Good Intentions: is rational choice the only choice?

A new book called Good Intentions proposes that Christians should stop judging economic matters on the basis of pre-conceived moral positions and start judging them on the basis of what actually works. A prime example is the debate about the minimum wage…

If the aim is to relieve poverty, say the authors, the minimum wage is in practice a fairly neutral instrument (though this is highly contentious) and earned tax credits work better. But religious people are attached to the concept because it seems self-evidently to be the Right Thing To Do. This is just one example of  ‘good intentions’ – policies and approaches that seek to do good but which, on examining the evidence, don’t actually work.

This is a really interesting approach to Christian ethical debate, and well worth reading. Whether an economic social policy achieves its stated aims, or not, is a very worthwhile question, and one that is too often overlooked.

But there’s an underside to the argument of the book. That is, it depends entirely on one particular view of economics called rational choice theory. The family-friendly version of this theory is eminently sensible and is given up front on page 13:

‘Economists make three important assumptions about how
people make choices. First, people have their own preferences—
that is, they know what they like and don’t like. Second, people
are rational. This doesn’t mean that they make decisions that
other people think are logical. Instead, it means that people
pursue their goals the best way they know how. Third, people
face constraints that limit their choices. These are the obstacles
and hurdles that keep us from achieving our goals.’

This is all well and good and it has won big economics prizes. It works very well in economic modelling, but it isn’t the way people actually behave in real life.

One line of inquiry, behavioural economics, does exactly what the authors want Christians to do,  but in relation to economics itself. In other words, they want to  investigate what works in reality, not merely in theory. As the authors say ‘people pursue their goals the best way they know how’. But this is in practice very far from rational – it is largely irrational. As Bryan Appleyard says in the Times:

Behavioural economics embraces human irrationality as a given, not an unfortunate epiphenomenon. Thus [it begins]  from what people do, not what they should do.

Dan Ariely’s Predictably Irrational and Jonah Lehrer’s The Decisive Moment are two very accessible summaries of this emerging field of study. Richard Thaler and Cass Sunstein’s Nudge is an extension of these ideas into the public policy arena, proposing what has been termed asymmetrical paternalism, in place of, or complimenting rational choice approaches. They claim we are strongly influenced by the context of our decisions and by re-engineering ‘choice architecture’ we can be helped to make better decisions (example: organ donation – opt in or opt out?)

But there’s more. While Rational choice theory supposes that people are ‘rational’ (in a particular sense), and behavioural economics assumes instead that they are far from rational but their irrational ‘lapses’ can be ‘fixed’, others argue that these two versions of economics have a faulty conception of rationality and point out that we often make the best decisions when we are being ‘irrational’. For instance, Gerd Gigerenzer’s version of  bounded rationality suggests that non-rational heuristics (such as ‘rules of thumb’) can often solve problems more efficiently and effecively than standard approaches to rationality (see Ch 5 of Gigerenzer, Rationality for Mortals, 2008)

Rational choice theory is an ideology, just like any other social theory. It’s a simplification of the complex ways in which people approach their decision-making. If the authors of Good Intentions wanted to educate their readers about Christian approaches to economics they could have started by explaining what the claims of various rival economic theories are and how Christians might evaluate them. On closer inspection, rational choice theory becomes less adequate than it sounds at first, but a large number of economists  refuse to see this and regard it as the Truth.

It would be helpful if those convinced by economic rationalism would present their ideas as one (favoured) possibility, not as the only possibility.

The Fourcultures angle on all this is to point out that the policy recommendations of rational choice theorists tend to lie very predictably at the Individualism end of the Four Cultures spectrum. Ask an economic rationalist whether or not there should be a minimum wage and you know the answer that will be given even before the equations are delivered. So rational choice is not so much an explanation of social (economic) phenomena as it is the outcome of social phenomena that are better explained by grid-group cultural theory. It does not point to a single rationality which it explains, but is rather an example of how each of the four quadrants of grid-group theory lives inside its own, partial rationality, and justifies itself to itself. In this sense, Good Intentions can be characterised as an argument for Individualism against Egalitarianism.