Rational Choice: Choice as an Act of Technical Rationality

Central to rational choice theory is a particular conception of the indi­vidual. Specifically, the individual is perceived to be ‘utility maximizing’ and, as the terminology implies, to act rationally in their choices. Scott (2000: 126) defines rational choice theory as ‘the idea that all action is fundamentally ‘‘rational’’ in character and that people calculate the likely costs and benefits of any action before deciding what to do’. Within rational choice theory, therefore, the individual is conceptualized as primarily motivated by the rewards and costs of their actions and the likely profit they can make.

This conceptualization of the rational behaviour of the ‘utility — maximizing’ individual assumes that choice is predicated on the follow­ing three stages:

1 Possibilities are identified and separated out as ‘different’ and distinctive from one another.

2 Information is acquired about each different option, so that they can be evaluated one against another, and against previously held criteria.

3 This rational appraisal leads to the selection of one option as the ‘choice’.

(David et al., 1997: 399)

In addition, rational choice theory is based on an approach termed ‘methodological individualism’. Implicit within methodological indivi­dualism is a particular conceptualization of society. This rests on the centrality in neo-classical economic thought that is given to markets as regulators of human behaviour. Thus, choices arise from free trade, competitiveness and individualism. These elements can be seen in Becker’s (1991: ix) comments that rational choice ‘assumes that indi­viduals maximize their utility from basic preferences that do not change rapidly over time, and that the behaviour of different individuals is coordinated by explicit and implicit markets’. As Scott notes, central to rational choice theory is the idea that complex social phenomena can be explained as the result of the actions, and interactions, of individuals. In rational choice theory the individual is taken as the elementary unit of social life and ‘social explanations [are] based entirely on trade between rational individuals’ (Gardiner, 1997: 150). Figure 4.1 summarizes these elements of neo-classical economics. While such an approach may hold good for understanding why people choose one particular consumer product over another, such a theory has posed a number of problems for economists in analysing choices where more complex information is required or where there are uncertainties or misinformation. In response to these issues Fine and Green (2001) note how new theoretical devel­opments in economics during the 1970s took account of the differential effects that imperfect information had on markets. In consequence, the development of these new theoretical and econometric directions enabled the discipline of economics to extend its analyses beyond its traditional spheres of financially based market relations. One such area is that termed New Home Economics.

Gardiner (1997) notes that the development of New Home Econ­omics arose from what neo-classical economists saw as a paradox. That

Figure 4.1 Neo-classical economics

is that there were increasing numbers of women in employment in the context of rising real incomes. Why, it was asked, should women choose to work when their husbands’ incomes were more than sufficient? The sphere of New Home Economics introduced ‘the notion of the house­hold as a maximising unit’ (ibid.: 37). This means that the household was assumed to function in a unified, rational and ahistorical way.

Two illustrations from Becker (1991) will illustrate how neo-classical economists have confronted, first, the problem of imperfect information and, second, have assumed the household can be analysed as a unity. Becker is a key proponent of rational choice theory and has applied this to an analysis of family life. Through mathematical models, Becker’s treatise on the family explores a number of issues including the division of household labour, marriage, divorce, fertility and employment. The following extract indicates a rational choice theory perspective of utility maximization as it is applied to choice of marriage partner. According to Becker, longer searches may increase the likelihood of finding the perfect partner but they are more expensive. The ‘rational person’ will find the optimum point between initial costs and eventual returns.

Increased search and better information raise the utility expected from marriage by improving the quality of marital choices. However, time, effort, and other costly resources must be spent on search, and the longer the search, the longer gains from marriage are delayed. A rational person would continue to search on both the ‘extensive margins’ of additional
prospects and the ‘intensive margin’ of additional information about serious prospects until the marginal cost and marginal benefit on each margin are equal. In particular, rational persons marry even when certain of eventually finding better prospects with additional search, for the cost of additional search exceeds the expected benefits from better prospects. (Becker, 1991: 325)

Becker argues that the common indicators of a good ‘choice’ such as family background, educational level, religion, income, and so forth are only proxies for the traits desired of a good marriage partner. Because they are proxies they constitute imperfect information. The real business of getting to know your partner occurs in the first few years of marriage or cohabitation. The problem of ‘imperfect information’ is, in conse­quence, the reason for high divorce rates in the early years of marriage. Thus:

I suggest that marriages fail early primarily because of imperfect infor­mation in marriage markets and the accumulation of better information during marriage. . . Women who divorced early in their marriage report that ‘difficult’ spouses and value conflicts were major sources of their discontent, presumably because these traits are much better assessed after a few years of marriage. (ibid.: 328)

The view that the household is a unified decision-making unit is illustrated in Becker’s analysis of altruism. As Gardiner (1997) notes in the public world of employment, production and consumerism neo­classical economists argue that the market acts as a coordinating mechanism that will regulate excessive behaviour. This coordinating mechanism is absent in the household. Becker resolved this through his discussion of altruism and selfishness. In Becker’s treatise altruism can be located in the head of the household to whom Becker gave the male pronoun. The female pronoun was given to the one who acts selfishly. This altruist will be a ‘benevolent dictator’ and act in the best interests of the household. He (sic) will control the resources and make decisions. In this way, therefore, the economic analysis of the household can proceed as if it were an individual.

