Rationality, Welfare and Ethics

Abstract

Almost all discussions on human behavior get deeply tied to rationality which is also typically, though mistakenly seen to be in conflict with ethical and moral behavior. However, what constitutes rationality cannot be exactly spelt out for all situations. Typically both rationality as well as ethics tends to be contextual. More broadly, a mode of decision making which looks carefully at the available resources, the actual objectives and finally adoption of efficient ways to achieve objectives gives us a useful notion of rationality. However, rationality gets too frequently identified with self-interest, howsoever understood. This, clearly brings it into conflict with ethics. It is important to note that ethical behavior itself can be visualized in different ways. It needs to be highlighted that in most areas of economic theory rationality gets identified with self-interest so that in case of typically such topics as general equilibrium emphasis turns out to be on something like Pareto efficiency. This would typically not be ethically acceptable. Though historically vital subject like welfare economics based on majority decisions do not get into this problem, it has not turned out to be useful in any way. It turns out that social welfare can be viewed in ethical terms. Much of the theory on these lines has been questioned by scholars like Rawls. In most cases we are back to the question of how ethics can be incorporated into social welfare. Moreover rationality, as used in economic theory has been strongly criticized on practical grounds giving rise to bounded rationality as understood in given contexts.