Metaeconomic Rationality
What is Metaeconomics?
Metaeconomics is an empathy-based, science- and humanities-grounded alternative to mainstream Microeconomics. Instead of assuming only ego-based self-interest as in Single Interest Theory (SIT) in Microeconomics, Metaeconomics uses Dual Interest Theory (DIT), which explicitly includes empathy-based shared other-interest as an internal part of human behavior.
What is Dual Interest Theory (DIT)?
Dual Interest Theory (DIT) holds that human behavior arises from two interacting motivations: ego-based self-interest (relating to Incentive) and empathy-based shared other-interest (holding the Ethic). Economic stability depends on balancing ego and empathy, self and other(shared)-interest, incentive and ethic—rather than privileging one over the other.
How does Dual Interest Theory (DIT) in Metaeconomics relate to Adam Smith?
Adam Smith emphasized that moral sentiments—the Ethic—must temper self-interest. Metaeconomics formalizes Smith’s insight using modern behavioral science, treating Smith’s two major works as one integrated argument: Wealth and Sentiment, Self and Other(shared)-interest, Incentive and Ethic. The Ethic is essential for tempering the Incentive, and therefore for economic efficiency and market viability.
Writing convention?
In Metaeconomics, the symbol “&” is used deliberately to emphasize that paired terms are joint, interdependent, and nonseparable, not merely additive. Expressions such as ego & empathy, self & other(shared)-interest, wealth & sentiment, and incentive & ethic denote co-arising drivers of human behavior and economic outcomes, consistent with Dual Interest Theory (DIT). Where “and” appears, it carries this same strong meaning; the use of “&” simply makes the jointness more explicit.
If you label everything "rational," you can indeed use "rationality"as the explanation --- but what is the point?
(Albert O. Hirschman, cited in Swedberg, R. Economics and Sociology. Princeton, NJ: Princeton University Press, 1990, p. 330)
A Common Perspective on Microeconomic Rationality
Hirschman and Swedberg are referring to the notion that every choice can be explained by the pursuit of self-interest, i.e., rational economic action(s) mean pursuing self-interest only, and, every choice is by definition rational, because the choice was made in the self-interest. This perspective is sometimes derisively referred to as "economic imperialism," that is, using Microeconomic Rationality to explain all manner of actions taken, choices made by humans/ all human behavior.
Microeconomics, self-interest only economics, has a long list about what it means to be rational, and all participants in Markets are presumed to have these characteristics (after Altman, 2012, loc 1089); “… materially selfish, maximizing his or her material wealth; focuses very much on himself or herself in making decisions; maximizes profits and productivity; is a prodigious and rational calculator; is forward looking; has stable and consistent wants and desires or preferences; has willpower.”
Behavioral economics based empirical science, puts essentially all of these presumptions in question. Metaeconomics, as a branch of Humanistic Behavioral Economics, in 4-decades of empirical research has found little support for the Microeconomic Rationality notions, at least not for most of the people most of the time, and, even for those who are closest to acting this way, only for a small part of the time (see details in Lynne et al. 2016). Like Thaler and Sunstein (2008) say it, real decision makers are better described as Human rather than the Econ characterized in this list.
Metaeconomic Rationality is Fundamentally Different
Metaeconomics goes beyond (the notion of Meta) labeling every action, every choice as being only in the self-interest, and goes beyond rationality associated only with achieving self-interest. Rather, Metaeconomic Rationality embraces the moral dimension of human experience and posits that an other-interest reflecting that moral dimension, moral community is also rationally pursued, and also often influenced by the economic calculus.
-
It is rational to do what is right, what one ought to do (other-interest, shared with others, but still internal to own-self), in complex integration with what one wants to do (self-interest is more primal).
-
The individual jointly pursues the self&other-interest (latter reflecting the moral dimension), at the same time, simultaneously, jointly: One perhaps cannot pursue the one without the other (like a sheep cannot produce wool without mutton!).
-
A "distinct entity" (Khalil, 1990) will emerge to represent/be the individual, a third part other than the two interests, who has looked deeply not only into the self but also into the conscience, while trying to sympathize, empathize... perhaps even act with compassion and altruism... with the state of others. Adam Smith spoke of the potential for an Impartial Spectator within each individual. The self and the impartial spectator interact: The distinct entity emerges, "...beyond self-interest and altruism (Khalil, 1990)," i.e., beyond both self-interest and other-interest.
-
The distinct entity is modeled in metaeconomics as someone with joint utility/interests and gaining utility/more interests achieved from rationally pursuing pleasure/avoiding pain and gaining from following the conscience, albeit each a substantively different kind of gain, perhaps irreducible (See Etzioni, 1986).
-
An individual who achieves an integrated balance might be best described in an I-Thou state consistent with this notion from Buber (1922, as translated by Smith, 1958).
Related Metaeconomics Concepts
This topic is part of the broader Metaeconomics framework, which uses Dual Interest Theory (DIT) to integrate ego-based self-interest and empathy-based shared other-interest in support of stable, efficient, and humane economic systems—formalizing insights anticipated by Adam Smith. For concise definitions, terminology, and links to related concepts, see the Metaeconomics FAQ hub: https://www.metaeconomics.info/faq-frequently-asked-question
References
Altman, M. 2012. Behavioral Economics for Dummies. Mississauga, ON: John Wiley and Sons Canada, Ltd.
Etzioni, A. "The Case for a Multiple-Utility Conception." Econ. and Philos. 2 (1986): 159-183. (See Reviews).
Khalil, E.L. "Beyond Self-Interest and Altruism." Econ. and Philos. 6(1990): 255-273.
Lynne, G.D., Czap, N.V., Czap, H.J., and Burback, M.E. . 2016. "Theoretical Foundation for Empathy Conservation: Toward Avoiding the Tragedy of the Commons." Review of Behavioral Economics 3:245-279.
Smith, R.G. I and Thou (translation of Martin Buber's Ich and Du, circa 1922). New York: Charles Scribner's Sons, 1958.
Swedberg, Richard. 1990 Economics and Sociology: Redefining Their Boundaries, Conversations with Economists and Sociologists. Princeton, New Jersey: Princeton University Press.
Thaler, R.H. and Sunstein, C.R. 2008. Nudge: Improving Decisions About Health, Wealth, and Happiness. New Haven, Massachusetts: Yale University Press.