The contrast between the implicit behavioral assumptions made by those who have proposed the Pigovian corrective taxes and subsidies in the face of external diseconomies and economies and the implicit behavioral assumptions made by those who argued that socialist organization can produce efficient results is striking. As noted in Chapter 5, for the Pigovian policy proposals to accomplish their own stated purposes, individuals who generate externalities must behave so as to maximize their own narrowly conceived economic interests. The effects of their own behavior on the predicted utility levels of others than themselves cannot be assumed to influence their behavior. By comparison, the idealized manager of the socialist enterprise must be assumed to act solely on the basis of nonindividualistic criteria. His own utility cannot be allowed to influence the decisions that he makes; he must choose in accordance with the costs and benefits predicted for the whole community; and his own position in the community must be treated as if it were the same as that of any other member. Whereas the Pigovian man must be strictly homo economicus in the narrowest sense, the socialist bureaucrat must be non-homo economicus in the purest sense. Both men can be only caricatures of actual persons, but both have been present in much serious discussion of real-world policy.
A shockingly large amount of modern “scientific” economics is built on scientifically unsupportable, inconsistent assumptions. Much of it is ideology masquerading as objective science – and the masks are often so thick that they fool even those who wear them.