Economics Dictionary of Arguments

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Decision-making process: A series of steps that people take to make decisions, such as identifying the decision, gathering information, and evaluating alternatives.
Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments.

Author Concept Summary/Quotes Sources

James M. Buchanan on Decision-making Processes - Dictionary of Arguments

Parisi I 311
Decision-making Processes/Public choice/Buchanan/Tullock: The calculus of choice addresses assumptions about the way that people make decisions (Buchanan and Tullock, 1962)(1). In economic analysis it is generally assumed that people engage in a calculus of choice based on a rational and self-interested assessment of costs and benefits. While economists may suggest that multiple factors go into this calculus, they often end up using price as a proxy. Price functions as a useful proxy for economic analysis because it makes a mathematical calculus possible, and it permits a cost and benefit computation to determine an “optimal” course of action. The problem with using price as a proxy is that price is simply an incomplete interpretation of value and not value itself. Prices simply reflect value differences among competing options, and computations based on price inherently privilege options that are easily quantifiable. For example, the cost of buying and installing an air filter to reduce pollution is easier to quantify than the value of an additional unit of clean air. Requiring legal decisions to be based on a cost and benefit analysis, therefore, results in a bias toward the quantifiable. The larger problem with the calculus of choice is not that it favors the things that are readily quantifiable over those that are more abstract, but that it does this while implying that people make choices on the basis of a calculus rather than as a matter of interpretation.
>Public Choice Theory
, >Public Choice.
Vs: This in turn can lead legal economists to focus on attributing too much force to the power of law to adjust the cost and benefit calculations of innumerable individuals. Behavioral analysis reveals that people often have difficulty making cost and benefit calculations (Schwartz, 2005(2); Sunstein, 2000(3), 2009(4)).

1. Buchanan, James M. and Gordon Tullock (1962). The Calculus of Consent: Logical Foundations of Constitutional Democracy. Ann Arbor, MI: Ann Arbor Paperbacks/Michigan.
2. Schwartz, Barry (2005). The Paradox of Choice: Why More is Less. New York: Harper Perennial.
3. Sunstein, Cass R. (2000). Behavioral Law and Economics. Cambridge: Cambridge University Press.
4. Sunstein, Cass and Richard Thaler (2009). Nudge: Improving Decisions About Health, Wealth, and Happiness. New York: Penguin.

Driesen, David M. and Robin Paul Malloy. “Critics of Law and Economics”. In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University.

Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.

EconBuchan I
James M. Buchanan
Politics as Public Choice Carmel, IN 2000

Parisi I
Francesco Parisi (Ed)
The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017

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