The conservative revolution meets reflexivity

Although a vast majority of economic theories assume that human agents are rational utility maximizers, some economic schools are more willing than others to carry this vision to its ultimate consequences. In particular, two of the leading schools of the so-called ‘conservative revolution’ of the 1970s are famous for having made an extensive use of the hypothesis of the homo oeconomicus. These approaches were the Public Choice school and the Rational Expectations school. Both theories launched demolishing attacks to a couple of basic ideas underlying interventionist economic policies: the idea that economists could discover the working of the economic system, and the idea that this knowledge could and should be used by politicians to “handle” or “fine tune” the system so as to maximize social welfare. Stated differently:

1. Both the economists and the politicians were assumed to behave in an altruistic fashion, not influenced by personal interests

2. The fundamental equations describing the functioning of the economic system would neither be affected by its discovery, nor by the government's intervention.

The Public Choice school directed its attacks mainly to the first of these assumptions, particularly against the standard view of the politicians' motivations. This school's fundamental thesis is that we cannot assume that economic agents are basically motivated by the maximization of their own income, and, at the same time, that public servants are simply benevolent incarnations of the general interest.