Tuesday, November 24, 2009

Rational self-interest

Hanlon's razor* says you should never attribute to malice what can be explained by stupidity**. But there's a related saying in economics: never attribute to stupidity what can be explained by rational self-interest. If people appear to be behaving stupidly, look for the underlying self-interest that you might have missed. Of course, people do behave stupidly, often en masse, so you won't always find an underlying rational self-interest, but you often will.

*Sometimes attributed to SF author Robert A. Heinlein.
**There's also Clarke's corollary: Any sufficiently advanced stupidity is indistinguishable from malice.

It is becoming a trope in liberal and progressive economics and politics that the right-wing and the Republican party are acting stupidly, irrationally, that they have become literally deranged, even at the highest level. I believe, however, that this view is problematic.

Part of the problem is that there's a huge equivocation floating around the economics profession concerning the definition of "rational self-interest"; similarly in philosophy and ordinary conversation, there's a huge equivocation about "rationality". At minimum, rational self-interest in economics means that people always act to maximize their subjectively conceived self-interest, and while they may make errors and mistakes, on the whole they act effectively to maximize their subjective self-interest.

This definition seems metaphysical and unfalsifiable: however people are actually behaving, we can hypothesize some subjective self-interest that the behavior maximizes, and we conclude they are acting in their rational self-interest. We can, however, talk about subjective self-interest separately from specific behaviors: we can actually test hypotheses about rational self-interest.

For example, if a lot of people are buying Acme razors, which cost 50% more than the objectively identical Potzrebie razor, we could make any number of competing hypotheses about subjective self-interest that's causing the behavior. Most obviously, we might have missed some property of Acme razors that really is objectively superior to Potzrebie razors: perhaps they last longer, or are more effective at shaving a man's upper lip or a woman's ankle bone. It might be that using Acme razors confers social status precisely due to its higher price. Perhaps people simply don't take the name "Potzrebie" seriously, and don't have confidence in its quality. It might be simply that people are persuaded by the advertising so they simply feel better using an Acme razor.

The last case highlights the specific, technical nature of the economic definition of rational self-interest. It's not relevant in this context that Acme razors don't objectively make a person feel better than Potztrebie razors: they don't produce a closer shave, they don't reduce the frequency of nicks and cuts, they don't last any longer, they're not any more comfortable to use. What's relevant is that a choice of behavior produces a difference in subjective feeling; people are acting "rationally" by choosing the behavior that really does produce the better subjective experience.

The first equivocation, then, in the use of rational self-interest is equivocating between the objective properties of the choice and the subjective consequences. But objective properties are never anything more than a means to an end — indeed one means among many — to produce subjective experience. It's often the case that people do make choices that correlate to objective properties: fresh food is objectively superior to spoiled food, and people almost universally prefer unspoiled food. But there are cases where the subjective experience, and thus the choice, is not correlated directly to the objective properties of the choices.

Similarly in philosophy and ordinary conversation, there's a sense of "rationality" that means concerned exclusively with objective truth, ignoring or excluding subjective factors such as emotion. Again, there's no problem with this definition per se, but it's clearly inappropriate to apply this definition to motivation, which is fundamentally subjective.

In one sense, "rationality" just means the true correlation between behavior and and subjective outcome; in another sense, "rationality" means having objectively true beliefs about the real world. If a lot of people believe that Acme razors give a closer shave than Potzrebie razors, they are acting in their rational self-interest by spending more for Acme razors, but this rational self-interest is predicated on an irrational belief, a false belief about the world. There's no contradiction: we're just using the word "rationality" to mean different things in different contexts, an ordinary and routine use of natural language. The fallacy of equivocation comes in when we pick the meaning from the "wrong" context.

The second fallacy about rationality and rational self-interest concerns the nature of the self-interest. There are subjective desires that are easy to empathize with, and desires that are more difficult to empathize with, and desires no one wants to admit they empathize with. It's easy to dismiss an odd or unusual desire as simply non-existent, or attribute some odd behavior to a false idea about reality. But some people, to use Winston Rowntree's example, just like lounging about in unconventional clothing, and so they do: there's nothing at all irrational about their behavior in either sense.


  1. At some level, no matter what people do it must by definition by in their self-interest, or else they wouldn't do it. I tend to see this as a reductio ad absurdum argument for the uselessness of attempting to explain human behavior in terms of individual's "interests".

  2. That's really not the case, though. Rational self-interest is not tautological, or definitional it's just actually true. In much the same no matter what we observe, we're fairly confident we'll have an evolutionary explanation for the development of organisms over time.

    I'm also surprised you seem to ignore the argument I explicitly introduce to rebut your position: that there are observations that would falsify the paradigm of rational self-interest, and that the hypotheses within the paradigm are themselves falsifiable. I am putting no greater burden on the paradigm of rational self-interests than biologists put on evolution.

    Rational self-interest stands in contrast to other paradigms of behavior. For example, billiard balls, genes, and computers don't act in their rational self-interest. Computers, even very powerful networks of computers, simply do what they're told; we cannot explain their behavior in terms of choosing the action that will best achieve some independently identifiable desire.

    In terms of human behavior, rational self-interest stands in contrast to Kantian and Kantian-like morality, that human beings act -- even a little -- to do what is "right" independently of identifiable wants and desires.

    Indeed Kant explicitly defines a "moral" action as one having no actual benefit to the actor. Kant is a subtle guy (perhaps over-subtle) and the full meaning of this definition is open to interpretation, but it's clear at least that he's trying to define morality at least somewhat independently of rational self-interest.

  3. Larry, Robert Heinlein wrote "Starship Troopers," which is one of me favorite movies of all time, actually.
    Larry, u want me to tell honestly and stuff? I am not very sure what much in the new posts is all about- i was starting to learn- when u stopped. Also, ure words are very confusing and complicated.
    I need time to study all ure new stuff. What's tautological, Kantian- it's not even in the Urdu dictionary and stuff, no one is using those words, taut just means stretched- so? I can not understand this stuff very well, i am sorry, Larry.

  4. This is words i do not know, u can not find in any Urdu-English dictionary (go and check).

    now i think maybe potzrebie just means sharp, so maybe acme means blunt. so who will pay 50% more for a blunt razor?
    C, it makes no sense.

  5. Equivocation is using two meanings for the same word. It's generally considered a logical fallacy.

    Acme and Potzrebie are just names. Wile E. Coyote buys most of his stuff from Acme; Potzrebie is a nonsense word from Mad magazine.

  6. A tautology is a statement that's true by definition. If we were to define "rational self-interest" as "whatever it is that motivates people", then the statement "all people are motivated by rational self-interest" would be a (boring) tautology.

    However, we can define rational self-interest as a particular kind of motivation, one that is ontologically and empirically distinguishable from other kinds of motivation.

  7. And the movie Starship Troopers has little to do with Heinlein's book, the book is primarily concerned with political philosophy. Some critics consider the book satirical; I'm inclined to take its weird mixture of libertarianism and authoritarianism at face value.

  8. Barefoot Bum
    This is a far leaping, poor attempt to connect a dot analyses between human behavior and preference of choice. Of course the obvious is clear. There would be no rational application for someone to spend 50% more for an item for no reason. It must have value benefits, such as longer lasting, better contour, greater sharpness, etc. This philosophy is odd to say the least.


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