Rational Choice Analysis PPT offered by Oana Anghelachi

2 objectives 1.What Rational Choice Analysis includes 2.Rational choice = analytics paradigm range of IDEOLOGICAL Views rational choice assumptions + moral values/ social norms = ideological worldviews

Rational Choice Theory Assumptions Two cardinal assumptions: 1.Individuals have preferences (know what they want) 2.They try to pursue those preferences Argue against =individuals will consider the material and nonmaterial costs and benefits of a course of action in order to decide whether to pursue it C > B = irrationality

Non-normative derivations Rational individuals will not exert effort from which they gain no utility Matter-of-fact prediction whatever allows people to capture the gains from their effort will promote effort whatever prevents people from capturing the gains from their effort will dampen such effort

Normative derivations The utilitarians/classical liberals/ ideological individualists John Stuart Mill, Jeremy Bentham, James Mill their normative belief: the good society is one that maximizes the opportunity of individuals to pursue their preferences Therefore they articulated POLICY PROPOSITION: the good society must define and enforce individual property rights; otherwise, society hobbles people with uncertainty the UTILITARIANS went from a pair of matter of fact assumptions about human beings, to a vision of normative goals for the good society

Normative derivations 1.Individuals have preferences 2.individuals pursue those preferences Thomas Hobbes The first architect of RC 20 th century political economists Collective action theory Theory of collective goods

COLLECTIVE Action Theory Not all goods are alike There are some goods that can be consumed rather easily, not only by those who contributed to their production but also by persons who did not contribute at all – it is difficult to exclude non-contributors from consumption of collective goods. For such goods – both depletable goods (air quality) and nondepletable goods (price stability/level of non violence in society) - one can benefit from the amount of the good that others produce, without contributing oneself. Collective goods problem: tangible goods (a clean park) intangible goods ( political mobilization)

COLLECTIVE Action Theory Objectives/goods like: industrial safety, gun control, reduction of social violence; Two important features: 1. joint production 2. non-excludable benefits the fundamental character of collective goods: the outcome for all depends on the choices of many interdependent individuals and cannot be secured through the actions of a single individual.

COLLECTIVE Choice Theory The body of work that focuses on the collective consequences of individuals making individual choices and especially on solving collective action dilemmas is Collective Choice Theory.

GAME Theory a method of diagramming the interactive choices that rational actors might make when they make individual but interdependent decisions (collective action problems) invented by John von Neumann and Oskar Morgenstern (1844) to study nuclear war without killing anybody In purely deductive game theory: one posits hypothetical actors, social constructs, and payoffs and then will figure out what will happen.

GAME Theory formal game theory on paper Experimental game theory:  offers real-world confirmation and disconfirmation  builds a foundation of empirical findings from which inductive hypotheses can also be generated and further tested. Studying invented games like: Prisoner’s Dilemma, Chicken, Assurance, Deadlock, Harmony

2. Ideological Prescriptions = RC derivations + Normative Values There are more dangerous threats to liberty and happiness, even for the poor, than any other collective goods. Individual liberty has higher priority than any other social goal. Right-libertarians: must shrink government to the size that they can monitor it effectively limiting it to the task of protecting liberty, property rights Market: no change If the consequences serve to protect the privileged to under produce collective goods that might benefit the poor then SO BE IT!

2. Ideological Prescriptions = RC derivations + Normative Values Government action might harm the poor more which would be worse. keeping the poor from mobilizing for revolution is a goal to be weighted against individual liberty and minimalist government. Economic conservatives: we should keep government small ask it to protect liberty, property rights Market: intervene only occasionally However when citizens are angry enough to mobilize to demand collective goods they favor some interventions to serve the interests of the poor

2. Ideological Prescriptions = RC derivations + Normative Values The disproportional disadvantage in collective action suffered by the poor is worse. Providing collective goods that many people want as sporadically and intermittently as they manage to mobilize to ask for them is not good enough. Real transaction costs are high, so society should provide these good routinely. Left-Libertarians: Government must protect liberty, property rights smoothly functioning markets but also to insure that all of these things are widely available provide collective goods that will help to compensate for the disadvantage in the mobilization suffered by the poor. The task (of citizens): is to watch closely and scream loudly and often.

Food for thought If Wifi is a public good, why is it being privately provided?