Not only is it possible to devise complete models of the economy on hypotheses other than rationality, but in fact virtually every practical theory of macroeconomics is partly so based. The price- and wage- rigidity elements of Keynesian theory are hard to fit into a rational framework, though some valiant efforts have been made. ... But if the Keynesian model is a natural target of criticism by the upholders of universal rationality, it must be added that monetarism is no better. I know of no serious derivation of the demand for money from a rational optimization. ... The use of rationality in these arguments is ritualistic, not essential.
Kenneth ArrowRelated topics
criticism derivation devise fit hard hypothesis model money natural possible rigidity universal use Keynesian macroeconomics monetarism optimizationRelated quotes
Capitalism is a system in which many scarce resources are owned privately, and decisions about allocating them are a private prerogative. Democracy is a system through which people as citizens may express preferences about allocating resources that they do not privately own. Hence the perennial question of political theory and of practical politics concerns the competence of these two systems with regard to each other. Is it possible for governments to control a capitalist economy? In particular, is it possible to steer the economy against the interests and preferences of those who control productive wealth?
Adam Przeworski
At the one end of the scale are the Communist countries: at the other end the United States of America stands for individual liberty in the political sphere and for the maintenance of human rights. But its economy is based on capitalism, with all the problems which it presents, and with the characteristic extreme inequality of wealth in its citizens... Great Britain, like the other countries of western Europe, is placed geographically and from the point of view of economic and political theory between these two great continental States... Our task is to work out a system of a new and challenging kind, which combines individual freedom with a planned economy, democracy with social justice.
Clement Attlee
Of all the elements of critical importance to plants, phosophorus is the least commonly found, and sources are rarely available locally. Of all the phosphatic fertilisers used, Europe and North America consume 75% (and get least return from this input because of overuse, over-irrigation, and poor soil economy). If we really wanted to reduce world famine, the redirection of these surplus phosphates to the poor soils of Africa and India (or any other food-deficient area) would do it. Forget about miracle plants; we need global ethics for all such essential soil resources. As long as we clear-cultivate, most of this essential and rare resource will end up in the sea.
Bill Mollison
Many hon. Members, I know, have studied the relevant documents which have been issued about German activities immediately after the last war. They show-I do not think anybody can doubt it-a devastating indictment of the complete absence of German sincerity from the very beginning in fulfilling any of the disarmament stipulations of the Treaty of Versailles. I believe it to be a fact that over the whole range of the disarmament stipulations of that Treaty the German military authorities practised ingenious, universal, and, let us admit it, to a certain extent successful evasion and obstruction at all possible points.
Anthony Eden
One interesting footnote: although Friedman made great strides in macroeconomics by applying the concept of individual rationality, he also knew where to stop. In the 1970s, some economists pushed Friedman's analysis of inflation even further, arguing that there is no usable trade-off between inflation and unemployment even in the short run, because people will anticipate government actions and build that anticipation, as well as past experience, into their price-setting and wage-bargaining. This doctrine, known as "rational expectations,” swept through much of academic economics. But Friedman never went there.
Paul Krugman