Oh those silly rational agents! What ridiculous duffers we were to ever believe in them. If you’ve read anything about business since the 2007/8 crisis you’ll already have read enough of this sentiment to wallpaper your flat with, but in the unlikely event you missed out, it was all pretty much covered in this op-ed by Joe Stiglitz in 2002 anyway.
And of course he’s right to a point. People aren’t perfectly rational, they are biased in certain ways being fascinatingly explored by behavioural economists, economists can be fixated on nice mathematical models.
And yet, and yet.
A lot of these attacks on rationality are intended as attacks on free markets, that rationality in this sense captures people at our worst. But despite the bad press of late, rationality isn’t just the domain of sociopathic capitalist uber-robot-mensch. It is, for instance, a key premise of Rawls argument in A Theory of Justice:
25. THE RATIONALITY OF THE PARTIES
I have assumed throughout that the persons in the original position are rational. In choosing between principles each tries as best he can to advance his interests.
Rawls fuller argument, in a nutshell, said a just society would be the one chosen by rational but ordinary people who did not know what role they would play in it. They would have to choose the structure of society from behind a veil of ignorance which concealed whether they would be rich and priveleged, or poor, or a redhead. Under these conditions, Rawls argued they would choose two rules; firstly liberty, secondly the prosperity of the weakest class. He then argues that redistribution is just to the extent it benefits the poorest in absolute terms; you can’t sacrifice the wealth of the poorest for pure equality where everyone would be poorer.
Rawls cites Amartya Sen and social choice theory, looking to economics not just for part of his argument but part of his premises. A Theory of Justice effectively revived the idealist or contract tradition as a counterpoint to the utilitarian tradition then dominant. He was also a defender of the welfare state liberalism of his time, and a good one. One marker of the breadth of his contribution in reviving an idealist tradition is the phenomenon of libertarian Rawlsians, like, say, Will Wilkinson; they tend to like the veil of ignorance but not the distributive principle.
Only in a social union is the individual complete. — Rawls, A Theory of Justice, again
((Rawls was too much the careful scholar to go in much for quotable quotes: he is readable but longwinded. He also preferred to caveat his sentences with learned references and restrictions on their scope. The sentence above he only let slip in an unguarded moment at the end of a footnote.))
There are two contrasting uses of rationality here, one from social choice theory, one from efficient markets theory, that are slightly different, but only slightly. The point is that rational agents aren’t just a vision of utility maximising robots chewing each other to pieces. The considered reasoning behind the veil of ignorance also shows rationality as a vision of people at their best.
2 thoughts on “Rationality and Society”
“Rawls fuller argument, in a nutshell, said a just society would be the one chosen by rational but ordinary people who did not know what role they would play in it.”
This is the principal with children sharing a piece of cake. One cuts and the other chooses.
I really like the last paragraph. The outsider’s view of how economists think is focused on your robot, but the ideal I’d like to live in is a bit different. And in some cases I think that maximizers would behave differently if you changed the scale. Quarter or decade? This company, or the region?
I love the equivalence between the classic sibling cake technique and Rawls’ veil of ignorance. Theories of justice: try them at home today, kids!