Comprehension
Comprehension: The passage below is accompanied by four questions. Based on the passage, choose the best answer for each question. Oftentimes, when economists cross borders, they are less interested in learning from others than in invading their garden plots. Gary Becker, for instance, pioneered the idea of human capital. To do so, he famously tackled topics like crime and domesticity, applying methods honed in the study of markets to domains of nonmarket life. He projected economics outward into new realms: for example, by revealing the extent to which humans calculate marginal utilities when choosing their spouses or stealing from neighbors. At the same time, he did not let other ways of thinking enter his own economic realm: for example, he did not borrow from anthropology or history or let observations of nonmarket economics inform his homo economicus. Becker was a picture of the imperial economist in the heyday of the discipline’s bravura. Times have changed for the once almighty discipline. Economics has been taken to task, within and beyond its ramparts. Some economists have reached out, imported, borrowed, and collaborated—been less imperial, more open. Consider Thomas Piketty and his outreach to historians. The booming field of behavioral economics—the fusion of economics and social psychology—is another case. Having spawned active subfields, like judgment, decision making and a turn to experimentation, the field aims to go beyond the caricature of Rational Man to explain how humans make decisions…. It is important to underscore how this flips the way we think about economics. For generations, economists have presumed that people have interests—“preferences,” in the neoclassical argot—that get revealed in the course of peoples’ choices. Interests come before actions and determine them. If you are hungry, you buy lunch; if you are cold, you get a sweater. If you only have so much money and can’t afford to deal with both your growling stomach and your shivering, which need you choose to meet using your scarce savings reveals your preference. Psychologists take one look at this simple formulation and shake their heads. Increasingly, even some mainstream economists have to admit that homo economicus doesn’t always behave like the textbook maximizer; irrational behavior can’t simply be waved away as extra economic expressions of passions over interests, and thus the domain of other disciplines…. This is one place where the humanist can help the economist. If narrative economics is going to help us understand how rivals duke it out, who wins and who loses, we are going to need much more than lessons from epidemiological studies of viruses or intracranial stimuli. Above all, we need politics and institutions. Shiller [the Nobel prize winning economist] connects perceptions of narratives to changes in behavior and thence to social outcomes. He completes a circle that was key to behavioral economics and brings in storytelling to make sense of how perceptions get framed. This cycle (perception to behavior to society) was once mediated or dominated by institutions: the political parties, lobby groups, and media organizations that played a vital role in legitimating, representing, and excluding interests. Yet institutions have been stripped from Shiller’s account, to reveal a bare dynamic of emotions and economics, without the intermediating place of politics.
Question: 1

We can infer from the passage that the term '‘homo economicus” refers to someone who

Updated On: Jan 13, 2026
  • believes in borrowing and collaborating with other disciplines in their work.
  • maximises their opportunities based on nonmarket choices.
  • makes rational decisions based on their own preferences.
  • is not influenced by the preferences and choices of others.
Show Solution

The Correct Option is C

Solution and Explanation

The term "homo economicus" describes a theoretical individual who makes rational decisions to maximize their own utility based on personal preferences. In the passage, Gary Becker's economic perspective views "homo economicus" as someone who uses rational decision-making and marginal utility calculations even in non-market situations, without incorporating methods from other fields. This contrasts with traditional economics, which assumes rational behavior, and newer fields like behavioral economics, which recognize that emotions and other factors can lead to deviations from pure rationality.

Considering the passage's context and the definition of "homo economicus," the correct answer is that "homo economicus" refers to someone who makes rational decisions based on their own preferences.

Was this answer helpful?
0
Question: 2

“Times have changed for the once almighty discipline.” We can infer from this statement and the associated paragraph that the author is being

Updated On: Jan 13, 2026
  • sarcastic about how economists, who earlier shunned other disciplines, are now beginning to incorporate them in their analyses.
  • critical of economists’ openly borrowing and collaborating across disciplines to explain how humans make decisions.
  • disparaging of economists’ inability to precisely predict market behaviour, and are now borrowing from other disciplines to remedy this.
  • judgemental about the ability of economic tools to accurately manage crises leading to the downfall of this lofty science.
Show Solution

