CAT 2024 Slot 1 VARC Question & Solution
Passage
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, decisionmaking 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 extraeconomic 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
Solution:
Option C is the correct answer.
The passage suggests that the idea of 'homo economicus' assumes that people have “preferences” that determine their choices. Deciding whether to spend limited money on food or warmth illustrates this rational decision-making based on individual preferences. This aligns with option C
Option A: The passage does not suggest that 'homo economicus' is not influenced by others’ preferences. It only states that this model assumes people have their own preferences that determine their actions.
Option B: This is wrong as the passage states that economists like Gary Becker, associated with the homo economicus model, did not borrow or collaborate with other disciplines.
Option D: The passage mentions applying economic reasoning to nonmarket domains but does not tie this specifically to homo economicus.
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
Solution:
Option A is the correct answer.
The tone of the phrase “almighty discipline” suggests mild sarcasm regarding economics' earlier dominance and self-containment. The statement reflects a shift in economics from being insular and self-assured to being more open to interdisciplinary borrowing. The author describes earlier economists, like Gary Becker, as imperialistic and unwilling to incorporate ideas from other disciplines. In contrast, contemporary economists like Thomas Piketty are portrayed as reaching out and collaborating.
Option B: The passage mentions that economists are now collaborating with other disciplines, but it does not suggest this is due to their inability to predict market behaviour. The focus is on how the discipline has shifted over time, not any predictive failures.
Option C: The author does not criticize economic tools for managing crises or say that economics as a discipline has fallen. The passage highlights a transformation toward openness, not a downfall.
Option D: The author is not critical of economists collaborating with other disciplines. Instead, the passage presents this shift as a positive change, contrasting it with the earlier insularity of the discipline.
Question 3
The author critiques Schiller’s approach to behavioural economics for
Solution:
Option C is the correct answer.
The author critiques Schiller for focusing on the direct relationship between emotions, perceptions, and behaviour while excluding the mediating role of institutions such as political parties, media organizations, and lobby groups. The passage states that these institutions historically played a vital role in framing perceptions and legitimizing interests, which Schiller’s narrative leaves out.
Option A: The passage suggests that media and politics are key intermediaries in shaping perceptions and behaviour and not a marginal role.
Option B: The passage does not suggest that Shiller actively denigrates or diminishes the role of institutions. The issue is his omission of institutions, not his critique of their importance.
Option D: The passage mentions that storytelling is part of Schiller’s approach but does not critique him for relying excessively on it. The critique is about the exclusion of institutions, not the use of storytelling.
Question 4
In the first paragraph the author is making the point that economists like Becker
Solution:
Option C is the correct answer.
The first paragraph describes how Becker projected economics into non-market domains like crime and domesticity, analyzing them with economic tools. It also states that he did not borrow ideas or perspectives from fields such as anthropology or history. Option C aligns with this.
Option A: The passage mentions that Becker applied economic principles to non-market phenomena like crime and domesticity, but it does not state or imply that he benefitted from this.
Option B: The passage explicitly contradicts this idea, stating: “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.” Becker did not borrow from other disciplines, so this option is incorrect.
Option D: The passage does not state that Becker actively guarded economics against outside influence. Instead, it focuses on Becker’s one-sided application of economics to other areas, without accepting external perspectives.