Distinguished Lecture on Economics in Government: Public Policy, Values, and Consciousness

Economists should pay more attention to value formation in economic analysis. First, preferences are not stable in any operationally meaningful sense. Any estimated micro behavior that does not take account of the consequences of the behavior on underlying preferences is incapable of serving as a guide to future action. Second, the economist's model of human psychology is inaccurate and misleading. Third, most analyses of complex social behavior start from models incapable of producing empirical results adequate for useful structural analyses. The paper suggests avenues for making progress on each of these issues, beginning with a different approach to utility maximization.