Jim Devine writes: >> FWIW, the idea of "rational utility maximization" is well-nigh >> tautological (a circular concept, true by definition). It's quite >> possible to "rationally maximize utility" while getting our >> preferences largely from others (peer pressure, etc.) or caring about >> the emotions of others (being "altruistic"). The only people who don't >> consistently try to attain their goals as they perceive them are >> schizophrenics and the like, who face serious internal conflicts of >> perceptions, emotions, and/or decision-making and snap or freeze. >> >> Most of us try to consistently attain their goals, but can't do so >> because of incomplete information, incomplete ability to process and >> thus understand the incomplete, asymmetric, and biased information we >> have, and the incomplete ability to make decisions (bounded >> rationality). The deviations found by experimentalists) from "rational >> utility maximization" (such as Kahnemann's "loss aversion") aren't >> really irrational, except according to the narrow-minded conceptions >> of textbooks and "pro-market" pundits (who put the "mighty consumer" >> on a pedestal). Holding on to what one has and putting less value on >> what you don't (loss aversion) have makes total sense in terms of a >> survival strategy in isolation from social support networks. Given >> uncertainty, a bird in the hand is worth more than one in the bush.
I agree with all of this. Interestingly, we recently did a litigation settlement which a creditor of a bankruptcy estate. To greatly oversimplify, the creditor had the choice of doing a settlement in which (A) the creditor paid $2 million to the bankruptcy estate, but retained the right to receive money from the bankruptcy estate in the future, which was reasonably estimated at $6 million, or (B) paid no money, but waived the right to receive money from the bankruptcy estate.. The creditor chose B for a variety of reasons, even though on paper it was economically irrational. >> The problem is not with individuals not maximizing utility, but with >> markets, which (as well-known to those who study economics seriously) >> fail to serve consumer wants and are best at serving those who have >> lots of liquid assets (i.e., money), among other things giving them >> "consumer sovereignty" over those with fewer assets. Again, no real disagreement with the statement as far as it goes. The disagreement is with your silent assumption that there is an alternative better than markets. David Shemano _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
