Amartya sen - rational fools PDF

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Amartya Sen - Rational Fools: A Critique of the Behavioural Foundations of Economic Theory ●

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Edgeworth’s principle of man as self-interested animal is persistent in economic models and foundational in economic theory ○ in Edgeworth’s time egoism and utilitarianism were seen as the exhaustive approaches to action ■ this is narrow - between the claims of the self (egoism) and the claims of all (utilitarianism) lie intermediate groups - families, friends, communities, classes etc ○ Edgeworth’s model, based on egoistic behaviour, led to a correspondence between exchange equilibria in competitive markets and ‘the core’ of the economy ■ ‘the core’ - outcomes which are Pareto efficient, in which nobody is worse off than he could be without trade, and no group of individuals could improve their position by altering the trade amongst themselves ● yet these outcomes are not necessarily impressive in terms of social welfare ○ often this question has been posed in terms of ‘what good outcomes can egoistic behaviour achieve?’ ■ this often assumes egoism, and hence avoids the issue at hand ■ first we should consider what egoistic behaviour consists in, and whether it is realistic (correct) One reason we might use the concept of a self-seeking egoist in economic models is because it is possible to formulate all behaviour so that no matter what is chosen, it represents the agent’s interests ○ this is if we define interests or preferences as revealed/residing exclusively in action ■ e.g. if I eat a banana rather than an apple, I was acting self-interestedly, and revealed a preference ○ one constraint on this is consistency ■ if I make inconsistent choices then for that to be rational I must be either be inconsistent or have changing preferences ○ this seems like an evasion of the issue ○ the rationale of this approach is that we can only understand someone’s preferences through the actual choices that they make ○ without preference and welfare the egoist approach presumes both too little and too much: too little because there are non-choice sources of information on preference and welfare, and too much because choice may reflect a compromise between various considerations, with personal welfare being just one The rational choice theory may appear circular, because behaviour is explained by preferences, which in turn are defined by behaviour ○ in spite of this circularity, the thesis is not meaningless, because it can be falsified - where choice is inconsistent ■ but this still doesn’t answer the question of whether the choices people make are self-interested; of whether egoism is accurate In considering apparent deviations from egoism, we might distinguish between two concepts:

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sympathy: where concern for others directly affects one’s own welfare ■ e.g. where knowledge of torture makes you sick ○ commitment: where something does not affect your welfare, but you judge something and act accordingly ■ e.g. acting to stop torture because you think it is wrong, even though it does not affect your welfare ○ whereas sympathy relates the welfare of different agents to each other, commitment relates choice to anticipated levels of welfare ■ in commitment a person chooses an act that he believes will yield a lower level of personal welfare to him ○ sympathy is a case of an externality, which might mess up some economic models but not all of them ○ commitment is genuinely counterpreferential, destroying a vital assumption of many economic models ■ it is connected with morals in a very broad sense ○ so, economic theory generally relies on the identity of personal choice and personal welfare, and commitment drives a wedge between the two Although commitment might not feature in much economic behaviour, one area it might feature would be the provision of public goods i.e. the free rider problem ○ is it plausible to think that in answering questions people will only give self-interested answers that maximise personal gain? ■ such a view assumes that people are only honest insofar as they have economic incentives for being so, but this denies the role of norms and conducts in society ■ similarly in the voters paradox, it may be that voters seek simply to record their true preference rather than maximise utility Commitment also features in the problem of work motivation ○ no system relies solely on economic incentives; on rewards and punishments ■ there is also reliance on attitudes towards work e.g. Chinese Cultural Revolution ■ such cultural understandings may be far more limited (in domain etc) than approaches such as utilitarianism We might also suggest that the structure of decision making is far more complex than simple preference ordering ○ under rational choice theory a preference ordering is supposed to reflect interest, represent welfare, summarise normative ideas and describe actual choices/behaviour ■ is this too simplistic a model to deal with all of that? ○ how can we represent this more elaborate structure? ■ distinction between ethical preferences and subjective preferences ● ethical preferences are what the individual would prefer on the basis of impersonal social considerations, and subjective preferences are what he actually prefers, on whatever basis ○ subjective preferences would seem to exclude commitments, but if they are determined on basis of choice rather than welfare then it is unclear ■ we need more than a simple dual structure, we need to be able to say that a

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certain preference ordering is more ethical than X and less ethical than Y ● hence we need to make rankings of preference rankings ● under such a system we can understand ‘selfless’ solutions of the Prisoners’ Dilemma by suggesting that the individuals have thought about which particular type of preference ranking would be preferable (for him and the other agent) in this case Does an understanding of action including commitment amount to seeing man as an irrational creature? ○ in terms of consistency, no, but this is a weak sense of rationality ○ what about the concept of rationality that says when P chooses X over Y, this implies that P’s interests are expected by P to be better served by X than by Y? Problems are that this: ■ is consequentialist, judging acts by consequences only ● actions may be chosen without reference to consequences ■ is an approach of act evaluation, not rule evaluation ● actions may be chosen because of the value of rules, rather than in isolation ■ only considers one’s own interests in evaluating acts ● why would be limit the notion of rationality to the consideration solely of self interest? seems arbitrary ○ we could question the supposed continuous existence of the self through time etc, why relate to yourself in the future rather than others now, or yourself in the future rather than others in the future?...