(no subject)

[eirias]

Interesting essay on economics and the notion of self-interested rationality, discussing what seem to be large gaping exceptions thereto. I've been reading his blog for a while (found it when researching an open-source stats package, oddly enough) and I often find it interesting; in fact I'm even taking a class this semester on the psychology of risk, in which I imagine I'll be reading about the same sorts of things that he studies.

Comments

[(Anonymous)]

First, rational self-interest is not the same as income maximization.

Second, there are only 2 requirements for preferences to be rational. They must be complete and transitive. That's all. So, yes, you can have a rational drug addict.

If one wanted to highlight the weaknesses of economic theory, I would recommend thinking about information costs.

[eirias.livejournal.com]

Hello!

Out of curiosity, do I know you? I don't get many randoms and I'd appreciate knowing who's reading, or at least who's interested enough to comment (feel free to drop me a private email if you'd rather not make your identity public).

I agree that self-interest is not always measured in dollars (otherwise why would we not all endeavor to become drug dealers?). In fact I suspect that the explanation for Baron's example of publishing academics has more to do with ego than with salary - and I'm curious to what extent decision scientists take social hierarchy into consideration (they must, at some level).

However, I don't understand what you mean by preferences needing to be complete to be rational - do you mean that if a person is given the choice between A and B repeatedly, his choice will always be the same, provided that A and B remain constant in the relevant aspects?

I do think that once you bring self-interest into the picture, "rational self-interest" may reasonably be taken to imply not only that the actor will be temporally and logically consistent in his choices, but also that the choices are made to maximize his own welfare. I admit that this is a tricky concept as it presumes that there's always a "best alternative," that there is some (universal?) way to prioritize consequences, and I don't know whether this is true. I have a hard time reconciling myself to the notion of a rationally self-interested drug addict; but then I suppose that a terminally-ill cancer patient addicted to morphine could be interpreted as such.

Also, I'm unfamiliar with the term "information costs" and am curious what it means in this particular context.