Rational actors and theory

• Micro vs macro
• Structure and agency–does one precede the other?

Robert Heilbroner was an economist who took an expanded approach to understanding rational choice theory. Some of his ideas:

• Market system is a mechanism for sustaining and maintaining an entire society.
• People make their own choices, and based on their own selfish interests.
• Why did you go to college?
• Why did you choose this major?
• What kind of toothpaste do you use? Why? Why bother to brush your teeth at all?
• Why do you choose to participate/not participate in classroom discussion?
• How did you decide which party to attend last weekend?

Risk and change vs safety first—So there is a principle in subsistence societies that self-interest should be subordinate to the survival of the collective unit (the village, for instance). To do otherwise may be good for a household, but what happens when that household needs the assistance of its neighbors?

‘Free’ markets work in a much different way–as economist Adam Smith said, buyer and seller each pursue his/her self-interest, and the market determines the price where those interests meet and are maximized (that is, the buyer is willing to pay a certain price, which the seller is willing to accept, and both benefit). Smith said that pursuit of rational self-interest acts like an ‘invisible hand’ that regulates markets and transactions. Is the market principle a risky way to organize a society? What happens when buyers or sellers have imperfect information or knowledge? For instance what if Social Security were privatized, and people made their own investments, and some invested poorly and lost their retirement? Would the overall larger ‘pie’ of self-interest be an improvement over a smaller, but less risky pie where the size of your slice was more predictable and less vulnerable to the fluctuation of market forces?

What is the value of rational choice theory?

• People make decisions all the time—on what basis?
• Behavior of markets—if bureaucracies have a huge influence on our lives, what about markets?
• Economic system—production and consumption—clearly more efficient
• Enclosure, intercontinental railroads,
• Generation of wealth
• Structure—what structure doesn’t come from rational choice?

What are its weaknesses?

• How would rational choice theory explain structure?
• Marriage? Divorce? Abortion? Art, literature, music?
• Economic system—opportunistic actors and inequality—how does that affect structures? Do markets reward greed? What happens when wealth inequalities increase–are some people just smarter, or have they figured out how to game the system?
• Prisoners’ dilemma–what happens when individually rational behavior leads to collectively irrational outcomes?
• Consumption is individual; survival is collective (literally, we do all need the Earth)
• Generation of risk–

How would rational choice theory work to explain some of the historical changes of the 19^th century?

• Laborers and wages
• Division of labor
• Enclosure movement (from ‘common field’ farming to fenced-in private property, individual ownership vs collective roles (peasantry, nobility), obligations (grow food, receive protection, subsistence), responsibilities (fulfill your roles)
• The solution: the market. According to Heilbroner, ‘fluid, mobile labor force that would seek work wherever work was to be found according to the dictates of the market’
• Karl Polanyi and the Great Transformation (of production factors)—culture and economy (Heilbroner says there’s ‘separation’)
  • Polanyi says that when production factors–things needed to make anything (land, labor and capital)–become commodities to be bought and sold as market goods, there is more going on here, a societal transformation, a shift from an economic system reflecting a culture, to a culture reflecting an economic system, in this case, based on the individualist dictates of the market and rational choice.
• Transition—was it ‘natural’? transition from what to what (from the Kivisto reading)?
  • Emile Durkheim (solidarities); Marx (feudalism-capitalism); Weber (tradition-rationality)
  • Ferdinand Toennies (gemeinschaft und gesellschaft, natural vs purposive will); Toqueville (individualism and turning one’s back on society)
  • Individualism—Robert Merton and ‘social strain’ (conformist, innovator (ends justify means), ritualist (indifferent to ends, respects means), retreatists (hermit, withdrawn), relationship to anomie
  • David Riesman and the lonely crowd (mass society)–what a concept–loneliness in the middle of a crowd–what does he mean?
  • Robert Bellah and associates (potential for a destructive individualism)—utilitarian (we’re selfish rational actors) and expressive individualism (we seek to express ourselves, our individualism, but not necessarily in crassly economy, self-interested ways), lack of balance between individualism and community, the latter is at risk without shared purpose and commitment
  • Robert Putnam and social capital–from his work Bowling Alone.
  • Erving Goffman,
    • presentation of self (we all do it, says Goffman, but individuals can seem from the outside as calculating actors);
    • total institutions / (loss of) identity;
    • stigma–who feels like they’re on the margins of society, what happens when that public perception of clashes with our own of who we are, when individuals feel ‘outcast’ in their own society?;
    • Goffman said that identities and interaction exert stabilizing influences–does this sound like structure?
  • Rational choice—utilitarian individualism; reflection of economic system? And make no mistake, the economic system is based on rational choice theory, and rational choice theorists do believe that individuals have the freedom to make choices, and those choices lead to the creation, or the reproduction (they were here before us, yes, but we still make those choices to reproduce these structures, and for the most part, things are fairly stable!).
• Contemporary processes:
  • World Bank, third world lending policies—underlying principles?
    • Wallerstein saw a ‘world system’ of ‘core’ and ‘periphery’ countries (with a long history of colonialism). More of a contemporary Marxian viewpoint.
    • Can a multilateral agency, whose stated mission is to manage lending to countries of the South, transform society by transforming the underlying theories by which the economic system operates, and still manage to create the structures that will stabilize social forces (a long sentence, but a potential test of theory in here)?

An example of rational choice theory applied to: Racial disparities in school discipline: Racism or rational choice? Josh Kinsler, Duke University (2005)

Abstract:

Using a cross-section of disciplinary data from North Carolina, I show that differential suspension rates between white and black students can be attributed to rational behavior on the part of school administrators. Racial bias is typically cited as the primary factor in explaining the punishment gap; however, within school analysis suggests racial bias is responsible for little of the overall gap in punishment. Rather, the aggregate disparities in school punishment result from varying school disciplinary levels. We present a theoretical model of the punishment decision which suggests schools with high levels of misbehaving children will use stricter punishment. To test our theoretical results, we examine the deterrent effects of school discipline for both offending and non-offending students. Both groups respond to the threat of discipline. However, non-offenders with observable characteristics associated with misbehavior respond significantly stronger to the threat of discipline. This behavioral response to punishment results in high risk schools utilizing severe discipline. Because black students are more likely to attend a high risk school a racial gap in punishment persists.

So, is racism at work here? Or as Professor Kinsler suggests, is this merely the decision calculus being used by individual school administrators, operating within certain constraints or ‘exogenous’ factors, which tend to lead to more punitive measures in lower-achieving schools? Do the rational policies explain the racial disparities in socioeconomic status that may characterize neighborhoods surrounding these schools?

Did she jump or was he pushed?