I’m finally responding to Eli Thorkelson, who asked for my comments on an article by feminist economist Julie Nelson. The article is a critique of rational choice theory (RCT) and I think it has some omissions and misleading claims.
I regularly come across particular instances of rational choice theorizing that I dislike, but non-economists, including sociologists, often dismiss rational choice theory without understanding it, so when the topic comes up among non-economists, I almost inevitably find myself defending it. My claim is that rational choice theory, broadly construed, is an important, though certainly not the only, useful framework for understanding human behavior. This should be considered an utterly boring claim. What is interesting is how any social scientist could deny it…
The primary problem with Nelson’s article is that she assumes an essential piece of what she should be trying to prove, namely, that RCT is inaccurate. Yes, RCT posits an inaccurate, unrealistic psychology, and all else equal, this counts against the theory. The reason it isn’t a fatal blow, is that the theory is relatively more accurate when applied to many social phenomena. To argue that RCT rarely led to accurate predictions is to dismiss essentially all of microeconomics and hundreds of studies in sociology and political science as well as other fields. e.g. What happens to car theft when a new anti-theft device is introduced? What happens to group solidarity as group size increases? To me, these examples prove that it is possible to do accurate work within RCT.
Though I’m sure there are exceptions, everyone I know who respects RCT believes it has some weaknesses. Some mainstream economists even argue that an overdependence on the assumption of rationality has led large segments of modern macroeconomics astray. This is a debate worth having. As Nelson notes, even in economics, the discipline most closely tied to RCT, many mainstream scholars are relaxing the rationality postulate. One might think Nelson would enthusiastically support such work, but she expresses skepticism that their revisions will ever be radical enough.
In a section entitled “How RCT has Done Economics Wrong,” Nelson claims, on the basis of cherry-picked quotes, that social problems such as “…the problem of child poverty—the physical suffering and stunted development of those in our society who are most manifestly not autonomous—is erased by the application of “rigorous” RCT economics.” But this ignores the fact that hundreds of scholars working within the rational choice framework, are very concerned about childhood poverty, and hope that their work will help us learn how to ameliorate it. Nelson, who was trained as an economist at the highly-regarded University of Wisconsin at Madison, must know this, and it is misleading of her not to mention it.
Nelson could have written a subtler critique of RCT, after all, I agree that alternative approaches are too often overlooked in economics. But even if we limited our view of RCT to economics, we will find a great deal of diversity in how it is used. I highly recommend those unfamiliar with this diversity see Tyler Cowen’s article, How Do Economists Think About Rationality?