Ayn Rand Philosophy, Objectivism, Science, Self-interest

[NightGizmo]

Well crap, that definition is so vague that it practically loses all meaning. From http://www.merriam-webster.com/dictionary/rational:

based on facts or reason and not on emotions or feelings

So economists decide they can eliminate the meaning of a word and then try to use it to justify their models? Sounds like bullshit to me.

[wufwugy]

Well crap, that definition is so vague that it practically loses all meaning. From http://www.merriam-webster.com/dictionary/rational:



So economists decide they can eliminate the meaning of a word and then try to use it to justify their models? Sounds like bullshit to me.

Many models are created to be testable; the economic view of rationality is not about justifying models. Rational behavior is a base assumption that allows the field to make sense. Things are no different in other sciences, where they require base assumptions to allow the science to have meaning.

As for the changed meaning of the word, this is also common in all sorts of fields. It's frustrating to deal with, but scientists have never been easy to deal with.

So irrationality can't exist within an economic model? It assumes that anything anyone does, regardless of how crazy, stupid, or self-destructive, is rational? I don't see how any model that's based on such a flimsy premise could work.

Unless you destroy the definition of rational, I guess.

Economic models aren't attempts to gauge that which is "crazy, stupid, or self-destructive" behavior, but to describe production and consumption of goods and services. To begin this process, economists assume that behavior is caused by the ultimate net "want" of individuals, and they call it "rational."

As for irrationality in economics, I don't know enough to say much on this. The contribution by "irrationalists" in the field is pretty small, and it's not really even economics in the first place; it's psychology. It can be said that there is some crossover, I guess. As far as I can tell, my university only offers an economics course dealing with something along the lines of irrationality like once every five years or something. It appears that the models that psychologists like Kahneman challenged still are the most functional.

[NightGizmo]

As for the changed meaning of the word, this is also common in all sorts of fields. It's frustrating to deal with, but scientists have never been easy to deal with.

They didn't change the meaning, they eliminated it. Based on your definition, when an economist says, "Agents act rationally", they might as well just say "Agents act." Their intended meaning is the same thing in both statements. Because from what you're saying, it doesn't matter what a person's reasons are -- all that matters is that they did something.

So why even use the word "rational" anymore?

Also, I don't know that the term "scientist" applies to a person that thinks that rationality is devoid of reason and comes up with theories that are not meant to be tested or provable.

[wufwugy]

They didn't change the meaning, they eliminated it. Based on your definition, when an economist says, "Agents act rationally", they might as well just say "Agents act." Their intended meaning is the same thing in both statements. Because from what you're saying, it doesn't matter what a person's reasons are -- all that matters is that they did something based on reasons.

So why even use the word "rational" anymore?

Also, I don't know that the term "scientist" applies to a person that thinks that rationality is devoid of reason and comes up with theories that are not meant to be tested or provable.

I added the bolded. That's where the assumption of rationality comes from. Economists say that when people do things, they have rationale for doing them. They assume this rationale is a conscious/subconscious valuation of net benefit, which is another way of saying that which is most desired. They claim desire is adequate since costs and benefits really just boil down to desire. When you're buying a burger for $5, really what you're saying is that you desire that burger more than any other $5 item, $5 of work, or the next best option (like $6 tacos or instead eating nothing and dieting like you had been thinking about).

[NightGizmo]

I added the bolded. That's where the assumption of rationality comes from. Economists say that when people do things, they have rationale for doing them. They assume this rationale is a conscious/subconscious valuation of net benefit, which is another way of saying that which is most desired. They claim desire is adequate since costs and benefits really just boil down to desire. When you're buying a burger for $5, really what you're saying is that you desire that burger more than any other $5 item, $5 of work, or the next best option (like $6 tacos or instead eating nothing and dieting like you had been thinking about).

But economists don't care about the actual reasons, right? Which strips the term "rational" of any meaning. Especially since you claim that in economics, all behavior is by definition rational.

Instead of "Agents act rationally", you can replace it with "Agents act based on reasons that are irrelevant to rest of our theory." Which, again, might as well be "Agents act."

I'm still confused why they even bother to use the word rational.

[wufwugy]

But economists don't care about the actual reasons, right? Which strips the term "rational" of any meaning. Especially since you claim that in economics, all behavior is by definition rational.

Instead of "Agents act rationally", you can replace it with "Agents act based on reasons that are irrelevant to rest of our theory." Which, again, might as well be "Agents act."

I'm still confused why they even bother to use the word rational.

The economics framework is that people act based on value assessments, regardless of what they are. They call this rational. This view has meaning because then if you can model value assessments, you can model behavior, or something to that effect.

Where rationality gets really mixed up is that different people (including economists) have different views of what "value assessments" are. They all include a very broad range of things, but it was people like Gary Becker who famously argued that they apply to previously unconsidered things, like rational addiction. Since utility maximization is in the eye of the beholder, the logical extension of the work Becker did is that all behavior is utility maximization and thus rational.

So, to your frustration with the vernacular, it is quite likely that it originally meant something different. I mean, in this sense, I agree, rational isn't the most constructive a word to use. But I do think it is meaningful to say that people act based on preferences. I mean, this is a basic assumption that can't be proved, but it's one economists have to make. They just chose to call it rational behavior. Intuitively, it is rational behavior for somebody to act upon a preference, by extension, since all actions come by preference, all actions can be called rational. But yeah I get how it's a confusing word to use.

On that note, economics is possibly the most poorly communicated science there is. It's so bad that the main economist who covers the Federal Reserve that I read regularly attacks the Fed for using whack language that sends all sorts of unintended signals to investors as well as the public. A significant unforced error in this regard is how the Fed constantly talks about inflation as if the general public understands it. The Fed usually says idiotic things like "we need inflation to rise" when what they're really saying is "we need nominal incomes to rise, which would be signified in part by inflation rising" yet all the public hears is "we're gonna reduce the value of your dollar and raise prices of the things you buy, suckers."

[NightGizmo]

The economics framework is that people act based on value assessments, regardless of what they are. They call this rational. This view has meaning because then if you can model value assessments, you can model behavior, or something to that effect.

Objectivism also believes that people act based on their set of values. But I believe that it differs from the economic framework in that value systems can be deemed irrational if they are poorly formed. Or, at the very least, the actions resulting from a poorly formed value system is irrational.

It still seems to me that economists are ignoring the actual value systems and instead just using a lot of fast-talking to establish a premise that lets them model whatever they want. Or I'm still missing something. I never studied economics, so that's a possibility, I guess.

[MadMojoMonkey]

This is fascinating and I'm really glad that NightGizmo is making these observations. I'm curious to follow what wuf's reply is.