Alternatives, Frames, and Relative Prices: A Broader View of Rational Choice Theory

Abstract

One important consequence of the increasing convergence between sociology and econ omics is that sociologists make increasingly more use of rational choice theories for the explanation of social action. This shift opens up the possibility that sociologists make use of what must be considered to be the most powerful regularity in the social sciences: the relative pnce effect, which states that behavior depends directly on relative prices (or relative scarcities). This effect is also known as the law of demand: as one good becomes more costly in comparison to others, a person will purchase less of that good. It turns out that crucial sociological questions (for instance the relation of gain-oriented behavior to moral behavior) make it necessary that we know something about the size of the relative price effect. Surprisingly, there is virtually no theory in economics on this point and thus rational choice theory is badly in need of being extended in this direction. In this paper, two such extensions are suggested. First, a theory of alternatives consisting of (a) a theory of social production functions, (b) a theory of non-given alternatives and (c) a theory of 'ipsative' sets of alternatives Second, a theory of framing is presented which links the relative price effect to the definition of the situation which in turn is theoretically linked to the theory of alternatives. It is argued that these extensions make rational choice theory much more relevant for sociological applications than the neo- classical model in which alternatives are exogenously given and the definition of the situation is implicitly locked to a standard trading situation.