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Rationality Philosophical concepts of rationality Instrumental vs. Principled rationality Utilitarianism Economics and rational choice Assumptions and.

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Presentation on theme: "Rationality Philosophical concepts of rationality Instrumental vs. Principled rationality Utilitarianism Economics and rational choice Assumptions and."— Presentation transcript:

1 Rationality Philosophical concepts of rationality Instrumental vs. Principled rationality Utilitarianism Economics and rational choice Assumptions and ambitions of rational choice theory Game theory Bounded rationality

2 Definitions Reason The intellectual ability to apprehend the truth cognitively, either immediately in intuition, or by means of a process of inference. Cognition The portion of human experience comprising thought, knowledge, belief, and inference (as opposed to sensation, volition, or feeling). Logic Branch of philosophy concerned with the distinction between correct and incorrect reasoning. It commonly comprises both deductive and inductive arguments. Rationality the quality of being consistent with or based on logic the state of having good sense and sound judgment; "his rationality may have been impaired"; "he had to rely less on reason than on rousing their emotions"

3 Rational behaviour A theory of rational choice presupposes that choices can be influenced by reason That implies that not only are we reasoning beings possessing cognitive abilities applying principles of logic (deduction/induction) to comprehend the world but also do we let reasoning guide behaviour/decisions/choices In that sense, RC theory proposes that reasoning is not an abstract human ability, but applied in behaviour, which allows behaviour to be explained and predicted

4 Instrumental rationality David Hume ( ) Reason alone can never be a motive to any action of the will reason is, and ought only to be the slave of passions Instrumental view of rationality Human actions/choices are ultimately driven by passions, desires Action determined by psychological states Rationality of action consists of acting in a way that promises to achieve the desired goal Passions or desires themselves cannot be irrational Only irrational if based on false judgment, and then the judgment is the irrational element, not the evoked passion Irrational can be the choice of means to satisfy the passion/desire

5 Principled rationality Immanuel Kant ( ) Hypothetical imperatives Effectively Humean instrumental rationality If you want to achieve Y, and this can only be accomplished by the course of action X, then it is (instrumentally or hypothetically) imperative to do X Categorical imperatives Do X regardless of your wants Reasoning about what actions to take requires that we conceive of ourselves as able to determine our actions autonomously Passions are alien influences that should not affect our reasoning Categorical are imperatives recognised by any agent possessing the faculty of reason Act only on that maxim which you can at the same time will that it should become a universal law

6 Utility Jeremy Bentham ( ) Principle of utility approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the happiness of the party whose interest is in question Utility: property of an object to produce benefit, advantage, pleasure, good, happiness Consequentialism: rationality of action is determined by the results those actions provide Allows for reason to override passion, if long-term balance of happiness is maximised by foregoing current passionate urge Social choices (utilitarian principle of justice) A social state is preferable to another if it provides a net increase in utility for the members involved (more tend to gain than to lose)

7 Economics and rational choice Marginal utility theory Mathematical modelling of utility functions Material self-interest as psychological underpinning of theories of market and consumer behaviour (Homo economicus) Vilfredo Pareto ( ) Pareto optimality Thin rationality: Utility as a mere representation of preference- orderings The theory of economic science thus acquires the rigour of rational mechanics; it deduces its results from experiences, without bringing in any metaphysical entity Revealed preferences: observed choice as indicator of reasoning behind choice Expected utility

8 Core assumptions of RC Utility maximisation Goals and preferences are exogenous (given); utility is the property of different courses of actions, i.e. their likelihood to achieve goals Consistency Rank-order of preferences Transitivity (if A is preferred over B; and B preferred over C; then A must also be preferred over C) Expected utility Choices are made under uncertainty The calculus of choice not only entails the consideration of preferences over a set of options, but also consideration of the relative likelihood of an action producing the desired outcome Radical individualism Collective action is nothing more than the action of individuals when they choose to accomplish purposes collectively rather than individually (Buchanan and Tullock, 1962)

9 Explaining the world Rational choice theory Universal: aims to explain all economic, social and political outcomes as caused by intentional acts of individuals Deductive: deriving law-like statements, predictions, explanations from theoretical axioms (whereas inductive theories aim to derive generalities from observation of many comparable occurrences of events) Deterministic: search for equilibria (given institutional structures and preference orderings, outcomes are causal consequences) Positivist: explaining what is, not explicating what ought to be Parsimonious: (high-leverage theory) aiming at universal explanations on the basis of few assumptions, little complexity Lack of realism: (thick or thin) rationality assumed to be dominant if not sole driving force of human behaviour; also assuming homogeneity between individuals; perfect information Theoretical legitimacy derived from predictive power: modelling the world AS IF everyone were a ulitility maximiser

10 Game theory Neumann/Morgenstern The Theory of Games and Economic Behaviour (1944) Game theory defines rationality as Maximising expected utilities Based on concept of instrumental rationality But contingent upon other players strategies Modelling how individuals interact directly, and not through markets Game theory shows choices are constrained by the behaviour of others, and how rational strategies can lead to suboptimal, perverse outcomes

11 The Prisoners dilemma Assume two burglars, Al and Bob being captured Given two options by police Confess and implicate the other in the burglary Dont confess Outcomes If both confess, implicating the other, both get 10 years in jail If neither confesses, each gets 1 year in jail If one confesses, implicating the other, and the other does not, the confessors goes free, the other gets 20 years in jail Dominant strategy is for both to confess Perverse outcome; 10 years for each Nash equilibrium: no one can gain from changing strategy Applications: Hobbes social contract theory Realist paradigm in international relations Israeli-Palestine conflict


13 Collective action Mancur Olson (1965) The Logic of Collective Action Predominant view that he challenged: Organized groups are basic units of politics Group membership and participation based on shared values and beliefs Sociological explanations of political processes Rational choice approach to collective action Radical individualism Requirement of separate and selective incentives to engage individuals Groups do not have preferences, neither do states or society; all of these are just machines allowing collective action to take place Problem of free-riding

14 Bounded rationality Herbert Simon ( ) if we take into account the limitations of knowledge and computing power of the choosing organism, then we may find it incapable of making objectively optimal choices. If, however, it uses methods of choice that are as effective as its decision-making and problem-solving means permit, we may speak of procedural or bounded rationality, that is, behaviour that is adaptive within the constraints imposed both by the external situation and by the capacities of the decision maker. Reasonable choice Substantive rational choice we need to know only the choosing organism's goals and the objective characteristics of the situation. We need to know absolutely nothing else about the organism Procedural/bounded rational choice we must know the choosing organism's goals, the information and conceptualization it has of the situation, and its abilities to draw inferences from the information it possesses. We need know nothing about the objective situation in which the organism finds itself, except insofar as that situation influences the subjective representation

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