>Date: Tue, 15 Aug 1995 06:54:35 -0500 (CDT) >From: Tibor R Machan Reason in Economics versus Ethics* Tibor R. Machan Misunderstanding Rationality What I want to discuss here is how the concept of rationality has been distorted at the hands of many economists who, often unbeknownst to them, have been following certain modern philosophers in their understanding of human reason. That distortion has left us with the very widespread and well entrenched idea, especially among defenders of the free society, that reason is only useful for purposes of determining what means to use to achieve various ends. As far as the ends are concerned -- i.e., what go als we ought to pursue, what is good and what is right to do -- that is supposedly to be left to such arational elements of our nature as desires, whims, instincts, drives, preferences, cultural pressure, etc. =09My discussion will not reach the highest level of technicality -- in this subject that would be easy to do, if one were so prepared and equipped to deal with all the highly abstract and even mathematical terminology employed in certain circles. I believ e, however, that what I plan to say will help us both understanding the problem and begin to see a way to its solution. Economic Rationality Rewarded Professor Gary Becker, University of Chicago Professor of Economics and Sociology, won the 1992 Nobel Prize in economics, for "having extended the domain of economic theory to aspects of human behavior which had previously been dealt withif at allby othe r social science disciplines such as sociology, demography and criminology." Becker is one of the earliest and perhaps most prolific among those economists who believe that what motivates human beings in the market place, namely, utilitythat is, to make a good dealis exactly what motivates them everywhere elsewhen they make love, play with their children, go to church, or develop theories of social science. As one of Becker's former colleagues, the late George Stigler, put it, "...Man is eternally a ut ility-maximizer--in his home, in his office (be it public or private), in his church, in his scientific work--in short, everywhere." Lecture II, Tanner Lectures, Harvard University, April 1980. Becker himself put it this way: "The combined assumptions of maximizing behavior, market equilibrium, and stable preferences, used relentlessly and unflinchingly, form the heart of the economic approach as I see it." [The Economic Approach to Human Behavior (U. of Choice Press, 1976).] Becker is perhaps the most unabashedly imperialistic of the neo-classical school of economic analysis in whose view human rationality consists of acting effectively so as to satisfy one's desires or fulfill one's preferences. Let's notice at the outset that some of the most prominent participants in the discussion appear to understand by "rational" nothing more than "logically consistent." For example, Amartya Sen tells us: Rationality, as a concept, would seem to belong to the relationship between choices and preferences, and a typical question will take the form: "Given your preference, was it rational for you to choose the actions you have chosen?" [Amartya K. Sen, "Choi ce, orderings and morality," in Stephan Korner, Practical Reason (New Haven: Yale University Press, 1974), p. 55.] Lest one think that this understanding of human behavior is confined to the Chicago type, neoclassical economic school, here is how Ludwig von Mises, former leader of the Austrian school of economics put the point: "Human action is necessarily always rat ional.... When applied to the ultimate ends of action, the terms rational and irrational are inappropriate and meaningless. The ultimate end of action is always the satisfaction of some desires of the acting man.... No man is qualified to declare what wo uld make another man happier or less discontented." [Human Action, p. 19] As Professor Richard McKenzie explains, "Austrian 'rationality' can be captured in the very general notion that people either known, or will learn within tolerable limits, what is best for them and will seek to improve their position in life, with no mention of what it is that is pursued." [The Limits of Economic Science (Boston: Kluwer-Nijhoff Publishing, 1983), p. 8]. Don Bellante more recently described the Austrian position, "The Austrian approach is most distinct from mainstream economics in its thorough emphasis on the individual decision maker as the focus of scientific analysis. Yet with the values and motives of individuals being entirely subjective it is impossible for an analyst to pass judgment on the optimality of the individual's chosen actions." ["Subjective value theory & government intervention in the Labor Market," Austrian Economics Newsletter, Spring/Summer 1989, pp. 1-2.] As should be obvious, the mainstrea m economics being referred to is contemporary welfare macro economics, such as we find in the works of Paul Samuelson, James Tobin