The application of rational choice theory can also be found in debates about human and social capital. Human capital, again strongly associ­ated with Becker, is commonly related to the extent to which education and training constitute investments in individuals that give rise to increased productivity or an increased economic yield. This relationship gives rise to studies which measure, for example, the national economic returns to education in terms of Gross Domestic Product or the impact of training on company profits. It is also used to explain differential incomes on the basis that investment in initial education and training will produce higher incomes (see Tight, 1996, for a useful summary and critique).

Gardiner (1997: 37) comments: ‘Whilst individual maximising behaviour has normally been used to explain male economic behaviour, such as the supply of labour to the market, the notion of the household as a maximising unit has usually been introduced where there is a need to explain female economic behaviour.’ Thus, in response to expla­nations for women’s lower earnings economists turn to the household. For example, human capital theorists argue that women’s lower earn­ings can be explained by their lack of investment in human capital. Such explanations have suggested that because young women know that as adults they will be primary carers of their families, they make rational choices not to invest in initial education and training. More recently, women’s increasing participation in paid labour and their higher invest­ments in education have produced alternative ‘choice’ explanations. In relation to the high proportion of women in part-time paid employment, for example, such explanations argue that women choose employment that requires less energy and time because this compensates for the greater time they will have to spend on domestic work. Overall, as Gardiner (1997: 49) comments: ‘Gender differences in employment patterns are explained as the result of the cumulative effects of men and women individually and in household units responding rationally to the way the market signals their comparative advantage in the different spheres of production.’

The general criticisms of rational choice theory focus primarily on the absence of a recognition of the many problematical aspects of the social world. Fine and Green (2001: 78) note that neoclassical economics is both ahistorical and excessively formalistic: ‘Because it is constructed on the foundation of methodological individualism, its concepts are time­less, universal and not infused with real history.’ Scott (2000) cites three main areas where rational choice theory is problematic:

• in respect of explanations for collective action as rational choice theory cannot explain why individuals join different kinds of groups and associations;

• in terms of the origins of social norms such as trust, altruism and reciprocity;

• in respect of the impact of social structures. Within rational choice theory primary emphasis is placed on the actions or agency of individuals.

Conceptualizations of social capital have been heralded as adding an important social dimension to economic theories and in this way contributing to what is seen as a major weakness of economic theories of rational choice. This has been particularly through the work of Coleman (1987; 1988a; 1988b). Coleman is associated with forms of methodological individualism developed by scholars in the Department of Sociology at the University of Chicago (Fine, 1999). He is, as Fine points out, the intellectual partner to Becker. Working within theories of functionalism and individualism, Coleman saw his work in terms of a convergence between economics and sociology that was underpinned by a rational choice model of human action. In this he sought to develop human capital theory by recognizing the role of social relationships.

In economic terms social capital is:

the network of social and community relations which underpin people’s ability to engage in education, training and work and to sustain a healthy civic community. Key conditions for the nurturance of social capital include reciprocity and trust, the imposition of sanctions when these fail, the existence of horizontal, not vertical, mechanisms for the exchange of information and support and the willingness of the community to take on responsibility for the provision of as many social services as possible. (Riddell et al., 1999: 55)

This perspective can be seen in the work of Coleman whose main concerns were to demonstrate how an individual’s attainment of human capital, say, in the levels of their examination and scholarly successes, were influenced by family and inter-family relations.

Coleman suggested that social capital is generated in two ways. These are within the household and between households. For example, an important source of social capital is the amount of time that parents spend with their children and one another. In this way, Coleman offered an explanation of why parents rich in human capital themselves might not pass this advantage to their children. Their engagement in paid work, for example, meant that they had limited contact with their children and with each other. The result is a lack of necessary invest­ment of time and energy in their children’s potential human capital. In another example, Coleman (1988a) recounts a situation in Asian immi­grant households in the USA where mothers purchase copies of school textbooks in order to help their children. Here Coleman argues that the social capital available for the child’s education is extremely high while their human capital is low. This social capital, according to Coleman, is converted into human capital in the form of educational qualifications.

By recognizing the significance of family and household the explanatory framework that Coleman develops does take more account of the influences of social structures than is found in the explicit individualism of Becker’s earlier work on human capital. Nevertheless, it is a muted development of an individualistic discourse that still relies on exchange relations between rational individuals for its primary explanatory framework. Using the language of trust, reciprocity, mutu­ality, support and community, the literature on social capital conveys a rosy glow of social relations as it posits exchange relations as beneficent and democratic (Blaxter and Hughes, 2000).

There are several critiques of these conceptualizations of rational choice that I wish to draw attention to and shall expand upon below. Overall it is hard to avoid the implication of this theorizing that neo­classical economists believe that if we were all to act as maximizing, atomistic, exchange-focused individuals the problems of social life would cease. However, how adequate is this framework both in terms of a representation of the realities of social relations and in terms of an appropriate moral and ethical framework? And, what does this mean in terms of the development of policy frameworks that encourage a greater extension of rational choice market-based economics? Certainly, feminism has had some responses to these questions.