On Tue, 10 Jan 1995, Jim Devine wrote:

Jim argues in the following that the economist's notion of rationality is
tautological, so lacking in empirical content, so lacking in normative
force. There's a long-standing] debate about this in philosophy which I
might briefly summarize here.

Carl Hempel argued that economic rationality, expressed in decision
theoretic assumptions about motivation, is an empirical matter in that
whether agents satisfy these assumptions (approximately) is something
which can in principle be tested. Such texting can take the form of the
work done by psychologists Daniel Kahneman and Amos Twersky, comparing the
actual behavior of experimental subjects to their predicted behavior on DT
assumptions. K&T's results indicate that subjects typically do not satisfy
these assumptions and have devised a "prospect theory" which they regard
as a better empirical description of human decision-making. This work has
also been confirmed in different ways by my old teachers Phillip
Johnson-Laird at Cambridge and Robert Nisbet at Michigan.

The significance of these results has been disputed by philosophers like
L. Jonathan Cohen and Donald Davidson (the latter of whom did some of the
pioneering psychological work in the '50s). Cohen and Davidson note some
the points urged by Jim and also that we can in principle readjust which
beliefs and desires we attribute to people to make their behavior come out
D-T rational no matter what the evidence is. They conclude that human
irrationality can not be experimentally shown or disproven. In their view,
the assumption of rationality is a necessary a priori condition of
treating people as responsible agents rather than things buffeted about
by external causes. 

Note though, that they take the "tautological" or, as they see it, a
priori, character of DT rationality as grounds for accepted its normative
force. Indeed, for them, it is a necessary normative assumption of doing
social and psychological explanation at all. In the Hempel version, such
rationality has no such normative force; it's simply a way people behave
and think (or not). So the logic of the debate seems to be that DT
rationality is either a priori and normative or empirical and not
(necessarily).

I agree with Hempel for reasons which are too long to go into just now,
unless people want to discuss this.

--Justin

> people on the list may be interested in the following, which I
> posted to sci.econ on netnews/usenet:
> 
> [EMAIL PROTECTED] (John M Hall) wrote:
> >
> > In article <[EMAIL PROTECTED]> [EMAIL PROTECTED] (Peter Nelson) wri
> tes:
> > >  Given that this is *SCI*.econ, what would convince me would
> > >  be a formal definition of rationality that could be falsified
> > >  and that could be applied in a formal model.
> >
> > Given that you view falsification as the
> > necessary condition, why not accept Steve's (?)
> > definition of purposeful behavior? This definition,
> > hypothesis, is falsified when one person is found
> > doing something they know will not acheive what they
> > are attempting to accomplish.
> >
> I would like to see how you would do this.
> The problem is that individual tastes, goals, etc. cannot
> be directly measured so one can't figure out what what
> they are "attempting to accomplish." The way economists
> typically get at what people are "attempting to accomplish"
> is by looking at what they actually do (revealed preference).
> So we've got a circular, unfalsifiable, argument.
> 
> The "rationality" assumption is tautological
> (or close to being so) and if it isn't totally so, it can
> be protected from any kind of empirical falsification by
> ceteris paribus clauses.
> 
> That said, there is nothing wrong with having a few
> tautological concepts as long as we are concious of their nature
> as tautological and the theory goes beyond tautology.  As Lakatos
> points out, all theories have a "hard core" of such concepts.
> Just as neoclassical economics has its unfalsifiable "rationality"
> assumption, Marxian economics has its "labor theory of value."
> Even geometry has its concept of the point (among others).
> 
> Once it is realized that the "rationality" assumption is
> tautological (or close to it), it is important to get rid of
> the value-laden or ideological conceptions that are inherent
> in the word "rational." By the standard economics definition
> of "rationality," Jeffrey Dahmer was a rational consumer.  We
> cannot assume that rationality is good.  The word "rationality"
> should be replaced by "consistency of goals" or simply
> "consistency."
> 
> -- Jim Devine


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