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The Problematic Legacy of Homo Oeconomicus and Rational Choice Theories

Taking the spatial dimension into account first requires a critical review of the classical models used in social sciences, especially the model of economic actions based on the concept of homo oeconomicus. The claims about its general validity and applicability are inherently linked to the alienation of space. The concept of homo oeconomicus and the assumptions that traditional rational choice theorists make about the human decision-maker and some other premises have been criticized by many authors as empirically unfounded and psychologically unrealistic (Buskens, 2015; Flache & Dijkstra, 2015; Gigerenzer & Gaissmaier, 2015; Green & Shapiro, 1994; Goldthorpe, 2000; Haselton et al., 2009; Hertwig & Herzog, 2009; Samuels & Stich, 2015). Theories of bounded rationality, behavioral economics, evolutionary economics, new theories of the firm, the strategic management approach, and nonrational theories have been divested of many unrealistic premises; nevertheless, some theoretical concepts of decision-making used in economics and partly also in social sciences[1] still carry the detrimental legacy of homo oeconomicus

and traditional rational choice theories. We do not repeat here the extensive critique of that model but rather focus on those aspects for which the lack of sensitivity to the spatial dimension of human existence and sociocultural realities is playing an important role, at least from a geographer’s point of view. In the geography of knowledge (Meusburger, 1998, 2015a, 2017), one critique is that many theoretical concepts of decision-making ignore—

  • • social and spatial disparities of knowledge;
  • • the impact that environments, spatial contexts, and spatial relations have on the generation and diffusion of knowledge;
  • • the selective mobility of different categories and levels of knowledge; and
  • • power structures in space. The enduring persistence of national and global urban hierarchies is due mainly to relations between knowledge and power, the spatial concentration of power, the vertical division of labor, and selected migration.

Mutual relations between knowledge and power have been intensely discussed elsewhere (Gregory, 1998; Meusburger, 1998, 2000, 2015c; Meusburger, Gregory, & Suarsana, 2015) and need not be repeated here. They are neatly summarized by Foucault (1980):

  • • The exercise of power perpetually creates knowledge and, conversely, knowledge constantly induces effects of power. (p. 52)
  • • Knowledge and power are integrated with one another, and there is no point in dreaming of a time when knowledge will cease to depend on power. (p. 52)
  • • It is not possible for power to be exercised without knowledge, it is impossible for knowledge not to engender power. (p. 52)

It is also criticized that some scholars do not distinguish between knowledge and information,[2] and that the costs and time needed to acquire the knowledge, expertise, and the advanced levels of educational achievement necessary to solve complex problems are neglected or underestimated.

From a geographer’s point of view, the ideal-type premises of homogeneous space and ubiquity of knowledge are the most critical shortcomings, the assumptions farthest from empirically verifiable realities. Unequal spatial and social distribution of various categories of knowledge and skills can be traced to early human history, at least to the time when the first scripts were developed (5500 BC). Spatial and social inequalities of knowledge, spatial concentrations of power (Meusburger, 1998, 2000; 2008; 2015c) and hierarchically structured urban systems are a constitutive element of highly differentiated societies that are based on horizontal and vertical division of labor. In a knowledge society, the range of knowledge gaps, knowledge asymmetries, and spatial disparities of knowledge is larger than ever and is constantly growing.[3] With respect to the assumption that knowledge is spatially ubiquitous, the rational choice model is so remote from the empirical facts that its heuristic value tends toward zero if the spatial dimension is taken seriously. The wide dissemination and use of the premise that space is homogenous certainly has to do with the exclusion of spatial and cultural constellations. Unfortunately, it has ecologically and culturally problematic consequences as well.

Even within the rules of social modeling, the rational choice model does not meet applicable standards. Models may idealize empirical reality only if their heuristic value is not undermined (see Werlen 1993a; 1993b, pp. 43-51). If the model strays too far from empirical reality, it can no longer help detect that reality’s regularities or properties. “Without knowledge, or beliefs that correspond to reality, thinking is an empty shell” (Baron 2008, p. 15, italics in the source).

The premise that knowledge is ubiquitous is sometimes justified by the impact of the Internet. The Internet facilitates the spatial distribution of easily understandable information and routine knowledge but certainly does not have deeper balancing effects on spatial disparities when it comes to the spatial distribution of jobs that need advanced scientific, technical, and expert knowledge. Such jobs are not as mobile as some authors may assume, they tend to concentrate in certain places or areas (Malecki, 2000; Meusburger, 2000, 2017). Different categories of knowledge travel at different speeds and very selectively.[4] The individual has limited cognitive capacities and only a minute and constantly diminishing share of all knowledge worldwide (see the Chap. 7 by Stehr in this volume). Even if the individual possesses the cognitive capacities to specialize in a certain field, it takes years and incurs great cost for that person to acquire such knowledge, educational achievement, and expertise.