or John Kenneth Galbraith, not that of the Chicago School. In any case, the Nobel committee has been rewarding for the last several decades a good deal of the work resting on the economic approach championed by Professor Becker. In 1986 they gave the Prize to Professor James Buchanan, who was credited for his p ioneering work in applying economic (or "public choice") theory to an understanding of the political process. Public Choice theory holds, in essence, that we can best understand the conduct of politicians and bureaucrats if we take it that they are all m otivated in line with the "utility maximizer" model of human behavior. As Buchanan characterized the approach, "Politicians and bureaucrats are seen as ordinary persons, and 'politics' is viewed as a set of arrangements, a game if you will, in which man y players with quite disparate objectives interact so as to generate a set of outcomes that may not be either internally consistent or efficient." ["Why Governments 'Got Out of Hand'," New York Times, October 26, 1986] Actually, Buchanan's views differ from the Chicago School's, although it is not possible to distinguish them concerning the nature of rationality. A few years ago it was Stigler himself who received the award for his similarly oriented work in studying government regulation. And earlier, in 1975, Milton Friedman, the head of "the Chicago School," was rewarded for his work along more general lines that many credit for laying some of the foundations for subsequent economic imperialism. As Friedman put the dominant viewpoint in his acceptance address, "every individual serves his own private interest.... The great Saints of history have served their `private interest' just as the most money grubbing miser has served his interest. The private interest is whatever it is that drives an individual." ["The Line We Dare Not Cross," Encounter, November, 1976, p. 11] All these economists believe that they are telling us something quite simple and true, namely, that, to use Buchanan's way of putting it, all persons in society "are seen as ordinary persons." And, as they understand it, ordinary persons are driven to a dvance their own lot on every front. Everyone is, to put it even more plainly, selfish. Greed is no sin but a fact of life, a natural drive. For the economists, however, such terms are misleading, since when pressed they will insist that they "do not assume that people in all parts of their lives are motivated by selfish considerations, but also by 'honesty,' 'justice,' 'love,' and 'friendship'." And Geoffery Brennan and James Buchanan note that "the homo economicus model in no sense rules out the possibility that each individual may be motivated by certain ethical or moral concerns, as long as we can take it that such ethical conduct on the part of anyone cannot be presumed to benefit everyone else."["The Normative Purpose of Economic 'Science'," In ternational Review of Law and Economics, (Winter 1981), p. 158.] Yet, as Becker himself made clear, "the heart of the economic approach [is] to include hatred, love, obligation, etc." [Personal correspondence, March 15, 1993.] Implied in this position is that moral choice is absent from human life, as it is from the lives of dogs or giraffes. Everything is set. Stigler once argued just that point, holding that the world is exactly as it has to benothing is wrong or right with it, it merely is. Furthermore, when reference is made to ethics or morality, what is meant is some form of conduct that benefits other persons than the agent. Thus the economist tends to accept the Kantian characterization of morality, to whit, that no action is morally significantpraiseworthyif it achieves a purpose of the acting agent. They do not take ethics to be a framework of understanding how to choose to act rightly or wrongly, principles whereby one initiates one's conduct for good or ill to b e identified objectively, independently of the current feelings, desires, preferences of the agent who is acting. Ethics or morality for these economists is, instead, doing whatever benefits other persons, period, that is, altruism. While these thinkers are supporters of free markets, since it has been the most productive in human history, their support is not, however, what the free market requires mostly in our time. It is insufficient to argue for a political economic system by assumingand that is all these economists dothat human beings are utility maximizers (even when they benefit others) and that the system of free production and exchange is most hospitable to how they must behave. That is because the criticisms of the free market rest on a far more detailed and complex conception of human behavior, one that includes reference to the basic capacity of human beings to initiate and make choices about what they will do. Furthermore, these criticisms take it that some standard of proper conduct is identifiable and should be followed, regardless