Economic Rationality

 

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).

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.

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