there is a broader definition of rationality, which includes the notion of a person’s beliefs being based on logical, objective analysis of all the available evidence. Whether this is a worthwhile definition continues to be the subject of much philosophical debate.

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