On the behavioral and rational foundations of economic dynamics

Abstract

Existing uncertainties about the correct explanations for economic growth and business cycles cannot be settled by aggregative analysis within the neoclassical framework. Current disputes in theory rest largely on ad hoc, casually empirical, assumptions about departures from perfect rationality under uncertainty. Such disputes can only be settled by painstaking microeconomic empirical study of human decision making and problem solving. Microeconomic research of the kinds that are required can receive powerful guidance from the theories of human thinking that have been developed and tested over the past twenty five years by cognitive psychologists.