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My point is humans have self-interest, and that humans act rationally to satisfy that self-interest. Not that the self-interest is "rational". An alcoholic who

My point is humans have self-interest, and that humans act rationally to satisfy that self-interest. Not that the self-interest is "rational". An alcoholic who buys liquor is acting rationally according to his interest of getting drunk. Being an alcoholic may not be rational (to us). But I'd rather operate in an economic framework that doesn't judge the rationality of my interest, but that I have self interest and act rationally.

svachalek 9y ago
There are plenty of behaviors like price anchoring that are irrational regardless of the supposed interest. The whole rational actor model is an interesting thought experiment, but naive.
- smokeyj 9y ago
  > irrational regardless of the supposed interest. What does this mean?
jononor 9y ago
What you've gotten is an economic framework where companies find and exploit every human weakness they can. And then the presumed self-interest and rationality of the individual is used as a way to make such behavior seem more legitimate.
wpietri 9y ago
That is a circular definition of rationality: What's rational? What people do. How do we describe what people do? Whatever they do, it's rational. Your point about self-interest is similarly tautological. If people against their conscious choice do things they know are bad for them, which is what addicts do, then it seems absurd to me to define that as "self interest". I'd say "rational" should instead mean what it commonly does: "in accordance with reason or logic". And "self interest" should mean something like "to the actor's long-term benefit". In which case, people frequently act irrationally and against their self interest. Which is certainly what the field of behavioral economics has been demonstrating.
- smokeyj 9y ago
  I think you're conflating self interest and best interest. In the case of banks, you have execs acting in their personal self interest and not in the long-term interest of the bank. Their long and short-term interests were not in alignment. This could be addressed by compensating execs with shares that are locked up for a period. To blame failure on irrationality is to not understand the motivations of the actors involved. Perhaps the risk of going out of business was mitigated by knowing they're "too big to fail". Perhaps it's not the banks that are irrational but the incentives given to them.
  - wpietri 9y ago
    You have introduced another dimension here, and I don't think it's helpful in resolving language about single individuals.
    - smokeyj 9y ago
      We're using different definitions of self-interest. https://en.wikipedia.org/wiki/Self-interest https://en.wikipedia.org/wiki/Self-interest https://en.wikipedia.org/wiki/Ethical_egoism https://en.wikipedia.org/wiki/Ethical_egoism (your use) https://en.wikipedia.org/wiki/Psychological_egoism https://en.wikipedia.org/wiki/Psychological_egoism (my use) In the normative sense, any action that is "bad" is irrational. In the descriptive sense, there is no such thing as wrong self interest, therefore it can't be irrational. In that sense "rational self-interest" is tautological. Which is why in my original question I asked for "an example of someone not acting in their (voluntary) self interest". We can also reason in principle that markets don't require that people have their long-term best interest in mind. The market for cigarettes and fast-food is operating just fine. Sure customers might suffer for it, but the market aspect worked just fine.
      - wpietri 9y ago
        Ethical egoism is not my position; I'm not making a moral claim. I agree, though, that psychological egoism is yours. And as Wikipedia explains, psychological egoism is considered tautological and lacking in explanatory power. Given that you apparently understand that people mean different things here, your intervention in this conversation is especially irritating. Rather than just recognizing that jrs235 is using a different definition of self interest, the one that Smith was using, you post an faux-naive question, wasting at least his and my time, and likely that of others.

svachalek 9y ago

There are plenty of behaviors like price anchoring that are irrational regardless of the supposed interest. The whole rational actor model is an interesting thought experiment, but naive.

smokeyj 9y ago
> irrational regardless of the supposed interest. What does this mean?

jononor 9y ago

What you've gotten is an economic framework where companies find and exploit every human weakness they can. And then the presumed self-interest and rationality of the individual is used as a way to make such behavior seem more legitimate.

wpietri 9y ago

That is a circular definition of rationality: What's rational? What people do. How do we describe what people do? Whatever they do, it's rational. Your point about self-interest is similarly tautological. If people against their conscious choice do things they know are bad for them, which is what addicts do, then it seems absurd to me to define that as "self interest". I'd say "rational" should instead mean what it commonly does: "in accordance with reason or logic". And "self interest" should mean something like "to the actor's long-term benefit". In which case, people frequently act irrationally and against their self interest. Which is certainly what the field of behavioral economics has been demonstrating.

smokeyj 9y ago
I think you're conflating self interest and best interest. In the case of banks, you have execs acting in their personal self interest and not in the long-term interest of the bank. Their long and short-term interests were not in alignment. This could be addressed by compensating execs with shares that are locked up for a period. To blame failure on irrationality is to not understand the motivations of the actors involved. Perhaps the risk of going out of business was mitigated by knowing they're "too big to fail". Perhaps it's not the banks that are irrational but the incentives given to them.
- wpietri 9y ago
  You have introduced another dimension here, and I don't think it's helpful in resolving language about single individuals.
  - smokeyj 9y ago
    We're using different definitions of self-interest. https://en.wikipedia.org/wiki/Self-interest https://en.wikipedia.org/wiki/Self-interest https://en.wikipedia.org/wiki/Ethical_egoism https://en.wikipedia.org/wiki/Ethical_egoism (your use) https://en.wikipedia.org/wiki/Psychological_egoism https://en.wikipedia.org/wiki/Psychological_egoism (my use) In the normative sense, any action that is "bad" is irrational. In the descriptive sense, there is no such thing as wrong self interest, therefore it can't be irrational. In that sense "rational self-interest" is tautological. Which is why in my original question I asked for "an example of someone not acting in their (voluntary) self interest". We can also reason in principle that markets don't require that people have their long-term best interest in mind. The market for cigarettes and fast-food is operating just fine. Sure customers might suffer for it, but the market aspect worked just fine.
    - wpietri 9y ago
      Ethical egoism is not my position; I'm not making a moral claim. I agree, though, that psychological egoism is yours. And as Wikipedia explains, psychological egoism is considered tautological and lacking in explanatory power. Given that you apparently understand that people mean different things here, your intervention in this conversation is especially irritating. Rather than just recognizing that jrs235 is using a different definition of self interest, the one that Smith was using, you post an faux-naive question, wasting at least his and my time, and likely that of others.