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Rational choice

Rational choice. 23/7-2008 8 th reading group seminar on qualitative methods. A theoretical framework. Often labeled a “theory”, but it is more properly understood as a theoretical framework (broader). Very general assumptions.

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Rational choice

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  1. Rational choice 23/7-2008 8th reading group seminar on qualitative methods

  2. A theoretical framework • Often labeled a “theory”, but it is more properly understood as a theoretical framework (broader). • Very general assumptions. • Filled with content in concrete settings: actors, preferences, time horizons, information, risk attitude, constraints (institutions, technology, resource availability etc) • Elster: RC puzzles. Some comments: • Theory and determinism/explaining everything (falsification?) • False assumptions or degree of closeness to reality • Under which contexts/for which research question does RC work better? • Modification of theory rather than start from scratch

  3. Basics • A “deceptively simple sentence” that summarizes the theory of rational choice: “When faced with several courses of action, people usually do what they believe is likely to have the best overall outcome” (Elster, 1989:22) • 1)Thin and 2)instrumental rationality: Ad 1)No initial requirements on what type of goals that should be pursued. 2) Actions are chosen because of intended consequences. Actions are not valued because of themselves (contrast with Kant)

  4. Requirements on preferences • Actors must be able to rank different outcomes. >, < or =. (Complete preferences) • If x>y and y>z  x>z (Transitivity) • Reflexive preferences: x≥x • “Weak ordering” is binary relation that is complete, transitive and reflexive • Theorem (Debreu, 1959): Preferences are complete, reflexive, transitive and continuous  There will exist a continuous utility function that represents preferences

  5. The utility function and inter-person comparisons • U(x1, x2, x3,…xn) • Utility functions as ordinal. We can only rank different alternatives, and we can therefore only make claims like Utility of outcome a> Utility of outcome b and we can not make claims like the utility of a is twice as high as that of b in a strict metaphysical sense. • Ordinality of utility functions makes inter-person comparisons problematic. We escape the “Utility-monster” problem and other problems that have been used against utilitarianism. • Solutions to the inter-person comparison problem that is generated: • Pareto-optimality rather than social utility maximization • The “representative individual” • Back to the social welfare function and welfare weights

  6. Choice under uncertainty • A priori knowledge of probability distribution related to outcomes, but does not know specific outcome. Way to model beliefs. • Given beliefs, maximize expected utility • Von Neumann-Morgenstern utility functions: • EU(p) = p1u1 + p2u2+…+pnun • Some needed assumptions: Doesn’t care about order in which lottery is described, cares only about net probabilities, independence of irrelevant alternatives, cardinal utility • Risk aversion or risk neutrality..baked into the utility function

  7. Learning and time preferences • Rational actors incorporate new information after observing events. Update their beliefs. • Bayes’ Rule P(A|B) = (P(B|A)*P(A))/P(B) • Game theory: Actions and types. Signaling games. • Optimization over time, discount factor: δ, between 0 and 1. • How to compute a pay-offstream, infinitesequence starting in t=0: ∑δtu = u/(1- δ)

  8. Elster’s alternatives • Loss aversion • Nonprobabilistic weighting of outcomes • Hyperbolic discounting • Heuristics • Wishful thinking • Inability to project • The desire to act for a reason • Magical thinking • The categorical imperative • Emotions • Social norms

  9. Geddes • Some misconceptions of rational choice arguments: • Are inherently conservative • Assumes that all people are motivated by material interest • Assume that preferences are stable or unchanging (plus preferences and strategies) • Unrealistic assumptions • Ahistorical and does not take into account the role of context • Deterministic • Cannot be used to explain path dependency

  10. Green and Shapiro • Feasibility of complex calculations? • As-if answer and Friedmanian instrumentalism • Evolutionary answers • The indeterminacy critique • Partial vs segmented universalism • Thick vs thin rational choice • Method- and problem driven approaches. Universalist aspirations • Post hoc explanations and “stretching” • Selecting evidence and arbitrary domain restriction • Bottom line: Little to contribute with to empirical political science

  11. Cox • G&S: Few new propositions in polsci that have been carefully tested and a successful RC would not be more universal than other existing middle-level theories • Earlier criticisms • Inappropriate standard of success • What about other theories? • Cox: • Selection of examples in G&S: There are indeed several successful examples + G&S have a narrow definition of rational choice • RC is in a sense more universal than many other middle level theories, methods and abstract models to be filled with content • Theoretical success also relevant, the ability to induce new research. Cumulative knowledge

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