The Use (and Abuse) of Robinson Crusoe in Neoclassical Economics

Abstract

Robinson Crusoe stories were and are extensively used in neoclassical economics. The behavior of neoclassical Robinson Crusoe, however, is at odds both with that of Defoe's hero, the original Robinson Crusoe, and that of real-world castaways. Only the early neoclassicals can be criticized for these contradictions because they intended to explain the behavior of their isolated individuals, whereas modern neoclassicals only seek to describe the decisions of Robinson Crusoe in terms of modern choice theory. This contrast mirrors the change in the way utility theory is conceived—no longer as a means to explain behavior but only as a means to describe it. It is argued that Robinson Crusoe and homo economicus are closely related and that, therefore, the Robinson Crusoe stories afford insights into the development of neoclassical economics and the problems resulting from its reliance upon the isolated-individual paradigm.

Decentralizing corporate governance? A praxeological inquiry

“…Our approach is deductive, building upward from basic axioms and assumptions, rather than inferentially downward from empirical observation. It is the so-called Crusoe methodology, a classical approach to theory building in which a theorist begins with the simplest form of economy-the economy of one-to establish the basic economic mechanics and then add complexity thereto (Söllner 2016). While virtually all classical schools of economics have established their basic premises with this method, the Austrian school has formalized and expanded upon it.…”

The Birth of Homo Œconomicus: The methodological debate on the economic agent from J.S. Mill to V. Pareto

“…Since commercial activities had changed the nature of men, Bagehot did not see a contradiction motivations and the definition of economics. On Robinson, see White (2008), Söllner (2016),…”

Can we cast away Crusoe? A search for other edu/economic-leaderships

“…There are optimal average benefits for all but as supply diminishes, utility to the user increases. Fritz Söllner (2016) wrote ‘[e]ver since its earliest beginnings [the neoclassical] school of thought has more or less appropriated Robinson Crusoe as one of their own. He makes his appearance in the writings of almost all of the neoclassical pioneers’ (p. 36).…”

“…Crusoe could govern himself, and later, Friday. Fritz Söllner (2016) notes the emergence of Crusoe as utility maximiser. William Foster Lloyd’s Lecture on the Notion of Value (1834) for the first time explicitly stated the principle of diminishing marginal utility … Lloyd tells us how rum, ink, bread, and gunpowder become ever more valuable to Robinson Crusoe as his stores dwindle (i.e., marginal utility increases when the quantity of goods decreases) … Of course, all authors who make use of Robinson Crusoe in one way or another assume the validity of the principle of diminishing marginal utility for their castaway, even if they do not explicitly state it.…”

“…In particular, even Robinson Crusoe (or any other isolated individual) will optimize intertemporally (p. 41) .... 14 To make his equipment he has to forgo at least part of the satisfaction of his immediate wants. “Crusoe must, therefore, decide at what point he no longer cares to make present sacrifices for the larger but larger-to-a-decreasing-degree, future gains” (113) (Söllner, 2016: p.42).…”