Rational economic man and his dog set out to mow a meadow.

• Author: Steele, G.R.
• Position: Reflections

How do we recognize anyone's decisions as rational? To a mathematician, rationality implies logical deduction from axiomatic certainties; rationality is the application of rules of logic that define the pathway from a premise to a conclusion. To a statistician, rationality implies calculations based on probability distributions; it would, for example, be irrational to flip a balanced coin repeatedly with the expectation of obtaining (on average) more heads than tails. In both of these illustrations, rationality is a characteristic of the problem situation.

In the context of mainstream economics, it is common to represent rationality as a psychological attribute. The rational economic man is one who displays a particular personal disposition. Rational man optimizes within constrained circumstances: he allocates the scarce resources that are available to him efficiently among competing uses. In so doing, he displays a remarkable set of abilities. He is able to indicate a well-defined preferred objective; to obtain all the information that pertains to that objective; to deduce logically the action that is necessary to reach that objective; and to put that action into effect.

If these considerations define rationality, then irrationality presents a conundrum. If rational man is not a truism, irrational man must exist. With well-defined objectives and "given" relevant circumstances, irrational economic man would flunk problems of logical deduction (the irrational mathematician), mathematical expectation (the irrational statistician), and constrained optimization (the irrational economic man).

In the economic context, irrational man cannot choose a suboptimal solution because if he chooses to fail and does so, then he must have succeeded, rationally. There are other possibilities: irrational economic man might be one (1) who cannot define his objectives ("his preference function is unspecified"), so his actions are unlikely to deliver optimal solutions, even though he knows the calculus; (2) who, having identified the configuration of his preference function, cannot master the necessary calculus; or (3) who has both of the foregoing deficiencies.

Consider a seemingly straightforward economic task: one man and his dog, who set out to mow a meadow. Consider rational dog. If that is absurd, consider irrational dog. If both are absurd, what remains? Although dog cannot deliver solutions requiring calculus or statistical analysis, this deficiency is...