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Rational Actors And Irrational Preferences

marketing@pennpoliticalreview.org November 18, 2013 Soapbox Blog No Comments on Rational Actors And Irrational Preferences

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The term ‘irrational actor’ seems to have weaved its way from the political science academic field through the course of policy discussion and into mainstream popular discourse.

Most recently, this term has been bandied around in reference to Iran, and whether or not any agreement with the Iranian state depends on the purported rationality or irrationality of the Iranian leadership.

However, when approaching these conversations, it is very important to clarify what exactly is meant by an ‘irrational’ actor. The presence of rational actors constitute one of the foundational widespread assumptions behind political science academia. However, this assumption is not unique to political science—much of economics and the field of game theory assumes rational behavior.

In this sense, rationality reflects a cost-benefit analysis. That is, actors (i.e. individuals or decision-making bodies) will attempt to weigh the expected benefits of pursuing a certain course of action, and compare those benefits to the expected costs. If the costs outweigh the benefits (providing a negative utility) then one should expect a rational person to not pursue such an action.

To give a concrete (if trivial) example: Let’s say that I’m sitting at home, late at night, and really want a glass of orange juice. If I were a rational actor, I’d calculate whether my expected utility of the glass of orange juice outweighed the costs of leaving my house and braving the cold and spending the money on the juice. In other words, I’d undertake a process of rational decision-making of whether it’s “worth it.” I would hope that we all have similar decision-making processes on a regular basis. The assumption that people typically act in order to further their own interests is pretty robust, which is why it can form the foundation of these academic fields.

However, let’s change this orange juice scenario a little bit. Suppose I arrive at the grocery store and find that there’s only one bottle left. Appreciating the high demand for the bottle of juice, the store owners increase the price by $100. At this point, I’d make the same calculation as before: given the expected utility of drinking this orange juice, would the costs (now increased by $100) outweigh the benefits?

The decision as to whether I’d decide to buy that juice or not is contingent upon my preferences. Preferences are a manifestation of an actor’s relative interests. If my preferences were such that wanted the bottle of orange juice badly enough, then it would be entirely rational for me to choose to buy that orange juice.

Thus, preferences are internal to the actor at hand. Preferences can be absurd or unusual, but strange preferences do not preclude rational behavior—it will just result in a different decision-making calculus.

It is this difference that we must keep in mind when discussing actor rationality in the political arena. The conversation must take care to differentiate between whether one believes an actor’s preferences to be unreasonable to the point of ‘irrational’, or whether one truly believes that an actor does not engage in rational decision-making.

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