of who is to be benefited. Despite their winning the Nobel Prize, the reputation of the free market has not gained a great deal from what those economists have said who champion this system from a "scientific" point of view. What little popular support there is now for capitalism in mainstream intellectual circlesfor example, Jeffrey Sacks and Janos Kornai at Harvardcomes from the collapse of socialism in Eastern Europe and elsewhere, and even that is waning by now. The economic advocates of free trade and the unregulated market place have had a little to do with that, of course, but they have also unleashed a strong backlash. (Stigler even agreed with this, saying in one of his addresses to the Mt. Pelerin Society that ideas have no impact, all that matters is what people desire!) Economic Rationality in Doubt Outside of the discipline of economics most academicians are hostile to capitalism. They treat the greed that economist praise with disdainone need but recall the "hero" of Oliver Stone's movie, WALL STREET, who espoused the doctrine "greed is good" and was roundly seen as a villain for this. One need only consider how the popular press has embraced the largely phony claim that the 1980's, guided by the free market rhetoric of Ronald Reaganwho many of these economic imperialists advisedwas a "decade of greed." It is my thesis here that extending the approach economist take to understanding human behavior to every area of human life is wrongpeople do not simply calculate costs and benefits all the time in terms of certain set preferences or goals. Indeed, actually they probably ought to do so more regularly than they actually do. I will also argue that a rational approach to ethics would give support to such a recommendation, although not to the view to many economists advance, namely, that we necessarily engage in such cost-benefit analysis everywhere in our lives. In short, we would all be better of if people did practice prudence more consistently as they embark upon their economic tasks. But it is by no means automatic that they do and to pretend it is misleads us into complacency. As the late Allan Bloom put it in his essay "Commerce and 'Culture'," "It is not true, as the moderns appear on the surface to say, that men in civil society are always motivated by utility, by self-interest...." To claim o therwise, as these economists do, leaves outsiders incredulous. As Stephen Breyer put it, in his review of Thomas Philipson's and Richard Posner's Private Choices and Public Health Harvard UP, 1993], a book critical from an economic approach of government sending on AIDS research: "Economics can wisely inform our efforts to attain our goals; but ultimately, if we prefer John Donne to Adam Smith, economists cannot prove us wrong." New York Times Book Review, March 6, 1994, p. 24] Quite right. Furthermor e, if the case for establishing and protecting the right to individual liberty, including in the market place, depends on such economic analysis, then so much the worse for freedom. Economics can, at most, offer reason why free markets are useful for pur poses of human well being, but it cannot demonstrate that such well being is something we ought to foster and place ahead, of say, equality, order, or revolutionary progress. Rationality in Market Behavior But can anything prove us right or wrong about our preferences? Actually, economic analysis can contribute to such a quest, namely, by showing us the limits of the possible or highly probable. Economics can confirm that one cannot get blood out of a turnip, as it were. And this is the beginning to the story of the virtue of prudence. One reason the market approach to understanding human conduct does make limited sense is that in markets people do tend to focus on making a good deal. And elsewhere, too, there are economic concerns. It is prudent to pay heed to our economic well being. What this means is that once a person has chosen to obtain some good or service via the market process, he or she is likely to take into consideration that there are several options available and search out which of those options will secure the desir ed good or service at the lowest possible cost and effort. Such instrumental rationality is clearly important and without it there would be a great deal of waste in human life. Adjusting one's available means to the goals one wants to attain is indeed r ational, but to understand why we require more than what the economist gives us, namely, the view that human beings are rational automatically. That view simply does not make sense of the widespread economic irrationality we witness in the world, not, at least, without making the economic approach entirely vacuous. Rationality in economics is supposed to be purely instrumental. When it appears to include considerations that seem not to be related to economics, the proper approach, as many prominent economists argue, is to bring those concerns