|Reviewer(s):||Tollison, Robert D.|
Published by EH.Net (January 2003)
Amartya Sen, Rationality and Freedom. Cambridge, MA: Harvard University
Press, 2002. vii-736pp. ISBN 0-674-00947-9.
Reviewed for EH.NET by Robert D. Tollison, Robert M. Hearin Professor of
Economics, Department of Economics, University of Mississippi
Professor Sen has been at the forefront of modern economics for many years, a
fact signified by his receipt of the Nobel Prize in Economic Science in 1998.
He has in particular devoted a significant amount of effort to welfare
economics and social choice theory, where his immense creativity has energized
an otherwise sterile and highly technical part of the discipline. He is equally
good in math and words, so that his work in this area is accessible to most
economists and scholars in other disciplines. H e is not just a puzzle solver;
he is a deep and significant thinker on such issues. The essays in this book
represent some of his most important work in these areas. While not denying
their importance, these are not literatures that I have followed closely, so I
will abjure from making any other comments on these aspects of Sen’s work.
Sen has also been a leading constructive critic of rational choice theory
(recall his terminology-rational fools). In this regard he joins other modern
critics of economic methodology, who have created a virtual cottage industry of
anomalies and other claims of the refutation of the implications of rational
choice theory (RCT). Many of the essays in this volume present Sen’s criticisms
of RCT, and since this is an issue in which I am interested, I will focus my
review on this aspect of Sen’s collection of essays.
First, this is not the first time that RCT has come under assault by scholars
arguing that economic actors do not conform to a maximization hypothesis.
Recall the extensive debate about whether firms maximize profits in the late
1940s and 1950s. This was a useful interlude in economics, but it mostly served
the purpose of forcing scholars to be more careful in framing maximization
hypotheses, and as a consequence, the profit-maximization hypothesis is
basically a non-issue today. Does a similar fate await the criticisms of RCT?
Time will tell.
Second, many of the criticisms of RCT by Sen and others are equivalent to
letting the best become the enemy of the good. No one can reasonably argue that
RCT is a convincing theory of human behavior at all times and under all
circumstances. It cannot explain why the soldier throws himself on the grenade
to save his compatriots. Maybe it will in the future, but this is not the
point. The point is that it provides a reasonable explanation of choices in the
vast majority of cases of ordinary behavior, and ordinary behavior in market
and non-market settings arguably constitutes the bulk of human existence. Given
this empirical regularity, we depart from the use of the model at our own
analytical peril. Why discard a useful theory because it does not explain
everything, but almost everything? And needless to say, with what do we replace
homo economicus? Homo Boobus?
Third, the charge from Sen and others that economics is about narrow
self-interest is entirely misplaced. When I was taught RCT as a graduate
student, it was made clear from the start that economics is silent on what
people want. Rather, given what they want, individuals pursue their goals
efficiently. Hence, there is room for all types of behavior in RCT. Individuals
may be sinners or saints, angels or alligators, but self-interest, scarcity,
and the law of demand are the best predictors of their actions. RCT is a big
tent whose scope has expanded radically over the last half century, and it
continues to expand each day as scholars continue to find new areas of
application. Narrow self-interest is a canard that has unfortunately captured
the interest of a few otherwise thoughtful economists. And the fact that
practitioners in other disciplines do not understand RCT except as a caricature
of narrow, greedy behavior should come as no surprise; in some cases RCT
threatens to overtake their disciplines and devalue their human capital.
Fourth, I have not done the basic research on the issue, but I wonder what the
scorecard is in the anomalies business? My impression is that practically every
anomaly has been met with empirical evidence suggesting that RCT is the
preferred explanation of the postulated choice outcome or experimental
evidence. In any event, it would be a useful exercise to catalogue every
proposed anomaly and what the evidence shows in each case. We need to know if
the set of verifiable anomalies is an empty economic box. And if an issue is
unresolved, this can be a separate category on the scorecard.
Fifth, modern economic theory does not assume that all actors are equally
rational (whatever this may mean). People pursue their self-interests with
different degrees of skill, either naturally acquired or learned. It has always
seemed to me that this point is not fully appreciated by the critics of
economics or by economists themselves as they go about their business of
explaining human behavior. And I am not talking about bounded rationality, but
rather innate differences in the ability of individuals to pursue their goals
effectively. Many anomalies seem to derive from this basis or at least from the
absence of repeated play formats wherein such differences would be mitigated
Of course, the main advertisement for a modified economic methodology is the
fact that someone as smart and insightful as Sen (as well as some of the other
critics) sees a need for such a change. I, nonetheless, perhaps simplistically,
do not see the promise of a new economics. RCT is doing fine, and while
anomalies add spice to the defense of RCT, in my view, in the end, they will
come to nothing. Professor Sen is to be applauded for forcing our profession to
examine our paradigm more closely, but the shot across the bow, correcting the
course, in the end falls harmlessly into the ocean.
Robert D. Tollison teaches economics at the University of Mississippi. His
principal areas of research are public choice and industrial organization.
|Subject(s):||Markets and Institutions|
|Geographic Area(s):||General, International, or Comparative|
|Time Period(s):||General or Comparative|