What is “Rational”?
I don’t normally delve into ethics that much, because I don’t think most people share my eclectic set of reasonings, but when I saw the comments on this Crooked Timber post on the economics of the death penalty, I decided I’ve got to say something. I am not an economist, but I am a scientist, and science is as science does, so I’m going to comment on this from the point of view of a scientist.
One thing I saw quite often was people saying, “Economists always assume that people are rational, but that’s obviously not realistic!”
This is misleading! Economists define “rational” differently from the normal word, just like how every other field has its own jargon (”text” in literary studies, for example, doesn’t mean “written words”, but any human-produced work that can be analyzed; “energy” in physics doesn’t mean the same thing that normal people mean, but rather the capacity to accelerate a mass (or counteract an opposing force) over a distance).
In any case, when economists say “rational”, they mean someone who has some sort of internal set of goals and attains them. A “rational” person responds to incentives in ways that maximize how much they get what they want. So, if a person wants to not die, they’ll avoid things that might kill them. The goals can change over time (an old man has different goals from a toddler), and from person to person (Bill Gates obviously has different goals from Brittany Spears, which led to their different decisions in life). Economists tend to muddy the jargon more and talk about “utility”, but that has nothing to do with money, in general. “Utility” is just “how much the person has reached their personal goals.” So, in a sense, a person’s ultimate goal is to get what they want, which is kind of logically redundant.
This hypothesis is pretty good! People want things, and they do things to get them. Simple! They want to be happy, or maybe they’re hugely emo and want to be sad. Maybe they’re masochists and want to feel pain. Maybe they’re ultra-patriots and so want to die for their country. Maybe they want fame, or maybe they want money. These are all perfectly rational reasons; the key is just finding out the underlying “want.” Everyone is motivated by something; it’s hard to think of someone who isn’t. And people respond to incentives based on their wants.
Instead, most of the problems with economics come from economists trying to get from looking at individuals to groups of individuals, because it’s very hard to analyze even one person; more than one is almost impossible to do in any detail. (Studying just one individual in really great detail is called a “biography”, and economists generally want to study how most people work in general). Often, for the sake of simplicity, economists assume that individuals are more or less similar, or that they vary only along very specific characteristics. This is obviously not true, but the assumptions can be useful and good enough for the particular thing they’re studying. The assumptions can break down, but it’s not because economists assumed that people were “rational”; it’s because a particular economist assumes that individuals are motivated by the same things.
So, saying “people aren’t rational” isn’t a good criticism of economics. People are pretty rational. It’s the other assumptions on top, the “useful approximations”, that make the theories sometimes a little shaky.
