December 3, 2012 at 11:06 am #17405
I remember hearing Milton Friedman talking about people acting in their rational self interest but if value is subjective then can we really talk about “rational” self interest?
This is tied with the question of whether it is possible to perform a selfless act but if I understand Austrian economics correctly then all acts are in the self interest of the actor. So while it might be a big burden for A to help B we can conclude that since A did help B that it was in A’s interest to do so.December 3, 2012 at 11:55 am #17406maester_millerParticipant
While it is true that value scales are subjective, I think the “rational” descriptor is in there to suggest that everyone acts rationally according to themselves. In other words, the thief who steals your car most likely did not do so because he’s some sort of unthinking brute who merely acts out of some sort of animal instinct. He stole your car because he wanted a car, and in his mind, that was the most effective way to obtain one. Most people might not consider that to be rational, but we can infer from his actions that, at the time at least, he in fact did consider that to be in his best interests.
That’s what I got from reading Mises, at least.December 5, 2012 at 2:29 pm #17407jmherbenerModerator
When mainstream economists use the phrase rational self interest they usually mean that a person uses suitable means (that’s the rational part) to attain ends that he perceives as beneficial (that’s the self interest part). Adam Smith famously postulated that we owe our supper not to the benevolence of the butcher or baker but to their self interest. In other words, in the market people act to benefit others out of regard for their own benefit.
Mises pointed out that this distinction between self interest and other interest isn’t relevant for the economic theory of human action. All we need is the distinction between the higher value of the chosen alternative and the lower value of the alternative not chosen.
Take a look at the section in Human Action on Rationality and Irrationality, pp. 18-21.December 6, 2012 at 2:00 pm #17408
I think I understand this but isn’t this outlook of rationality and self interest unique to the Austrian School?
I mean Friedman and other free market economists seem to work with a view that there is such a thing as self interest that is distinct from the Austrian understanding of self interest. According to the Austrian School there is no choice to be made for any actor that isn’t in their self interest.December 6, 2012 at 8:58 pm #17409jmherbenerModerator
Mises has a broader conception of rationality than the typical neoclassical economist. Action is by nature rational for Mises. But neoclassical economists accept the narrower concept of the rational choice model.December 7, 2012 at 7:25 pm #17410
Thank you Prof. Herbener this is what I thought but I just wanted to be sure that I understood both the Austrian position and the mainstream position.
One last question. Given the stated distinction between the Austrian and Neoclassical position does this not imply that for Austrians any research or findings based on using the neoclassical definition of rational choice is useless?
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