Neoliberal market advocacy does not require assuming rational self-interested actors.

Evidence

As Günter Schmölders’s political statements and interventions clearly show, the assumption of the homo economicus, or rather of rational and self-interested actors, is not a necessary condition for the neoliberal advocacy of market mechanisms. On the contrary, Hayek himself had emphasized repeatedly that the limits to individual knowledge made market mechanisms necessary to allocate knowledge and negotiate supply and demand. Economics, for Hayek, tried to answer the question that he considered central to all social sciences, namely “how can the combination of fragments of knowledge existing in different minds bring about results which, if they were to be brought about deliberately, would require a knowledge on the part of the directing mind which no single person can possess?” Focusing not on the economy as a whole but on individual economic actors, Schmölders argued that irrational factors influenced their economic choices, circumscribing their freedom to choose what was in their best interest. Whereas other neoliberals, like Gary Becker, maintained that predictions assuming behavior in line with the homo economicus could still produce valid results, Schmölders argued that explanations could only rarely confine themselves to the hypothesis of economic rationality alone but had to integrate sociological and psychological factors. For Schmölders these non-economic principles of human behavior not only influenced individual economic activity but also, and more importantly, established boundaries for state intervention into the economy. — Dieter Plehwe, Quinn Slobodian & Philip Mirowski (eds.), Nine Lives of Neoliberalism, 333

Categorization

• XREF: Extended back through the book’s internal-varieties case: this undercuts the common caricature that neoliberalism rests on rational-actor assumptions. — connects to: Neoclassical finance requires only a few well-financed arbitrageurs, not rational average investors. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 1212
• SEED: Angles toward unpacking the caricature that neoliberalism = homo economicus by showing Hayek’s knowledge problem as the actual foundation.