by Mario Rizzo
Behavioral economists who like to indulge in normative pronouncements have decided that quasi-hyperbolic discounting violates rationality. In other words, suppose a person decides today that he will give up the hamburgers he loves beginning in 2010 (because of the high fat content). But then when 2010 arrives he reverses his decision and continues to eat them. To stress the point, let’s suppose that he repeats this preference-reversal one or two more times during 2010.
The poor fellow is, in addition to all his other troubles, violating standard economic rationality.
Here I want to point out that this form of analysis misses something basic about human decisionmaking and the pursuit of happiness. Read what Immanuel Kant had to say in 1785:
“There is one end…which we may presuppose as actual in all rational beings… This purpose is happiness. … But it is a misfortune that the concept of happiness is so indefinite that, although each person wishes to attain it, he can never definitely and self-consistently state what it is that he really wishes and wills. …[I]t is impossible for even a most clear-sighted and most capable but finite being to form here a definite concept of that which he really wills. If he wills riches, how much anxiety, envy, and intrigues might he not thereby draw up his shoulders! If he wills much knowledge and vision, perhaps it might become only an eye that-much-sharper to show him as more dreadful the evils which are now hidden from him and which are yet unavoidable; or it might be to burden his desires…with even more needs!
…[H]appiness is an ideal not of reason but of imagination, depending only on empirical grounds which one would expect in vain [strictly] to determine an action through which the totality of consequences – which in fact is infinite – could be achieved.” (Foundations of the Metaphysics of Morals, Section II, §§ 415 ff.)
The upshot: Don’t expect the most “rational” person to clearly understand and consistently pursue what will make him happy.
This is another one of those examples where a simple concept of rationality – perhaps useful instrument in understanding market phenomena or some aspects of decisionmaking – is transformed into a normative ideal. The economist quite reasonably simplifies the world to understand it. But then he should not criticize the real individual for being more complex than the neoclassical model of rationality allows.