Rational-choice model

Economists have proposed rational choice models of addictive behavior (Becker and Murphy 1988 Becker, Grossman and Murphy 1991,1994). These models characterize how consuming harmful addictive products can decrease future well-being while at the same time increasing the desire for those products in the future. Because these models consider only time-consistent agents, however, they a priori rule out the possibility of self-control problems. 

Like the rational choice models of addiction, our model assumes that the choice to consume an addictive product is volitional, in the sense that people balance their current desire for the addictive product against their perceptions of the future consequences of current consumption. Our model is quite different, and less extreme, than rational choice models, however, because it assumes that people may be overattentive to their immediate gratification (that is, they may have self-control problems) and... 

Example 1 illustrates some basic intuitions of the stationary model. We now show that these intuitions hold more generally. To do so, we focus on the case where there is an infinite horizon (T= ). We do so for two reasons. First, it is expositionally easier to describe the results for an infinite horizon. Second, this assumption is closer in spirit to the rational choice models of addiction and yields more realistic results. 

Our goal in this chapter has been to outline some simple models of the relationship between self-control problems and addictive behavior. Researchers who use mathematical models to study human choice— mostly economists—traditionally approach intertemporal choice problems by assuming time consistency. By focusing on self-control problems, therefore, we depart from this traditional approach. We conclude by discussing some of the advantages of our self-control model of addiction relative to rational choice models of addiction. 

Related to the issue of realism, we predict that models incorporating self-control problems (especially, we conjecture, models that include an element of naivete) will be better calibrated than rational choice models and hence make sounder quantitathv predictions. We do not have empirical evidence for this conjecture, but to illustrate our reasoning we present a simple calibration exercise within our framework We demonstrate how very patient people with very small self-control problems can get addicted in situations in which time-consistent people would get addicted only if they were to discount the future at an implausibly heavy rate. 

The crucial intuition driving these calibration results is the incremental nature of most addictive behavior. At each point in time, people choose whether to indulge now, and the cumulative effect of these decisions determines whether people get and remain addicted. With self-control problems, a sequence of incremental decisions can lead to behavior very different from how people would behave if committing up front to a lifetime path of behavior. In a rational choice model, in contrast, the incremental nature of addiction is irrelevant. If people know exactly what the future holds, and have no self-control problems, then people become addicted only if that is the optimal lifetime path of behavior. 

It is also the case that rational choice models of addiction tend not to make qualitative predictions that are inconsistent with self-control models of addiction. Essentially all qualitative implications emphasized in rational choice models of addiction are also consistent with our self-control model of addiction. For instance, extensions of our model (and all other reasonable models we can imagine) would be consistent with the prediction that demand for addictive products decreases with the price of those products—... 

Among Marxists there is a widespread resistance to the use of rational-choice models and to intentional models more generally. Some of the reasons underlying this attitude are quite respectable, others are less so. Some are general, others more specific. They will become clearer as I proceed. I shall first sketch a general account of the nature of intentional explanations, and then go on to discuss their importance in Marx. 

Zey, M., Ed. (1992), Decision Making Alternatives to Rational Choice Models, Sage, London. 

Heinrich s and Mintzberg s models are examples of classical rational-choice models of decision-making. They do not describe how decisions actually are made. Instead, they prescribe how organisations should make decisions in order to arrive at satisfactory solutions. There are a number of assumptions behind these models (March and Simon, 1958) ... 

Leahy, D. E., Morris, J. J., Taylor, P. J., Wait, A. R. Membranes and their models towards a rational choice of partitioning system. In QSAR Rational Approaches to the Design of Bioactive Compounds, Silipo, G., Vittoria, A. (eds.), Elsevier, Amsterdam, 1991, pp. 75-82. 

Throughout, we have not addressed the issue of whether self-control problems can lead to behaviors that cannot be explained with time-consistent preferences. In fact, such smoking guns—qualitatiw predictions that are inconsistent with rational choice theory—are difficult to come by in our highly stylized and simplified models. In these models, only a few types of behavior can arise, and most of these behaviors could arise from time-consistent preferences.27 One might ask, then, why it is worthwhile to study a self-control model of addiction. We feel there are a number of reasons. 

When motivation became the object of scientific study, the same kind of exceptions to rational choice soon became apparent. Pavlov came up with the most robust solution—conditioned behavior, refined to conditioned motives, stated definitively in . H. Mowrer s two-factor theory (1947).1 In this form, Plato s passions seemed discernible in parametric research, and the ancient dual model was perpetuated. 

Just how one decides whether one is in the mood for broiled salmon or roast duck isn t the concern of the decision sciences, at least not unless the way it is done turns out to conflict in some fashion with the rest of the model of rational choice. It sometimes seems to me - to me... 

Many of the discussions in chapter 1 apply immediately to Marx s economic theory, such as the analysis of rational-choice theory (t. 2. t) and the comments on the methodology of unintended consequences (1.3.2). Some additional problems also arise, however, that are more specifically related to his economic writings. In 3.1.1 1 first consider the appropriateness of talking about Marx s economic "models", in the modern sense of that term. Under this heading I also discuss Marx s use of "tendency laws" to explain economic relations. In 3.1.2 I comment on Marx s attempt to apply the Hegelian distinction between essence and appearance to economic life, notably to the relation between values and prices. I argue that while this particular application fails, others hold out more promise. This discussion is closely related to the analysis of fetishism (2.3.2) and of ideology (notably 8.2.3). 

I do not claim that people are insensitive to incentives, only that the interaction between emotions and incentives is more complex than in a cost-benefit model. The role of emotions cannot be reduced to that of shaping the reward parameters for rational choice. It seems very likely that they also affect the ability to make rational choices within those parameters. This dual role of the emotions - shaping choices as well as rewards-has analogues in pain, addictive cravings, and other visceral factors. As in these other cases, the claim is not that the emotions fully determine choice, or that there is no trade-off... 

If the preceding chapter is correct, economics is at risk of meeting a similar fate. Its well-crafted models of rational choice in a world of free, enforceable contracts have become unproductive, and continued growth depends on the flexibihty to strike out in new directions. Fortunately, the theoretical environments that can prove hospitable to migrating economists already exist, and the journey is not too far. This chapter will discuss alternative approaches to the analysis of risk, the structure of labor markets, and the nature of the employment relationship. In the end, I will try to show that, together, they can largely explain the broad historical and institutional facts of risk, reward, and conflict. 

Simon, H. 1955. A behavioral model of rational choice. Quarterly Review of Economics 69, 99 118. 

In the next sections, in surveying different approaches to the study of power in economics, I first present approaches stemmed from the standard model that preserve hypothesis of methodological individualism and rational choice. Subsequently I introduce three structural approaches stemmed from hterature on sociological economics based on the hypothesis of methodological collectivism. Finally, I integrate these different approaches in a general framework drawn on the perspective of the New Institutional Economics. 

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