A New Model of Rational Choice

Abstract

Classical economic theory always assumes that the individual will "act in his interest"; but it has never examined carefully the entity to which "his" refers. Often, as when households are taken as the unit for income and consumption, it is implicitly assumed that "the family" or "the household" is this entity whose interest is being maximized. Yet this is without theoretical foundation, merely a convenient but slipshod device. In this case, as in many others (e.g., when a man is willing to contribute much, even his life, to national defense, rather than use a strategy which will push the cost onto others), men act as if the "his" referred to some entity larger than themselves. That is, they appear to act in terms, not of their own interest, but of the interests of a collectivity or even of another person. Indeed, if they did not do so, the basis for society could hardly exist. Yet how can this be reconciled with the narrow premise of individual interest? . . . We could simply solve the problem by fiat, letting "his" refer to whatever entity the individual appeared to act in the interest of. This obviously would make the theory trivially true, and never disconfirmable. A more adequate solution is one which states the conditions under which the entity in whose interests he acts will be something other than himself.'