Models
Take the assumption of rationality, for example. When we observe that other people disagree with use, or that they do things we would not do in their place or that we would rather they not do, it is very easy to say that they are irrational. This is a fallacy, since I could just as easily be the irrational one -- if anybody is irrational -- and there could be many other reasons why we disagree. By starting from the assumption that people are rational, and trying to explain the disagreements on the basis of rationality -- not irrationality -- I protect myself from that fallacy. Just because I start with the assumption of rationality doesn't mean I have to stick with it, and sometimes I don't; but it proves right more often than not, so it is the right place to begin a study of economics.
The assumption of self-interest works somewhat the same way. It may seem very cynical always to try to explain human behavior first in terms of self-interest -- but what is the alternative? When we assume self-interested motives we are reasoning as follows:
"Self-interested motives are common among human beings.
Joe Smith is a human being.
Therefore, it is probable that Joe Smith's motives in this particular case are self-interested."
Experience teaches us that self-interested motives are indeed pretty common. There are exceptions, I believe, and that means the rule "Human beings are self-interested" is a defeasible rule. It's a good guideline for critical reasoning in economics, but we have to be aware that there are exceptions.
I believe almost all modern economists would accept these assumptions as guidelines for sound critical reasoning in economics, if not as facts.
For now, however, let us look at some less controversial points from the neoclassical economists, points that will be important for all modern economists:
