April 25, 2013

• There is no upside to irrationality.

  JDN 2456409 EDT 21:06.

   

  Daniel Ariely is certainly a fine behavioral economist, though not quite the caliber of Daniel Kahneman (and apparently people named Daniel are drawn to behavioral economics?). His writing is easy to read but generally avoids dumbing anything down. His personal stories are compelling and moving, though one does tire of hearing over and over again about the accident that burned him. (I’m sure this was a pivotal moment in his life, but the reader doesn’t need to keep hearing about it in chapter after chapter.)

  One thing that the Upside of Irrationality does not achieve, however, is its stated objective of finding an upside to irrationality. This is probably because such an undertaking is provably impossible; if something has an upside, it can’t really be all that irrational.

  So what does it show then? Well, it shows that there are benefits in human life to deviations from rational-agent neoclassical economics. And it certainly makes quite a compelling case of that; we are both more trusting and more trustworthy, more loving and more forgiving, more loyal and more industrious than a neoclassical rational agent would be. Indeed, a neoclassical rational agent would be, basically, a high-functioning psychopath; intelligent, rational, but without emotion, empathy, or remorse. (Perhaps this is why high-functioning psychopaths are overrepresented among corporate executives; neoclassical capitalism is literally designed for them.)

  But rationality doesn’t mean being a neoclassical rational agent. Such a being is “rational” in an instrumental sense, but it is not really substantively rational to live that way (it will not actually make you happy), and rationality certainly does not require you to be a psychopath. It is not irrational to love your family, trust your friends, or be kind to others.

  I’ve actually heard some neoclassical economists try to argue that their rational agents are not callous psychopaths; but then they make game theory arguments that would only make sense on the assumption that they were. They say things like, “The rational action in the Prisoner’s Dilemma is to always defect,” which simply isn’t true unless you’re a horrible person (and maybe not even then). If you care at all about harming the other player, that option doesn’t even tempt you all that much, let alone seem like the obvious correct answer. (And indeed, in Prisoner’s Dilemma scenarios, actual, empathic humans do much better than so-called “rational agents”, or indeed, than neoclassical economists.)

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