within the rubric of economics. Thus when I was a fellow at the Hoover Institution in 1975-76, Aaron Director, the somewhat ignored guru at the University of Chicago, told me that "true" has no meaning in economics, only "useful" does. Yet, because there is no provision wit hin the economic perspective to rank preferences in some rational order, except perhaps by reference to some other preference scale that is itself simply given, the claim that the economic approach pays heed to virtues or ethics is vacuous. Vacuous Eplanations by Preference Satisfaction There is, as Becker makes clear, an effort by many economists to account for seemingly varied human motivatione.g., honesty, justice, love, friendship, etc. But the account states that some people just have a preference for these and when they abandon t he quest for efficiency in some economic endeavorfor example, in obtaining items offered for sale in the market placethey do this only because their other preferences make this necessary. Thus if someone foregoes seeking a promotion by means of betraying his best friend, at whose expense he might have gained the better paying position, it is only because the person prefers keeping the friend to obtaining the better job. Or if someone refuses to treat an employee unjustly in the course of seeking to obta in some economic objective, that is only because within his or her preference scale treating employees justly occupies a prominent position. In then end, then, all decisions are economic decisions, after all, to recall Friedman's point, "every individual serves his own private interest." This kind of reasoning was explored by Wittgenstein some decades ago. Bousma gives the following account of it: The hedonist says: "Men desire nothing but pleasure." ..."Obviously this is no empirical proposition. The hedonist does not find this out by going about asking people what they want. He has no statistics about this. And yet he knows very well that peo ple want all sorts of things. So it isn't at all like: Everybody wants a motorcar. If someone wants a motorcar, then he wants pleasure, and if he wants to smoke or to write a letter, then he wants pleasure. Pleasure is another word for whatever anyone wants. In other words it's a tautology. Everyone prefers the preferable. So pleasure is the desirable, the preferable. "But there is, of course, the illusion of having discovered something. How does that happen? Perhaps in some such way as this. Freud asked -- in his own language: What is the essence of the dream? Then he inspected and noticed that a certain dream wa s a wishfulfilment dream. And another, and another. This was it. A man is hungry and dreams of feasting, is thirsty and he dreams of passing water. Some dreams are like this. This comes like a flash, a great light - an aper=E7u....Concerning pleasuret here is no doubt. Pleasure is desired and there is no question of 'Why?' or 'For what?' about it. When it is desired, the case is clear. And now the temptation is to say that when you desire an automobile, what you desire is automobil-pleasure, eating- pleasure, writing-pleasure, etc. The generalization, which was mistaken at the outset, compels this manner of speaking....Pleasures are not all of the same kind. There are higher and lower. This is the mistake of the generalization breaking out into cu rious distinctions, or it proceeds to develop the absurdities of the calculus. We desire nothing but pleasure, but there are qualities of pleasure. Poetry-pleasure is better than pushpin pleasure." [O. K. Bausma, (J. L. Craft and Ronald E. Hustwit, eds. ), Wittgenstein, Conversations 1949-1951 (Indianapolis, IN: Hackett Publishing Co., 1986), pp. 58-60.] To the charge of vacuousness Becker responds by saying that the conclusions of the economic analysis "would not be attacked so much of they were in fact vacuous." [Personal correspondence, March 15, 1993] Yet here the proper reply is that since such vac uity is put in service of capitalism, as well as some rather disturbing notions (e.g., that crime or suicide or divorce is always rational), and since the prominent economic supporters offer no other support for the system, most people find the approach o bjectionable, not just fruitless. Becker does not appear to appreciate just how serious the opposition to capitalism is, regardless of how it is given backing. Because in his case the critic can plausibly argue that the economist is embarking on scientism, economic imperialism, at the e xpense of leaving out some perfectly sensible common sense considerations, not only the economists method, but his preference for a system of free exchange in the market place, is dismissed as unworthy of support. Rationality in Ethics Sen notes that from the economic or instrumental conception of rationality, paradoxes will arise "in a situation where the outcome depends on other people's actions in addition to one's own"[ibid.]