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Amartya Sen Rational Fools Notes

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Amartya Sen - Rational Fools: A Critique of the Behavioural Foundations of Economic Theory
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Edgeworth's principle of man as self-interested animal is persistent in economic models and foundational in economic theory
* in Edgeworth's time egoism and utilitarianism were seen as the exhaustive approaches to action
# this is narrow - between the claims of the self (egoism) and the claims of all (utilitarianism) lie intermediate groups - families, friends, communities, classes etc
* Edgeworth's model, based on egoistic behaviour, led to a correspondence between exchange equilibria in competitive markets and 'the core' of the economy
# 'the core' - outcomes which are Pareto efficient, in which nobody is worse off than he could be without trade, and no group of individuals could improve their position by altering the trade amongst themselves
* yet these outcomes are not necessarily impressive in terms of social welfare
* often this question has been posed in terms of 'what good outcomes can egoistic behaviour achieve?'
# this often assumes egoism, and hence avoids the issue at hand
# first we should consider what egoistic behaviour consists in, and whether it is realistic (correct) One reason we might use the concept of a self-seeking egoist in economic models is because it is possible to formulate all behaviour so that no matter what is chosen, it represents the agent's interests
* this is if we define interests or preferences as revealed/residing exclusively in action
# e.g. if I eat a banana rather than an apple, I was acting self-interestedly, and revealed a preference
* one constraint on this is consistency
# if I make inconsistent choices then for that to be rational I must be either be inconsistent or have changing preferences
* this seems like an evasion of the issue
* the rationale of this approach is that we can only understand someone's preferences through the actual choices that they make
* without preference and welfare the egoist approach presumes both too little and too much: too little because there are non-choice sources of information on preference and welfare, and too much because choice may reflect a compromise between various considerations, with personal welfare being just one The rational choice theory may appear circular, because behaviour is explained by preferences, which in turn are defined by behaviour
* in spite of this circularity, the thesis is not meaningless, because it can be falsified - where choice is inconsistent
# but this still doesn't answer the question of whether the choices people make are self-interested; of whether egoism is accurate In considering apparent deviations from egoism, we might distinguish between two concepts:
* sympathy: where concern for others directly affects one's own welfare
# e.g. where knowledge of torture makes you sick
* commitment: where something does not affect your welfare, but you judge something

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