Abstract
Economics is the science of studying behavioral aspects of the consumer market. Trends in the consumer market directly influence the production, distribution and consumption of goods and services. Micro economic specifically explores the aspects of rationalization that affects the decision making of the consumer market. Research in these areas is key to the basis of institutional theory: which can be used to make future productions of the consumer market for instance. The theory of bounded rationality holds, that the decision making process is usually influenced by limitations such as time, available information and cognitive functions. The consumer therefore is believed to utilize readily available information that can be easily digested. This research paper will show how the contributions of Imre Lakatos to scientific research methodology. The main aim is to explore why consumers always tend not to choose cheaper products.
Brief Overview
Bounded rational theory describes the manner in which human beings make their decisions. The process of choosing between which decision will embody the most benefit entails rationalizing. However, according to.., there is too much information available and too little time to invest digesting it all. As such, people’s rational thinking is bounded by cognitive limitations. This provides a gist of the fundamentals of the bounded rationality theory. Imre Lakatos was a philosopher of science who introduced research programmes into the process of doing scientific research. Lakatos believed that science embodied rational and irrational theories. In this manner therefore, the research process was either scientific or pseudoscientific. The bounded rationality theory embodies the thought process adopted by scientists that result in either scientific research or pseudoscientific research.
In order to understand the dynamics of the two concept as presented in this paper, it is crucial to explore the origins that describe how the two concepts came to be. Research methodology describes the style of conducting research and a set framework used to reach conclusions. This framework describes the basis of confirming the scientific theory. Newton, for instance, confirmed his value of gravity by use of a framework that could be revisited by other scientists to confirm his claim. Galileo also used a framework to determine that the earth was round, contrary to contemporary scientific belief at the time that the earth was flat. This illustrates the bounded rationality theory; in the rational thinking of scientists who deduced the latter and Galileo, who made valid deductions
This research paper therefore aims to explore why people disdain cheap products. Aspects of the two concepts toward accepting or rejecting Imre Lakatos’ views scientific methodologies. For instance, what are his main assumptions? How did he manipulate axioms and models to establish his views? What is the main anomaly and how did he handle it? The answers to these questions will help to determine how these aspects he explored are related to scientific research programmes: and whether his theory was theoretically or empirically progressive – or both.
Introduction
Economics is a behavioral science that explores social aspect of how goods and services are produced, distributed and consumed. According to the American Economic association, there is a general trend that can be observed in the behavior of people when there is a want to be fulfilled. A deeper look into micro-economics reveals that those trends are reflected in their decision making practices. Economic research has explored some of the reasons why people move towards incentives that offer better returns. The efforts in economic research aimed at exploring the behavioral trends form the basis of institutional theory. Institutional theories are used to inform, say, the government or stakeholders of the economy in order to establish market trends within the country or region for instance. It can also be used by multinational corporations to determine market trends to adjust their production and distribution practices. This discussion will explore the aspects that directly impact this theory.
Studies also show that people mostly go for products that are not cheaper. Products available in the market are all price to suit individuals with diverse economic ability. Therefore the lower class individuals have access to affordable products and services that are inherently basic. The middle class get to enjoy more flexible goods and services and offer relatively more incentives; and the uber class gets to enjoy the most incentives out of the various products and services available in the market. The general trend however, is that the lower class hold the firm belief that if they could just get products with more incentive – available to the middle class, - then their wants can be fulfilled beyond just the basic level. The middle class also strive to acquire products and services that offer maximum incentives – available to the rich. In this case therefore, there is the general trend set that the lower classes aspire for products that can be afforded by the middle class and the middle class for the rich. According to Herbert Simon, people always tend to choose what they aspire for. For instance in this case, the lower classes aspire to access products of the middle class.
Bounded Rationality Theory
In the ideal world, people rely on information to make informed choices: however, the information used by most people to rationalize their decisions is limited. According to Simon, there is too much information available; however, the human mind has limitations. A human being is unable to synthesize all this information: it would entail investing intellect. However, given the limitations of time and the desire to make decisions quickly, most people prefer to engage their minds with the short bits of information that they can invest their intellect into. Their decision is therefore not accurate per se, but only utilizes available information to them to inform a decision that is done quickly. However, according to Karl-Dieter Opp, this is source of controversy given how the research to establish this claim is conducted.
