Reconstructing microeconomics as a kind of anthropology

Here is the closing part of my introduction to what will be a forthcoming Taiwanese, classical Chinese character edition of my earlier book Discover Your Inner Economist:

Finally, hidden in Discover Your Inner Economist is an implied revision of how economics should be done in the university. Most economic theory starts with the notion of market supply and demand, and then proceeds to analyze problems. In my vision, it is first more important to understand how people understand the incentives before them, noting again that not all of those incentives center around money.

Our perceptions of reality, in my view, are shaped by the intersection between “signals sent” on one hand, and our “chosen self-deceptions” on the other. Our worldviews are thus formed, and then in any given social interaction we acquire an understanding – not always accurate – of what is at stake. For instance, we frame what that bonus at work really means, what kind of marriage offer is on the table before us, or what a company is really offering in a long-term contract. In other words, our view of the world comes first, and our response to incentives comes second. We cannot understand incentives without a deep understanding of how worldviews are formed, processed, and revised.

In that sense psychology and anthropology are always prior to economics more narrowly construed, and I have tried to outline how to do good economics under those constraints.

I hope you enjoy this book!


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