Papers of BAS, Humanities and Social Sciences
Vol. 2, No 3-4, 2015
RATIONAL CHOICE AND META-PREFERENCES
Abstract: The theory of rational choice is one of the most important developments of classical microeconomics in the second half of the twentieth century. It was established on a firm basis by three Nobel prize winners Paul Samuelson, Kenneth Arrow and Amartya Sen. Later, it became gradually eclipsed by the rise of behavioral economics, which stresses the well-known fact that the choices which constitute our economic behavior usually are less than fully rational. Putting aside the issue about the descriptive adequacy of rational choice theory, it remains important from a normative point of view. Regrettably, all attempts to incorporate its lessons into a general theory of rational action are hindered by the fact that virtually any axiom of the theory, which functions as a part of the implicit definition of the concept of rational choice, can be juxtaposed with a relatively elementary counterexample. Many such counterexamples were formulated by Sen himself, and the future development of the theory seems possible only if we find a way to sidestep them. The present text proposes a novel solution to some of those counterexamples. It is organized as follows: (§1) introduces the conceptual apparatus of rational choice theory, paying special attention to the notions of feasible set, choice function and revealed preference; (§2) lists some of the popular “axioms” of the theory and sketches their informal meaning; (§3) elaborates on the reasons for Sen’s dissatisfaction with those axioms, linking them with the well-known phenomenon of menu dependence; (§4) introduces a novel approach which employs not one but two relations of preference, the second one being interpreted as a relation of meta-preference since it grades not the alternatives belonging to some feasible set but feasible sets themselves. As we shall see, this allows us to circumvent some of Sen’s criticisms.
Keywords: rational choice, choice function, revealed preference