Rational Choice Theory
Rational Choice Theory
“Man is a rational animal who always loses his temper when he is called upon to act in accordance with the dictates of reason. ” As seen from Oscar Wilde’s famous quote, rationality is one of the most crucial and controversial subjects in studying human behavior. To study and examine this rationality, numerous scholars have tried to establish their own theories and generalize their explanation with empirical evidences from real world, which ultimately produces so called, the theory of rational choice. Rational Choice Theory is an approach to understand human behavior.
The approach has long been the dominant paradigm in economics, but in recent several decades it has become more widely used in other fileds such as Sociology, Political Science, and Anthropology. The main purpose of this paper is to provide an overview of rational choice theory and briefly discuss its basic assumptions, critiques, political implication, and alternative explanations of individual choice mechanism. First of all, historical backgrounds of rational choice theory and its transition from the field of Economics to that of Political Science will be elaborated.
Next, various definitions and meanings of the rational choice will be discussed. The basic assumptions of the rational choice approach with political implication will be followed. Several issues raised by rational choice theory will be followed after this discussion. This paper will suggest some of the main criticisms that have been levied against the rational choice approach. Limited empirical validity of rational choice theory and methodological individualism, which reveals innate problematic nature of the theory, will be discussed.
Finally, alternative explanations of individual choice mechanism will sum up this discussion. Before elaborating its theoretical discussion, it is necessary to discuss historical backgrounds of rational choice theory. In the article, “A Genealogy of Rational Choice: Rationalism, Elitism, and Democracy”, Maloy introduces Skinner’s analysis of behaviorism as fundamental background for the discussion of rational choice theory. He argues that, “Skinner’s analysis deserves the attention of the recent debates around rational choice ecause it calls attention to the ineluctable ideological features of methodological debate” (Maloy 751).
According to Maloy, Skinner could “clarify the sorts of normative force which attach to empirical theories in social sciences by a close textual analysis of some leading contributions to the behaviorist debate”, which ultimately enables the discussion of rational choice to be furthered applied into different fields of study (Maloy 751). Milton Freidman is another crucial figure that provides profound theoretical base for discussing rational choice theory.
In “The Methodology of Positive Economics”, Friedman argues that people and firms make decisions that can maximize their profit under perfect information. He defended rational choice model by arguing that, “a theory should be judged by its predictive accuracy, not the realism of its assumptions” (Friedman 10). His argument provides theoretical foundations of rational choice theory in Economics, even though it is often criticized by later scholars because of its weak empirical validity and ceteris paribus nature.
While rational choice theory has been dominant paradigm in Economics, it has become “adapted and adjusted in a number of ways to fit” different fields of study such as Political Science; Maloy explains that “the distinctiveness of the rational choice approach among political scientists consists, in general terms, in the use of economic models to explain and predict political behavior (Maloy 753). Maloy points out three prominent figures, Arrow, Downs, and Olson as rational choice founders especially in the field of political science.
According to Maloy, Arrow’s work focuses on so called, “collective rationality whose underlying purpose is to measure collective choices using standards normally applied to individual choices (Maloy 753). Down uses Arrow’s collective rationality as the starting point of his study and “aims to articulate a behavior rule for democratic governments so that they could be included in economic theories of general equilibrium, alongside non-state agents like private firms and consumers (Maloy 754).
Finally, Olson’s analysis has taken “the key elements of Arrow’s and Down’s constructs and applied them to a narrower field”; He argues that “as long as the service provided by a voluntary association is a public good on which an individual can ride-free, there is no incentive actually to take on the costs associated with joining, membership and participation, unless the marginal contribution of that individual appreciably advances the organizational cause” (Maloy 754).
All three choice founders’ works have enabled rational choice theory to be in the central place of political discussion in “the creative and cross-disciplinary ways” (Maloy 755). By arguing that voting results have no specific social meaning, voting has no individual efficacy, and participation in interest group activity has no special individual efficacy, these rational choice founders could criticize unrealistic and irrational assumptions and norms of traditional democratic system and bring rational choice model to the place of political discussion from the field of Economics (Maloy 755).
Rational Choice Theory generally starts with consideration of the choice behavior of individual decision-making units, which in economics are often consumers and firms. The theory suggests that the individual decision-making unit is certain larger group such as buyers or sellers in a particular market. Once individual behavior is set up, the analysis generally moves on to examine how individual choices interact to produce outcomes. Then, what does it mean by arguing that a choice is rational?