The Correct Option is A

Solution and Explanation

The phrase "Times have changed for the once almighty discipline" indicates a shift in how economics is viewed and practiced. To grasp the author's sentiment, let's analyze the accompanying text. Traditionally, economists, such as Gary Becker, applied economic principles to non-market areas without drawing from other fields. However, the text describes a recent move towards collaboration in economics, where economists now use ideas from disciplines like history and psychology to better understand human behavior.
Behavioral economics is cited as an illustration of this change: economists now acknowledge that standard models, which assume rational choices, don't fully explain human actions. They are incorporating insights from fields that consider emotions and psychological influences, demonstrating a more inclusive and cross-disciplinary approach.
The remark "times have changed" suggests surprise or irony regarding economists' recent willingness to adopt ideas from other fields, a departure from their former "imperial" approach of applying economics elsewhere without reciprocal borrowing.
Consequently, the author's tone is best described as: "sarcastic about how economists, who earlier shunned other disciplines, are now beginning to incorporate them in their analyses."
Was this answer helpful?
0
Question: 3

In the first paragraph the author is making the point that economists like Becker

Updated On: Jan 13, 2026
  • benefitted from the application of their principles and concepts to non-economic phenomena.
  • used economics to analyse non-market behaviour, without incorporating perspectives from other areas of inquiry.
  • tended to guard their discipline from poaching by academics from other subject areas.
  • had begun to borrow concepts from other disciplines but were averse to the latter applying economic principles.
Show Solution

The Correct Option is B

Solution and Explanation

In the first paragraph, the author explains how economists like Gary Becker applied economic principles to non-economic areas such as crime and family life. They extended market analysis techniques to understand personal decisions, like calculating marginal utility. However, Becker's approach did not include insights from other disciplines like anthropology or history, suggesting a singular focus on economic methods.
Therefore, the correct option is: used economics to analyse non-market behaviour, without incorporating perspectives from other areas of inquiry.
Was this answer helpful?
0
Question: 4

The author critiques Schiller’s approach to behavioural economics for

Updated On: Mar 23, 2026
  • linking emotions and rational behaviour without considering the mediation of social institutions.
  • denigrating the role of institutions while creating a link between behavioural economics and perceptions.
  • relying excessively on storytelling as the main influence on the formation of perceptions.
  • ignoring the marginal role that media and politics play in influencing people’s behaviour.
Show Solution

The Correct Option is A

Solution and Explanation

This question asks to identify the criticism of Schiller’s behavioral economics approach as presented in the passage. The correct answer is: linking emotions and rational behavior without considering the mediation of social institutions.

Here's the breakdown of the reasoning:

1. The passage explains that behavioral economics combines economics and social psychology, examining how people make decisions outside the traditional "Rational Man" framework.

2. Schiller’s method connects perceptions and stories to behavioral shifts and social results, using storytelling to show how perceptions are shaped.

3. The main criticism in the passage is Schiller's omission of political and institutional influences. It states: "Yet institutions have been stripped from Schiller’s account, to reveal a bare dynamic of emotions and economics, without the intermediating place of politics."

4. This critique points out that Schiller’s model directly connects emotions and behavior, overlooking the mediating role of political institutions and social structures, which traditionally influence this connection.

Consequently, the answer that captures this deficiency is: linking emotions and rational behavior without considering the mediation of social institutions.

Was this answer helpful?
0

Top Questions on Reading Comprehension

Questions Asked in CAT exam

The passage given below is followed by four summaries. Choose the option that best captures the essence of the passage.
In the dynamic realm of creativity, artists often find themselves at the crossroads between drawing inspiration from diverse cultures and inadvertently crossing into the territory of cultural appropriation. Inspiration is the lifeblood of creativity, driving artists to create works that resonate across borders. In a globalized era of the modern world, artists draw from a vast array of cultural influences. When approached respectfully, inspiration becomes a bridge, fostering understanding and appreciation of cultural diversity. However, the line between inspiration and cultural appropriation can be thin and easily blurred.
Cultural appropriation occurs when elements from a particular culture are borrowed without proper understanding, respect, or acknowledgment. This leads to the commodification of sacred symbols, the reinforcement of stereotypes, and the erasure of the cultural context from which these elements originated. It is essential to recognize that the impact of cultural appropriation extends beyond the realm of artistic expression, influencing societal perceptions and perpetuating power imbalances.
View Solution