I'm tempted to jump in and head-butt the libertarian: If you were to ask a compulsive gambler if he really wanted to waste his life, he would probably say no: that the life he wound up with is not the life he really wanted...
there is a huge social desirability bias here. Part of the reason why people who spend a lot of time and money on socially disapproved behaviors say they "want to change" is that that's what they're supposed to say.
Think of it this way: A guy loses his wife and kids because he's a drunk. Suppose he sincerely prefers alcohol to his wife and kids. He still probably won't admit it, because people judge a sinner even more harshly if he is unrepentent. The drunk who says "I was such a fool!" gets some pity; the drunk who says "I like Jack Daniels better than my wife and kids" gets horrified looks. And either way, he can keep drinking.
An economist's musing on the self-control content of choice probably says more about the shortcomings of Max U (the neoclassical model) rather than the purposeful human at the center of alternative paradigms.
This isn't simply a case of "if you choose X you must prefer X and therefore you're better off" either, but it simply undermines the importance of making errors (to learn) and choice (to change).
Despite the crudity of the assumption that choice reveals preferences, it's simply wrong to think that such a theoretical tool is undone by any empirical evidence, be it observation or data. A point that surface in a recent conversation I had with Jim. My point on rationality was this:
Rational in terms of a means-ends framework. i.e. your choices are consistant with your (subjectively defined) goals.
Limits to this are your epistemic understanding of an issue (people process new information in different ways); the fact that information isn’t “given” and needs to be searched for (the Hayekian knowledge problem); we don’t have a complete “set” of information and therefore geniune (Knightian) uncertainty exists.
All of these very well might result in a decision that looks as if someone’s made themselves deliberately worse off, but it’s merely a mirage since the researcher has a different information set (and a different context of rationality) than the individual.
I’m saying we should use their idea of rationality (i.e their means and their ends) rather than ours.
The problem is that the list i’ve given (showing the limits of rationality) applies equally as much to the researcher, plus the researcher lacks the knowledge of time and place that the individual has.
Let’s say you and I both want to invest £100. We’d probably have two different strategies, because we have different levels of risk aversion, different information, and different expectations about future economic conditions.
If it turns out in a years time that your £100 is worth £110 and mine’s worth just £105 was I being irrational?
According to neoclassical theory, probably. But I don’t think you can say that. Rationality doesn’t imply “perfect outcome” it means that given your epistemic framework, your information, your preferences, etc, you make a decision that you think is most consistant with your goal (in this case, making as big a return as possible).
Maybe my goal has a more social context and I was willing to make £5 less than you because I wanted to invest with a specific firm who I want to help out. Suddenly it becomes impossible to say whether your decision or mine was rational since we had different goals.
Coming back to this evidence, to make assertions of rationality means you know the goal. Typically economists’ assume people are maximising utility, measured in some financial terms. We might use broader measures such as access to healthcare, employment, sanitation etc
But we can’t say we know what the goals are, and we have different information than the individual, so we can’t say it’s irrational. I don’t think that people are”deliberately making themselves worse off” and therefore there’s no justification to intervene (on rationality grounds)
Hence I don’t think that this evidence is able to refute the theoretical definition of rationality. You need theory to beat theory.
Instead of concluding that people are irrational and then we solve this by reducing their choices (by acting on their behalf), I’m saying that the sujectivist approach is to begin by assuming they’re rational and then expand their choices (with development policies that promote free labour markets, free migration, free trade etc)
To sum up I think it’s consistant to retain a rationality assumption without denying that people make choices they regret, and choices that seem irrational to us. But it’s not for us to judge peoples actions and choose for them, it’s to work together to give them greater choice.
Globalisation, to me, is the economic force that increases choice and is therefore the most important development mechanism available.
(And further undermining the empirical agenda, I can’t see how one can objectively measure “choice”)
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