Rational Choice Theory
R. Edward Freeman
Is a body of literature that explores the idea that humans can and sometimes do make choices that are based on principles of rationality. Rational Choice Theory encompasses a large body of work, including much of modern eco nomics. This article is confined to the use of rational choice theory in ethics (see game theory).
Sometime during the 1950s, moral philosophers became concerned with a question that is as old as Plato and Aristotle: Why should one be moral? Plato believed that if a person knew the right thing to do she would automatically do the right thing. Aristotle held out the possibility of weakness of will or akrasia, that a person could know the right but fail to do it because of some defect of character. Marked by Kurt Baier’s The Moral Point of View, published in 1958, philosophers began to ground an answer to ‘‘Why be moral?’’ in theories of reason and rationality.
At the same time, John Rawls (1971) and later David Gauthier (1986) picked up the social con tract tradition begun by Hobbes and began to develop theories of social institutions that grounded the morality and justice of institutions in theories of rationality. Thus, ethics and political philosophy merged around the notion that humans could rationally choose the ethical point of view and design political and social institutions that were based on principles of rational choice.
The publication of Rawls’s magisterial A Theory of Justice is the landmark event in the application of rational choice theory to ethics. Rawls asked us to imagine an original position of hypothetical contractors behind a ‘‘veil of ignorance’’ trying to decide which principles of justice were rational to accept. Suppose that no one knew the position that she was likely to occupy once the veil was lifted, and hence no rational chooser would make an exception for herself. The principles chosen, according to this argument, would be in line with the rational choice principle called ‘‘minimax.’’ Under conditions of total uncertainty, where the consequences of choice are important, rationality dictates choosing the alternative which has the least worst outcome.
The important point here is not whether or not minimax is the correct principle; rather, it is that Rawls connected ethical and political philosophy with an entire stream of research in eco nomics in a manner that was novel. A whole body of scholarship on Rawls began to appear in economics journals. Psychologists who studied how people actually make decisions began to become relevant to ethicists. In short, ethics based on rational choice theory became more interdisciplinary, and Rawls became required reading in many graduate seminars in a number of academic disciplines.
Rational choice theory consists of a number of different decision or choice problems. The first could be called ‘‘decision making under uncertainty,’’ and consists of the principles or axioms or theories that a decision maker should or does use when she has several alternatives each of which is probabilistically determined by states of nature. Sometimes the decision maker has no control over the state of nature, and sometimes she can act as if she can influence which state actually occurs. In a famous example, Leonard Savage supposes that a chef has already cracked five eggs into a bowl that will contain the eggs for a six egg omelet, and wants to proceed rationally with the sixth egg. If she cracks the sixth egg into the bowl with the others and it is rotten, then all eggs will have to be discarded. Alternatively, if it is a good egg, the omelet will proceed quickly. Or, she can crack the sixth egg into a separate bowl, sparing the five good eggs, but incurring a cost of washing the bowl. One theory, Bayesian Decision Theory, asks the chef to put a probability judgment on the state of nature that is de fined by whether or not the egg is rotten, and to maximize her utility taking into account the costs of washing the bowl, etc. Now there are certain problems for which probability assignments make little or no sense. Rawls argued that the basic problem of choosing principles of justice was just such a problem. These special cases of uncertainty have been called ‘‘decision problems under ignorance.’’
A second kind of rational choice problem is one of interdependent choice, whereby two or more decision makers determine the final out come of a situation. This is the province of game theory. A third kind of rational choice problem is called the ‘‘social choice problem.’’ Suppose that individuals in a society must decide on a voting rule by which to make social decisions. Which voting rules are rational to choose? Kenneth Arrow (1963) showed that there is no voting rule that obeys a few very simple conditions of rationality. In addition, the subsequent research on social choice theory for the past 45 years has led to a new understanding of the conditions of rationality.
The so called Arrow Paradox illustrates a strategy in much of rational choice theory. Axioms or conditions are proposed, and general possibility theorems are proved which show that certain decision rules can be derived or not from the axioms. If one can prove an impossibility result, then new conditions or modified axioms are proposed and the process begins anew. Daniel Ellsberg, Maurice Allais, and Robert Nozick have each proposed paradoxes that occur with regard to one foundational principle of rational choice theory, the ‘‘sure thing principle.’’ The PRISONER’S DILEMMA il lustrates a paradox about the interdependence of certain choices in game theory.
Rational choice theory continues to be a wealth of insight for moral philosophers, but among some philosophers, questions have been raised about its foundations. Why, for instance, must morality be grounded in individual choice, in general and rational individual choice in particular? What normative work is the term ‘‘rational’’ doing in such a theory? The attempt to ground ethics in rationality is just one more attempt to reduce all of human behavior to mere reason, negating or minimizing other kinds of behavior. This critique of rational choice theory argues that the primacy of the individual ignores the view that the very best of human activity may well be a function of human communities and the capacity to care for others, rather than a function of individual self interested choices.
Bibliography
Arrow, K. (1963). Social Choice and Individual Values, 2nd edn. New Haven, CT: Yale University Press.
Baier, K. (1958). The Moral Point of View. Ithaca, NY: Cornell University Press.
Campbell, R. and Snowden, L. (eds.) (1985). Paradoxes of Rationality and Cooperation. Vancouver: University of British Columbia Press.
Gauthier, D. (1986). Morals By Agreement. Oxford: Oxford University Press.
Luce, D. and Raiffa, H. (1957). Games and Decisions. New York: John Wiley and Sons.
Rawls, J. (1971). A Theory of Justice. Boston, MA: Harvard University Press.