On Human Rationality

Oh, how this bugs me.  I think behavioral economics is a great thing.  However, the language that is used to discuss behavioral economics — and specifically, the types of problems it addresses — is hugely problematic. There is this pervasive idea, largely arising from economics, that because people do not behave according to the predictions of some narrow pecuniary incentive structure, they are somehow not rational.  Rebecca Bird and I recently wrote a brief essay in which we bemoaned this perspective, noting particularly in the case of indigenous peoples, the diagnosis of irrationality is the ticket to paternalism, allowing “marginalized people to be further marginalized and fail to reap the benefits of even well-intentioned [development] projects.”  In many traditional social contexts, pecuniary rewards may trade-off with social prestige.  People could be hyper-rational in their optimization of social capital and fail utterly to meet the bar for narrow-sense economic rationality.

This is all I have time for right now, but there is more to come (both scholarly a paper and probably more blog posts).

4 thoughts on “On Human Rationality”

  1. Well.... I'm not so sure that economists assume people are rational only if they follow narrow pecuniary interests. The assumption of rationality ("RAT") is simply one of means-ends analysis whereby agents maximize their expected utility (usually) with reference to some complete and consistent set of preferences. Those preferences, however, can contain anything - from the pecuniary to the spiritual or whatever.

    Of course, there is plenty of bad economics... which is what you're really talking about, not economics per se.

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