Economic Development, Social Order, and World Politics: With Special Emphasis on War, Freedom, the Rise and Decline of the West, and the Future of East Asia

By Erich Weede | Go to book overview

2

RATIONAL CHOICES AND
RESPONSIBLE DECISIONMAKING

1. Rational Action by Individuals

According to the rational choice or economic approach to human behavior, individuals perceive some set of options, evaluate the beneficial or harmful consequences of realizing these options, form expectations about the probability distribution of gains and losses attached to various courses of action, and then choose the expected utility-maximizing course of action (for example, see Coleman, 1978; 1990; Lindenberg, 1985; 1990; McKenzie and Tullock, 1978a; 1978b; Nicholson, 1992; Opp, 1979; 1991; Tullock, 1974). In this perspective, rationality is an undemanding concept. As McKenzie and Tullock (1978a, p. 9) interpret it, the utility-maximization or rationality assumption comes quite close to the assertion that human beings are inherently greedy: "The individual will always choose more of what he or she wants rather than less. It also means that he or she will choose less of what he or she does not want rather than more." In this perspective, rationality implies neither education nor refinement nor common sense nor reasonableness. McKenzie and Tullock (1978a, p. 56) therefore do not hesitate to attribute rationality even to rats or to "seriously disturbed and/or very stupid people with no education and who had been institutionalized for long periods of time."

Rationality need not imply a conscious comparison of the expected utilities to be derived from various courses of action. The economic approach explains behavior, not mental processes. We may retreat to the assertion that individuals behave as if they were rational, as if they attempted to maximize utility. The theory does not prohibit the notion that our efforts may fail. We may not perceive the full set of possible courses of action; we may misjudge utilities and probabilities.

Unfortunately, the theory runs into some problems. In experiments we may place subjects in a situation where they face a limited number of options, give them excellent information about the monetary consequences of their actions, and provide them with full information about probability

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