The term ‘rational’ and its variants (rationality, rationalism) are used in a lot of contexts in economic debate, both positively and negatively, but nearly always sloppily or dishonestly. A specimen I’ve seen on more occasions than I can count is the line (usually presented with a sense of witty originality) ‘if you are opposed to economic rationalism, you must be in favor of economic irrationalism’.
In keeping with the idea of this regular feature, I thought about providing a definition that would clarify the issues surrounding this word and the reasons it causes so much confusion. In reflecting on the problem, however, I’ve come to the conclusion that the word ‘rational’ has no meaning that cannot better be conveyed by some alternative term and that the best advice is probably to avoid it altogether.
The basic problems surround the kind of use that is standard in economics and related discipline, in which ‘rational’ choices are those that maximise the value of some objective function. A lot of energy has been dissipated on disputes over whether this is a normatively compelling or descriptively accurate, or whether some alternative such as ‘satisficing’ would do better.
Rather than taking sides in this dispute, I will offer the following purely mathematical claim. Given any data on any observed set of problems involving the selection of one or more choices from a set of alternatives, the observed choices can be represented as the maximisation of an appropriately specified function. To give an easy example, satisficing can be represented (rationalised) as optimising, taking calculation costs into account, or alternatively as a combination of set-valued maximisation with a selection rule based on the order in which alternatives are presented.
If this claim is accepted, it’s evident that the definition of rational choices as those that maximise an objective function is empty, since all choices satisfy this criterion.
Most uses of the term rational and the opposed ‘irrational’ involve some confused mix of the following connotations
- reasonable as opposed to emotional
- calculating as opposed to intuitive
- self-interested as opposed to altruistic
- materialistic as opposed to non-materialistic
- logically consistent as opposed to inconsistent
Of these points, the last requires some further explanation. Various consistency properties have been proposed as requirements for rationality. The one that is most obviously reasonable, though not invariably compelling, is transitivity. If I prefer A to B, and B to C, I should prefer A to C.
The problem with debates involving the word ‘rationality’ is that people tend to shift from one meaning to another, sometimes deliberately and sometimes without realising what they are doing. Given the entrenched nature of all five uses listed above, and the tangled relationships between them, it’s impossible to specify a ‘right’ meaning. The best option is probably to avoid the word altogether, and to use the specific terms I’ve suggested as appropriate to its various components.