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The Dynamic Temporal Sequence and Reflexive Adjustment Behavior: Foundations for a Behavioral Alternative to Optimization Theory

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  • Davis, John B.

Abstract

This paper discusses the difference between mainstream and heterodox economics in terms of philosophy’s distinction between two types of temporal sequences governing events: the static, truth-tenseless before-after sequence and the dynamic, truth-tensed past-present-future sequence. Mainstream theory and optimization analysis employs the first. However, Aristotle showed long ago this implies fatalism. Heterodox explanations employ the second, which I argue implies people reflexively adjust their choices over time in a combined backward-looking and forward-looking way that rules out optimization. Central to this explanation of behavior is how uncertainty about the future is connected to uncertainty about the past. I show this can be explained in terms of how people engage in counterfactual thinking whereby their uncertainty about the future is investigated through how they re-examine their uncertainty about the past. This behavioral explanation affects how we interpret two different sets of temporal phenomena heterodoxy emphasizes: (i) irreversibility and path-dependence and (ii) emergence and cumulative causation. I argue this demonstrates the need for the open economic thinking heterodoxy employs, not the closed economic thinking the mainstream employs.

Suggested Citation

  • Davis, John B., 2024. "The Dynamic Temporal Sequence and Reflexive Adjustment Behavior: Foundations for a Behavioral Alternative to Optimization Theory," Working Papers and Research 2024-03, Marquette University, Center for Global and Economic Studies and Department of Economics.
  • Handle: RePEc:mrq:wpaper:2024-03
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    File URL: https://epublications.marquette.edu/econ_workingpapers/97
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    More about this item

    Keywords

    temporal sequences; fatalism; reflexive adjustment; future-past uncertainty; open economic thinking;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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