A Study of Irrational Judgments

Abstract

T HERE is an important difference of opinion among social scientists concerning whether human behavior is rational or irrational. Traditionally, economic theory has been based on an assumption that behavior is rational, in a specific sense to be defined shortly, whereas most psychological and sociological theory insists that behavior is, at least largely, irrational. Some of the more advanced workers in psychiatry and anthropology have been discovering that much of what superficially appears to be irrational, in terms of what the outside observer considers to be the interests of the subject or the information available to him, is really rational when certain premises of thought-often repressed or at least hidden-are taken into consideration. These newer discoveries pose for research the question of whether human behavior is ever irrational in terms of the value judgments held by the individual or the group and the information available to them. This question remains a crucial one for the economic theory of choice, and its resolution will strongly influence the future direction of economic theory, as well as the relationship of economics to the other social sciences. Some writers in econometrics have claimed that most of the empirical assumptions of the older economists can now be abandoned but that the assumption of is still crucial and must be so, or economics can be nothing more than a descriptive science of the sort envisioned by the institutionalists. By rationality they usually mean in effect transitivity,2 or an internally coherent choice pattern such that if an individual chooses A in preference to B, and B in preference to C, then he will choose A in preference to C.3 The relationship need not logically be that of preference, although it always is in economics. Edwards cites the extensive economic literature in which it is demonstrated that transitivity of preferences (for commodity bundles) is a necessity for conventional economic theory. The psychological assumption behind