In this paper we revisit the literature on rational choice theory (RCT) and the critical approaches to it. We will present a concise description of the theory as defended by Gary Becker, Richard Posner, and James Coleman (as well as others) at the University of Chicago from the mid-1970s to the early 1990s. We will discuss its epistemological assumptions and predictions and also the most important counter-arguments. We will emphasize the critique based on behavioral economics and will try to see if humans’ supposed cognitive constraints lead to a failure of rationality or if they constitute rational responses to the scarcity of information, time, and energy. In our discussion, we will use findings from experimental economics and the sciences of the brain, especially evolutionary psychology and neuroeconomics. Our intention is to present an improved theory of rational choice that, on the basis of the above discussion, will be more descriptively accurate without losing its predicting power. We will conclude by trying to answer the most important related policy question: when rationality seems to fail, does this necessarily imply that agents should be paternalistically protected from themselves? We will briefly defend the thesis that, in the long-run, it is much better for society at large if individual decision makers are left alone to develop rational responses to their cognitive constraints.
In some contexts, the actual behaviors of individuals can appear as aberrant with rational agent-based theories. Behavioral theory tries to explain these anomalies, especially with respect to social preferences. The purpose of this paper is to show how experimental economics has provided an accurate measure and further characterization of these preferences. Based on a very selective review of experiments, we show how a fruitful dialogue has been established between behavior analysis in the laboratory and in theory.
One of the most impressive changes in economics and decision sciences is the emergence and rapid growth of so-called “behavioral” economics and neuroeconomics. These fields raise several methodological issues, some of which are at the forefront of current debate. Among those issues, the most prominent is: what is the epistemic relevance of non-behavioral or “cognitive” data, i.e., data which bear on cognitive processes and states involved in decision making? Faruk Gul and Wolfgang Pesendorfer (2005/2008) have vigorously criticized the idea that these data could be relevant for economics and decision sciences. Their criticisms became the focal point of a very active methodological literature. In this paper, we reconstruct and discuss Gul and Pesendorfer’s views and arguments. Although we are not convinced by some of them, we believe they suggest a genuine issue: the “missing links.”
Most behavioral economists take the normative implications of their experimental findings to be broadly paternalistic. They tend to suggest that the results of behavioral economics logically entail the extension of the set of public interventions on the market. In this article, I show that this conclusion follows from an implicit normative reasoning that is unsustainable because behavioral economists remain committed to standard welfare economics. I suggest that the behavioral economists’ defense of paternalism can be understood as an attempt to maximize a social welfare function taking into account the fact that individuals make incoherent choices. But this defense depends on a theory of rational preferences that behavioral economists do not have. Moreover, a defense of paternalism in a welfarist framework leads to downplay the agency dimension of persons. Alternative defenses of soft paternalism may exist but likely require that normative behavioral economics gives up welfarism.
Behavioral economics sought to draw inspiration from research on empathy to modify the interactive model of homo economicus. However, it was faced with the impossibility of considering emotions, and emotional empathy in particular, within the framework of a theory of social preferences rooted in the rationality of the interactionist and individualistic model of game theory. This impossibility is due to the fact that game theory first, then behavioral economics, did not want to question the fundamental motives of the individual when he/she interacts with others. Yet the question of emotions, and emotional empathy in particular, should lead to questioning the sources of behavior. Indeed, what do the other behavioral sciences tell us? While the survival of the organism is undoubtedly a fundamental objective common to all living things, human beings derive their specificity from the fact that they also have fundamental and pre-wired mechanisms that specialize them for life in interaction with their fellows. It is thanks to these fundamental mechanisms that the human species has been able to develop productive and societal modes of cooperation on a large scale. We propose, therefore, a change of perspective in behavioral economics that would allow us to consider that the ultimate objective of the individual in society is not to ensure his/her survival and needs but rather to create and maintain their links with others.