In rational choice theory it means that an agent’s choices reflect the most preferred possible alternative among given opportunities. In other words, choices must reflect utility maximization. Elinor Ostrom defines rational choice theory as a guide to “understand humans as self-interested, short-term maximizers” in his work, “A Behavioral Approach to the Rational Choice Theory of Collective Action” (Ostrom 2). In the article, “The Political Psychology of Rational Choice Theory”, William H. Riker also suggests that “the rational choice model begins with the assumption that actors know what they want and can order their wants transitively” (Riker 25). “Transitively” here means that an agent of rational choice model can do so called, “a transitive ordering”; “To know what one wants requires one to choose the best from among several goals and, failing to attain it, to choose the second best, etc” (Riker 24). This formulation of ordering enables an agent to pursue the best option with given constraints that limit choices he or she can have.
In their work, “Rational Choice Theory”, Coleman and Fararo define rational choice sociologically as they use the term, “models of purposive action”, rather than rational choice; “These models rest on the assumption that actors are purposive which means they act in ways that tend to produce beneficial results” (Coleman and Fararo 21). These several definitions point out that choices pursuing utility maximization and outcomes made by these choices are key elements in rational choice theory.
Then how is different when rational choice theory is applied into the field of Political Science instead of other fields of study such as Economics and Sociology? According to Riker, Economists’ main concern for rational choice is “the process and outcomes produced by voluntary exchange, where of course, all participants benefit. On the other hand, “Politics mainly concerns processes and outcomes produced by group decisions which are practically binding on those who cannot resign from the group. Thus, there can be losers and winners in politics according to Riker’s argument (Riker 24).
Although Rational choice theory has long been the dominant paradigm in Economics and other fields of study, it has been subject to vigorous criticism. In “Pathologies of Rational Choice Theory”, Don Green and Ian Shapiro raises several empirical problems that rational choice theory possess; they “conclude that a number of methodological deficiencies plague empirical applications of rational choice models. They argue that, “fundamental and recurrent methodological failings rooted in the universalist aspirations that motivate so much rational choice theorizing” (Freidman 59).
According to Green and Shapiro, “these mistakes stem from a method-driven rather than a problem-driven approach to research, in which practitioners are more eager to vindicate one or another universalist model than to understand and explain actual political outcomes” (Friedman 59). Green and Shapiro’s argument can be summarized into three propositions; “there is a list of methodological characteristics that are undesirable in an empirical science and are thus to be avoided. ” “Empirical applications of rational choice theory are more likely to commit these mistakes than other types of empirical analysis in political science.
“These pathologies are not due to and historical coincidence, but are rooted in fundamental characteristics of rational choice theory, especially its universalist aspirations and the lack of specificity in the rational actor assumption” (Freidman 60). These propositions suggest that rational choice theory has its empirical limit for testing and predicting actual political outcomes. In detail, Green and Shapiro point out several problems of rational choice theory that possibly undermines the empirical validity of the theory itself.
Post hoc theory development” known to statisticians as “curve fitting” is one of these problems that rational choice theory contains. Green and Shapiro “contend that rather than formulating bold predictions that are falsifiable by empirical evidence, rational choice theorist tend first to look at the empirical evidence, then design a rational choice model that fits it” (Friedman 5). Another problem raised by Green and Shapiro is rational choice theorists’ engagement in “arbitrary domain restriction” (Friedman 5). As discussed earlier, certain restrictions or constraints enable “a transitive ordering” in rational choice theory.
Green and Shapiro argue that these constraints and restrictions are defined in ambiguous ways in rational choice model, which ultimately makes the empirical validity of the theory weakened. Green and Shapiro’s examination of the phenomenon of voting behavior is another major example that shows these problems rational choice theory innately possesses. “In a real-world election with a large electorate, it is instrumentally irrational for anyone to case a ballot, since no single vote has more than an infinitesimal chance of deciding the outcome.
Whether one favors selfish or selfless ends, virtually any activity in pursuit of those ends would be more effective than the time spent on voting and on educating oneself about candidates and issues. Yet hundreds of millions of people do vote. For rational choice theory, this would appear to be a gigantic anomaly” (Friedman 6); As noted earlier, rational choice theory presumes that an agent of the model seeks best possible outcomes to maximize his or her utility in given constraints.
However, according to Green and Shapiro, in a real-world voting behavior does not confirm this assumption of rational choice theory where voters cast a ballot without having enough time to assess or predict its possible outcome and realizing whether his or her action of voting maximize benefit or not. Another issue raised by Green and Shapiro is free riding problem; While voters can easily pursue a free riding action on the efforts of others to help the cause succeed, there is no need for people to devote resources of time and money to cause desired results.
