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perfect-market models are easier to build, but the same methods applied to imperfect markets can also
produce striking and unexpected insights.
But, you may ask, why restrict ourselves to these particular building blocks? Why, in particular, must
economic reasoning be based on the assumption of self-interested, rational behavior? Why can't we
build models based on more realistic psychological premises, or on a more historically based
understanding of institutions? Or why can't we take into account the fact that tastes and motives are
themselves socially determined, and build a field of ''socioeconomics?"
Page 77
I don't have any fundamental answer to these questions. In the long run we may suppose that economics
will be part of an integrated social science, just as genetics has become a branch of biochemistry, which
in turn is understood in principle if not often in practice to be grounded in quantum mechanics. Indeed,
in the very longest run everything will be grounded in quantum mechanics. As an empirical proposition,
however, attempts to find alternatives to the economist's formula of self-interest plus interaction or, to
use the title of a marvelous book by Thomas Schelling, Micromotives and Macrobehavior have been
notably unsuccessful.
Consider, for example, the repeated efforts of heterodox economic thinkers to find alternatives to the
rational, profit-maximizing firm like John Kenneth Galbraith's claim that modern corporations are in the
hands, not of their stockholders, but of a "technostructure" driven by bureaucratic imperatives. Did
these attempts lead anywhere? Surely the answer is no: once you get past the impressive-sounding
neologisms, theories like Galbraith's make few useful predictions; and what he claimed as deep
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