For decades, traditional rational choice theory and instrumental rational action models focused on a peculiarly rational and omniscient type of person who has or easily gains access to all the knowledge, skills, and expertise needed in order to make rational decisions and achieve his or her goals.[5] [6] Most adherents of these theories have ignored or suppressed the fact that people differ in their cognitive capacities, level of knowledge, professional experience, and skills, not to mention their level of education.11 A number of authors writing about rational choice theory

(e.g., Buskens, 2015; Radner, 2015) simply altogether avoid using categories such as knowledge, skills, expertise, and educational achievement.

Another weakness of traditional rational choice theory is the fact that rationality— conventionally understood to be a method of thinking and logical consistency—has little explanatory power. The concept of rational behavior focuses on a person’s strategic choice of the best means to achieve a certain goal, but it does not include consideration of the goal’s reasonableness and attainability or of the resources needed in order to pursue the goal.

[F]ormal logic is concerned with the rules for drawing conclusions from evidence with certainty. That is, it is concerned only with inference. It says nothing about how evidence is, or should be, obtained. Formal logic, therefore, cannot be a complete theory of thinking. (Baron, 2008, p. 81)

In decision-making and goal-oriented social action, formal logic must be combined with knowledge, expertise, skills, and the newest information. Because actors differ in their levels of information, knowledge, skills, experience, and educational achievement, they arrive at very different decisions if they follow the principle of rational decision-making. What seems rational to an agent who has little expertise and relies on public information might be irrational to an actor with great expertise or to a stock broker with insider knowledge. “[A] given act may appear rational at the time it is undertaken; yet when a different goal is activated to which that act was detrimental it may appear irrational and one might come to regret it” (Kruglanski & Orehek, 2009, p. 647). High levels of knowledge, skill, expertise, and early access to important information help people come to decisions that are apt to achieve the desired goal. Gaps in expertise, skills, educational achievement, and information usually restrict goal attainment.[7]

Like any goal-directed activity, thinking can be done well or badly. Thinking that is done well is thinking of the sort that achieves its goals. When we criticize people’s thinking, we are trying to help them achieve their own goals. When we try to think well, it is because we want to achieve our goals. (Baron, 2008, p. 29)

Max Weber (1922/1980), who first made rationality a key concept in modernistic thinking, was interested in the fact that rationality created a culture of objectification (Versachlichung) and relegated myths, superstition, and unjustified beliefs to the background. He used the term specifically in the sense of economic rationality that denotes the strategic choice of the best means to reach a given goal. However, Weber’s concept of rationality was later extended to fields where it was not appropriate. Max Weber never asserted that rationality alone will help define expedient and achievable goals, that rational agents are capable of recognizing the value and the utility of their goals, or that rational behavior will trigger creativity and innovation.

Aspects of space and spatial contexts did not play a particular role in the debates mentioned above, but they were highlighted by debates around nonrational theories. Since the late 1990s, nonrational theories, concepts of ecological rationality, geographies of science, and other fields of social geography have developed a growing sensitivity for the significance of spatial contexts, spatial relations, environments, and contact fields for learning processes, knowledge production, decision-making, and innovation. They have emphasized that learning processes are intrinsically interwoven with conceptions of space (see the Chap. 12 by Gardenfors in this volume).

  • [1] For an overview of the large variety of rational choice models, see Wittek, Snijders, & Nee (2013).
  • [2] For detailed discussion see vol. 10 in the series on Knowledge and Space.
  • [3] This statement contradicts the popular view that anybody in the digital age has access to theknowledge available worldwide. The Internet offers access to information, not to knowledge.Whether available information is understood, accepted, and assimilated into a person’s existingknowledge base depends on complex psychological processes (Meusburger, 2017).
  • [4] Mobilities of knowledge are the topic of volume 10 in this series.
  • [5] ‘ ‘Neoclassical economics typically employs the assumption of perfect rationality ...Rationalactors never fail to find the action that maximizes their utility, even if this requires unlimitedcapacities to process and memorize all information available and to have unlimited foresight of theconsequences of all available courses of actions in a distant future” (Flache & Dijkstra, 2015,p. 907). Empirical evidence shows that people have limited and unequal information-processingand computational capabilities. These findings have led to various models of bounded rationality(Simon, 1956, 1982, 1990).
  • [6] Professionals, scientists, engineers, and other experts must study many years to acquire the task-related or goal-relevant knowledge they need for their problem-solving and decision-making.Much of this knowledge and expertise can be learned only in specific institutions of higher education. It is therefore difficult to understand why differences in the level of educational achievementplay but a marginal role in action theory and rational choice theories.
  • [7] This observation is even more relevant for social systems than for individual decision-makers.
 
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