"Those who believe society can best be understood as a series of markets begin by positing a rational, calculating individual whose goal is to maximize 'utility.' This premise says everything and nothing, since it is true by definition in all cases. But it is a key aspect of the market model, since it is the behavioral part of the logical argument that whatever the market decides must be optimal." [1] " 'When you dig deep down,' Charles Schultz once observed to me, 'economists are scared to death of being sociologists. The one great thing we have going for us is the premise that individuals act rationally in trying to satisfy their preferences.' " [1] Economists assume people that people make "rational" [2] decisions but abstain from testing that assumption. Instead of testing, economists trot out "revealed preferences theory" which states that choices are rational because they are based on preferences that are known through the choices that are made [3]. In other words, economists resort to meaningless, circular arguments to justify their normative claims for market outcomes. Researchers who actuality observe humans making decisions, find that economists are wrong. Humans give undue importance to recently presented information. [4] What does this mean? Simply put, people are manipulated by information providers -- the last commercial has the most influence. Change the order of the messages, and one changes the choices made (no need to change the prices -- or the content). What are the implications? If people are not "rational", the economist's normative claim for market outcomes can not be defended -- can not be used to rationalize the ongoing destruction of the planet. Jay -- www.dieoff.com --------------------------------- [1] p. 41, EVERYTHING FOR SALE, Robert Kuttner; Knopf, 1997 http://www.amazon.com/exec/obidos/ASIN/0394583922 [2] "The social sciences have a long, rich history of writings on rationality. In the tradition of neoclassical economic science, as in the writings of Pareto (1935), an action is rational when it corresponds with the ends or goals sought. Rationality means the adaptation of means to ends. The more congruent the means to the ends, the more efficient the decision and, therefore, the more rational the organization (Weber 1947). Economists abstain from applying the test of rationality to ends." [p.16, DECISION MAKING: ALTERNATIVES TO RATIONAL CHOICE MODELS, Mary Zey; Sage, 1992] http://www.amazon.com/exec/obidos/ASIN/0803947518 [3] p. 31, RATIONAL CHOICE THEORY AND ORGANIZATIONAL THEORY: A CRITIQUE, Zey; Sage, 1998 http://www.amazon.com/exec/obidos/ASIN/0803951361 [4] UNDERWEIGHTING OF BASE-RATE INFORMATION REFLECTS IMPORTANT DIFFICULTIES PEOPLE HAVE WITH PROBABILISTIC INFERENCE, Robert M. Hamm, 1994 http://dieoff.com/page19.htm
