2. Instrumental rationality Flashcards
Define rationality
Rationality involves the appropriate use of reason to make the best possible choices considering what is under the circumstances really in the best interests of the choosing agent (Tomer, 2008)
What are the two main types of rationality?
- Instrumental rationality
- Rationality of ends
Define instrumental rationality
(also known as the rationality of means or cognitive rationality);
this involves applying appropriate reason to choose the best possible means to attain one’s ends. Most economists, but especially mainstream economists, recognize this as the only form of rationality.
Define rationality of ends?
Rationality of ends: this means applying appropriate reason to choose ends that serve our best interests, i.e., to determine what our objectives ought to be.
What does Tomer argue economists need to do?
To utilise a concept of true rationality involving both rationality of ends and instrumental rationality rather than just the latter
Who is the instrumental conception of reality assumed to descend from?
David Hume
When is an act considered to be irrational according to Hume?
If it is not the best means of achieving the ends that the actor himself had a view when choosing the act
Why are people seen in reality to violate the assumptions of instrumental rationality?
- Preferences change over time (Fullbrook, 2004)
- Heavily influenced by commercial advertising and fashions (not independent) (Stillwell, 2012)
- Don’t optimise at the margins at would be predicted: we see trends routines etc (Institutionalist)
- Mathematical models restricts free-will, behaviour is programmed (Austrian)
- There is an absence of self-conscious reflection meaning behaviour is irrational
Why is neoclassical theory not complete?
Because it does not address the formation of preferences, it must be asked how these preferences are formed (Stillwell, 2012)
What did Frank H Knight argue?
Living intelligently [rationally] includes more than the intelligent use of means in realising ends; it is fully as important to select the ends intelligently” Tomer
What is rationality of ends also known as?
Sometimes called expressive or practical rationality
How should goals be determined?
To determine rationality of ends we should look towards the individual and determine what their true preferences are, in other words the best end result for the person’s wellbeing instead of using their actual preferences which reflect a person’s wants and immediate desires which may change with experience, social influences and skill acquisitions (Tomer, 2008).
How do preferences differ between neoclassical rationality and heterodox rationality?
Economic rationality defined in its mainstream sense relies on maximising one’s actual preferences whereas true rationality requires behaving in line with the objectives that will satisfy the highest long-run well-being by considering the long-term consequences of behaviours, the sense of morality in the individual and what gives them genuine happiness (Tomer, 2008).
What are some examples of actual preferences that fall short of our true preferences?
- non-rational behaviour such as emotional reactions, instinctual and subconscious behaviour are all not accounted for in the rigid mathematical model of the neoclassicals
- activities such as drinking alcohol and gambling (spontaneity)
How does Sugden 1991 put the argument on rationality?
“a voyage to a foolish destination – no matter how efficiently conducted – is a foolish enterprise”