Imre Lakatos on Research Methodology
Imre was a renowned powerful individual in Hungary. He pioneered in the development of research programs before his demise. Fundamentally he believed that certain research methodologies were flawed in their approach. Lakatose believed that if research was truly to fulfill institutional theories, then it would have to utilize concrete facts. This assumptions was based on his Lakatose criterion of research, in which, he claimed that research in the arena of science should only be attempted after the establishment of hard core theoretical assumptions. He gave the example of witches in ancient times being burned to the stake as one example of the consequences of science going wrong in their theoretical assemblies. He argues, that just because a few facts have been verified, it is not enough to use those facts as the basis of a framework to execute a theoretical formula. Imre, gives an example, that Isaac Newton, was a good example of a scientist who followed the criterion of his assumptions while attempting to do his research. Since scientific theories can be refuted, he expresses his ideas that is possible to establish beyond reasonable doubt, the basis of a theory by exploring all facts. The fundamentals of research are to analyze facts and make deductions that form the basis of a theory. Isaac Newton was able to accomplishing this by gathering all the facts and investing his intellect to establish his laws that to this day is irrefutable.
Imre believes that the concept of rationality changes over time, leading to the establishment of new theories. These theories represent a problem shift that was not previously addressed by the predecessor. Problem shifts are progressive theoretically, empirically or both. They are theoretically progressive if the new theories are able to embody a wider scope of issues not addressed by the previous theories. It can also be empirical if in addition to covering a wide scope, there is actual evidence that supports the theory: that is irrefutable. Developing new theories introduces the aspect of heuristics. This can be positive or negative. It is negative if the aspect of the theory cannot be changed for instance the hard core aspects. It is positive if the new information is congruent with the hard core facts in the theory and suggest ways to revise the rationalization of the theory.
Lakatos’ set of hard core assumptions was the basis of axioms. These assumptions were centered on different times, for instance the Aristotelian assumptions were set in a time when the sun was the center of the solar system. A separate assumption was based on observations made normally of regular uniform planets that exuded perfect motions. The last set of assumptions was based on the identification that each of these planetary systems was unique in their size, motions around the sun and exhibited varying speeds. Axioms are basically proposed assumptions used to formulate the framework of research methodologies. They are unsubstantiated, cannot be proved yet and hence are used temporarily to give an insight into the theories designed.
The applications of these findings are a cause for pause in economic research aimed at understanding consumer decision-making practices. Assumptions that are made about the market in contemporary times that do research for instance on the decision making employed when purchasing smart phones are inadequate. According to Peter Earl et al, the market trends and behavior is constantly changing and therefore the assumptions used at the beginning to formulate the research framework are inadequate: since they quickly become irrelevant in the course of the research.
Conclusion
This research has explored the fundamentals of rationalization of the consumer market in economics. It has also established that prevailing issues are bound to change and therefore research must strive to emulate as much hard core facts as is humanly possible. Imre’s views on rationalization and how it affects research are equally important as it clearly reveals the flaw in research theories established in most scientific research
Efforts aimed at discerning consumer behavior must therefore utilize some of the important views presented in this paper by Imre, before embarking on research. It has been shown through his axioms that certain flaws exist when decisions are made to explore research based on the proposed assumptions. The bounded rationality theory expresses the limitations and constraints faced by consumers during their decision making process. Imre uses this to inform express his views on notable flaws in scientific research: and his views are crucial in the course of formulating institutional theories. This paper also discusses the main reason consumers choose not to buy cheaper products: their aspirations.
References
American economic Association. What is economics? n.d. https://www.aeaweb.org/resources/students/what-is-economics (accessed April 25, 2016).
Earl, Peter E., Lana Friesen, and Kristin Hatherley. Bounded Rationality and Consumer Research: Lessons From a Study of Choices of Mobile Phone Service Contracts. School of Economics Discussion Paper 449, School of Economics, University of Queensland, 2011.
Opp, Karl-Dieter. "Contending Conceptions of the Theory of Rational Action." Journal of Theoretical Politics, 1999: 171-202.
The Economist. Simon Herbert. March 20, 2009. http://www.economist.com/node/13350892 (accessed April 25, 2016).