In other words, “rational choice theory would seem to be refuted not only by people who vote, but by those who contribute small amounts of money to political campaigns, attend rallies, and engage in other forms of collective action designed to secure goals whose achievement is independent of the efforts of any single participant” (Friedman 7). As seen from Green and Shapiro’s founding, most criticisms of rational choice theory seem to be that the assumptions of the theory are not literally and completely true.
No model can pass such a test, as all theories abstract from reality in certain way. Determining the empirical validity of a model would therefore seem to involve an examination of both feasibility of assumptions and conformity with real-world data. The most basic assumption of rational choice theory is that the primary unit of analysis is the individual decision-maker. Those who believe that groups are fundamental have criticized this assumption. This issue of so called, “methodological individualism” are dealt in many contexts in the social sciences.
In the book, “Rational Choice Theory: Advocacy and Critique”, Coleman and Fararo argues that models of purposive action or rational choice model can be useful in explaining and predicting human behavior. They further their argument by saying that “because the values and beliefs of individuals are shaped primarily by the socializing influences of society, especially as mediated through social relationships with significant other, an understanding of the culture and structure of societies and of the positions of individuals within them is necessary” (Coleman and Fararo 22).
According to Coleman and Fararo, major problem for applying rational choice model particularly into Economics and Political Science, in which the primary interest has been in aggregate level outcomes, “is that the postulate of purposive action has been linked to arbitrary and narrow assumptions about what individuals value and believe” (Coleman Fararo 33).
Also the assumption that human behavior is narrowly self-interested and the use of the term rationality to refer to the efficient pursuit of economic benefits has often produced incorrect assumption that rational choice model are innately egoistic; “that they regard individuals as calculating the expected benefit to themselves of alternative lines of action and acting accordingly (Coleman and Fararo 34).
Recent empirical evidences suggest that human beings are capable of acting in ways for the interests of others or the social group above their self-interest, which implies that the assumption of individual’s pursuit of self-interest does not match with reality. Coleman and Fararo further their discussion of this “methodological individualism” by arguing that a social norm can be one primary example, which refutes the basic assumption of rational choice model.
According to Coleman and Fararo, “When a social norm is know to have been violated, some type of formal or informal sanction will result” (Coleman Fararo 35). Formal sanction like a legal code or a set of rules and informal sanction like a disapproval or social ostracism would affect individual’s choice making process. Therefore, unlike the basic assumption of rational choice model suggests that human behavior is oriented from self-interest, by the effect of social norms and values, individuals can consequently act in altruistic or selfless way for pursuing the interests of groups they are involved in.
Because of its limit and problematic nature of rational choice theory, the need for alternative explanation has become necessary for many scholars who criticize the theory. Dennis Chong provides some insights for the possible alternative of rational choice theory in his article, “Rational Choice Theory’s Mysterious Rivals”. According to Chong, even though Green and Shapiro’s critique against rational choice theory has failed to provide complete form of alternative explanation, there are some theoretical debates and discussions that suggest possible theoretical replacement or revision.
Chong argues that, “Green and Shapiro occasionally allude to the influence of social-psychological and moral factors” such as group loyalties, emotions, political identities, ideology, obligation, and altruism (Friedman 47). As found in Coleman and Fararo’s arguments that institutional or social factors can affect individual’s choice making process, many scholars further their discussion of this social motivation as the alternative of rational choice theory.
In his article, “When Rationality Fails”, Michael Taylor argues that social identification and intrinsic motivation can explain some of significant social phenomenon and collective action that has been ignored by rational choice theory; “If a person defines herself as a member of a group, or if her membership in a group is made cognitively salient, then she is more likely to observe the group’s norms and cooperate with group members in social dilemmas” (Friedman 230).
For intrinsic motivation, Taylor explains that there are some activities that are intrinsically motivating people to be participated such as interesting work, volunteering, and political activities. In this case the activity itself or enjoyment of that activity is the reward for people. When extrinsic rewards like money are introduced, intrinsic motivation would diminish (Friedman 231). By suggesting the concept of social identification and intrinsic motivation, problems of rational choice model for explaining some collective action can be resolved.
In this paper, a sense of how rational choice theory works and of its methodological foundations has been introduced. It has also been noticed that rational choice theory is not an ultimate answer. The theory is subject to a number of criticisms, but there is no doubt that its influence in various fields of study have brought tremendous amounts of theoretical debates, and increased the depth of economic, sociological, and political discussions.
It is impossible to attain complete knowledge about anything, especially social phenomena. However, it is certain that rational choice approach is one of most crucial theoretical resources for human beings to explore and examine to gain this ultimate answer. It can be useful or misleading, depending on how it is treated. It is responsibility of remaining and future scholars and people to correctly apply and use this theory with open-minded attitude.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 9 December 2016
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