Rationality

Enlightenment

philosophical movement in Europe 17th and 18th centuries

• caused by scientific revolution, rise of bourgeoisie, and weakening of traditional authority, printing press, age of exploration

• led to further scientific development, academic institutions, political revolutions, and modern liberal state

core ideas:

• reason as a way to acquire knowledge

• political, economic, and religious liberty

• focus on human agency and belief in human potential

knowledge

acquired through reason, including knowledge of humans, society, and what is good

approaches:

• rationalism

• empiricism

• hybrid approaches (kant, pierce)

rationalism

innate truths independent of experience & deductive reasoning from these truths lead to knowledge, as in mathematics

empiricism

knowledge comes from sensory experience & inductive reasoning from these experiences can lead to further knowledge (e.g scientific experimentation)

liberty

descriptive and normative claim about human choice & foundation of political position of liberalism which emphasizes individual rights, free markets, democracy, and secularism

• negative and positive liberty (agree on need to ensure political freedom, but not psychological freedom [acting on true preferences])

negative liberty

absence of coercion → liberal state must ensure citizens do not coerce each other except to protect liberty

positive liberty

presence of self direction and autonomy → liberal state must promote positive freedom by giving citizens capability to act (e.g through education)

The Human

foundation for philosophical & cultural movement of humanism

• places individual human @ center

• human capability to acquire knowledge through reason, act rationally, and improve both personal and social wellbeing

• secular justifications for political and moral positions

• belief in human equality

• art and philo that explore human concerns, including meaning of life and role of personal choice in meaning

enlightenment and choice

individual choice matters

• can be done rationally

• can be used to promote individual and social good

• can be foundation of moral, political, and cultural worldview

concepts of value

perfectionism & pluralism

• based on enlightenment ideas

perfectionism

society should promote good life, typically developing human nature

• focus on human development

• linked to positive liberty and institutions like public education

pluralism

different values can be justified and society should wish for us what we wish for ourselves

• religious tolerance & political freedom

• justification for liberalism and especially negative liberty

• political system should allow for coexistence of diff values

rational choice theory

basis for (often liberal) normative claims from these disciplines

• individuals are rational decision makers → have coherent preferences that they implement their choices in informed and deliberate manner

• rational choice as pillar of individual and social analysis

utilitarian foundations

human behavior driven by rational pursuit of utility and societies should aim to maximize utility of their members

hedonic calculus

Bentham’s approach to calculating net pleasure of action:

• intensity: power of action

• duration: how long does pleasure/pain last

• certainty/uncertainty: is it likely to result in pain/pleasure

• propinquity/remoteness: how near is it?

• fecundity: is it followed by sensations of the same kind

• purity: what is the chance of sensations followed being opposite kind

• extent: how many people does it affect

non-hedonic conception of utility

value pluralism: people can rationally pursue diff goals even if they don’t maximize happiness

revealed preference: rational is to maximize utility & since people are rational, max utility is whatever revealed by choice

ordinality: we cannot observe or compare cardinal utility (how much/little utiltiy an action brings) only their ordering

consequentialism

utilitarian: happiness matters, how it is attained is irrelevant

rational choice theory: utility (hedonic or not) assumed to depend on end outcomes rather than processes to attain those outcomes

• descriptive and normative claims

choice

act involving selection of a choice object from a set of available objects

rational choice theory

people have stable and transitive preferences

• make choices by satisfying these preferences

• choose object they prefer most

preference: attitudes towards choice objects represented using preference relations

stability: preferences not sensitive to context and are independent of various irrelevant situational factors such as how choice is presented

transitivity:

economic choice

ability to use utilities to describe preferences allows us to rigorously study optimal choice between goods and services with differing monetary costs

• can analyze choices of consumers, businesses, and workers, market equilibria, and changes to equilibria as function of cost

strategic choice

ability to use utilities to describe preferences allows us to rigorously study optimal choice in games (strategic interactions w/ others)

• can analyze not only actual games, but also strategic behavior in markets, law and regulation, political strategy, language, and evolution

revealed preference

RCT often associated w:

• individual preference (utility) synonymous w well being

• choices always maximize preference and wellbeing

• choices reveal wellbeing and used as basis for normative analysis (analysis of what is best for individuals and societies)

normative analysis derived from revealed preference attempts to address fundamental questions about fairness, efficiency, and justice (social choice theory)

Pareto optimality

• extremely weak definition of social welfare, since it does not make any assumptions about magnitude of utility experience by each individual

social welfare functions

• observe individuals utilities from allocation, then we can define social welfare functions that aggregate these utilities into social utility

more choice

invisible hand

Fundamental theorems of welfare economics: A competitive

market leads to a Pareto optimal allocation of resources, and any

Pareto optimal allocation can be supported as a competitive

equilibrium

Intuition: If there were any way to make someone better off without

harming others, people would have an incentive to make that trade

coase theorem

In the presence of externalities, a competitive market will lead to a

Pareto optimal allocation, regardless of initial allocation of property

and responsibility for the externalities (externalities are indirect

costs or benefits to uninvolved third parties, like pollution)

Intuition: Bargaining (just like the free trade in an economy) can be

used to reach agreements that are Pareto optimal

arrow’s impossibility theorem

mediam voter theorem

Becker’s Rational Analysis

Free to Choose

The Age of Choice