Are People Rational (in the Economist's Sense) and Reasonable (in the Lawyer's Sense)?

Topics: Utility, Decision making, Rational choice theory Pages: 9 (3653 words) Published: December 11, 2012
Are People Rational (in the economist's sense) and Reasonable (in the lawyer's sense)? Both concepts of rationality and reasonableness indicate a process of reasoning by anticipating and analysing the consequences of their potential actions and establishing a list of preferences, depending on the anticipated consequences. A rational person, having established their list of preferences, will choose the action which will maximise their utility. There are many different variations of rationality which will be outlined later in this essay. In order for a person to be rational their list of preferences must be complete and transitive as well as choosing the preference that maximises their utility. Ulen (1999) 'Consumers have transitive preferences and seek to maximise the utility that they derive from those preferences, subject to various constraints.' A reasonable person will also analyse the consequences of their actions to create a list of preferences in a similar way to a rational person but they will also consider the welfare of others in their decision and adjust their list of preferences accordingly. In this essay I will look at how a variety of different factors, both direct and indirect will affect a person's ability to act rationally, reasonably or in some cases both. I will also make a comparison between rationality and reasonableness in people and rational and reasonable corporations. A purely rational person is completely self-interested and will only look to maximise their own preference function and will have no consideration for the welfare of others. Macesich (1997) '.....the economist's concept of a rational person is one who seeks to maximize his or her own self-interest. His or her concern for the well-being of others is limited. The selfcentred drive produces outcomes in which private and social costs diverge. As a consequence, outcomes can conflict with society's general interest.' Pure rationality is present in only the minority of people as most people involve other people's welfare or utility in their decision-making, to varying degrees. A purely rational, self-interested person can never be reasonable. The actions of a purely rational person may coincide with those of a reasonable person but nevertheless they can never be reasonable. Immanuel Kant's argument was that of moral duty, where one has the duty to act, regardless of the consequences. Connolly (1959) 'If I carry out the action enjoined by a moral law (e.g. “Act justly”) for the sake of pleasing or obeying an external lawgiver, e.g. God, my action is not on that account morally good......The principle is: “I ought to act justly, if I wish to please God.”' This indicates that a person can only be reasonable if they are acting because it is morally right and not just to avoid a particular penalty. Kant's example can be illustrated in a modern example where by a company will only increase their employee's wages due to statutes enforced by law, not because their employee's are paid barely enough to live on. This example shows the company being entirely rational but not reasonable as they are only improving their employee's welfare to avoid the penalty of the statute, this action cannot be reasonable under Kant's argument. The state of mind of the decision-maker is critical to whether they are reasonable,[that is, whether] there needs to be consideration for other people's welfare. There are different levels of rationality. A purely rational person is only self-interested and will look to maximise their utility regardless of the effect on other parties, whereas someone can still be rational and consider other people's welfare. People can still be rational even if they put other's preferences ahead of their own. Ragnar Frisch argued that rational people may also consider other people's functions when making decisions. It may be the case that the preference function of other's preferences takes priority over one's own preference function. Frisch's...
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