. More importantly for our purposes, he observes that "M orality would seem to require a judgment among preferences whereas rationality would not" [ibid.]. This suggests that if the view of rationality embraced by the economists is left intact, there will be a gap between morality and rationality. Must we ac cept this? I'll turn to that point shortly. Outside of the market place virtues other than prudencein the narrow sense of looking out for one's economic well beingtake precedence. Courage, honesty, justice, generosity, love, and so forth are also important to practice. By denying our freedom to m ake a choice as to which of the numerous virtues one needs to practice, economic imperialism is not only false to the facts but also demeans us. It suggests that we are unable to pay attention to anything other than the satisfaction of certain built in d esires. This denies our humanity and creates the illusion that we carry on as we must, driven by our preferences, never mind the situation, never mind what is at stake. It is no wonder, then, that some economists have argued that economic analysis can m ake the best sense of the behavior of laboratory mice! Let me make clear that, no doubt, nearly all aspects of human living involve some economicssome thought of cost and benefit as determined in the market place. But there are values one cannot reduce to such factorsfriendship, love, truth, beauty. There i s, then, the economic aspect of, say, the purchase of a Rembrant. But is not the beauty of the work more important? The way the Becker approach manages to cover so much is that it is very opensome might call it vacuous. Every decision a person makes has to do with cost and benefit, but what will count as such for that person is really purely subjective. Thus if a cri minal prefers to steal Volkswagens instead of Rolls Royces, that is explained by reference to that criminal's preferences. But if another makes the opposite choice, that too is explainedboth wanted to maximize their values, satisfy their preferences, but what they prefer or what actually is of value to them is a mystery as far as the economic approach would have it. The economists can say that everyone acts rationally only because the goals of behavior are entirely a matter of subjective-personal choice , nothing that is objectively determinable. Even if someone where to steal the leaves off the front yard of a neighbor, never mind that there are zillions of those everywhere for free, it could be argued, on these grounds, that the thief is rational just so long as he or she prefers to the leaves and stealing them of the neighbor's front yard will satisfy his or her desire for leaves more readily than any other alternative (plus it won't thwart the efficient satisfaction of his or her other desires)! Bu t this is not of much help in understanding thieves and how their kind of life fits in with how human beings ought to live. Despite the welcome support of free trade measures in most commercial realms the economist's thinking has generated among these famous economists, to defend and revitalize the concern for individual freedom requires more. The proper approach would be to admit that while economics can shed light on many all aspects of human living, other disciplines must also address those areas, lest we be left with a rather incomplete and thus misleading understanding of ourselves. (Of course, they will reply that my motivation for saying this is purely economicI want to keep my job, to retain its reputation as being useful, so I prefer that their imperialism be rejected. But this tact can be turned against these scientific theorists, so I will not explore it further.) On how to Proceed I want at this point to explore what rationality is. I will not employ the time honored method of considering the most recent reflections of prominent contributors to the discussion, such as Robert Nozick's input via his The Nature of Rationality. I wa nt, instead, to startor at least to simulate starting anew. Lest we fail at the outset in our exploration of the difference between the economic and ethical ideas of rationality, we need to defend, briefly, a way of going about answering the question "What does 'rational' mean?". This may look like trying to be gin without the prospect of getting off the ground, since all beginnings seem to pose the problem of needing support. But, as Aristotle and Rand have argued, it is just a mistake to believe that no starting point is warranted. Some matters really cannot be questioned or doubted with any hope of being understood, despite what some current school of philosophy, e.g., Ric hard Rorty's form of pragmatismsuggest. [I have argued this in my papers "Evidence of Necessary Existence," Objectivity, Vol. 1 (Fall, 1992), pp. 31-62, and "Some Reflections on Richard Rorty's Philosophy," Metaphilosophy, Vol. 24 (January/April 1993), p p. 123-135.] We (barring funsters and madmen) pose questions when we face problems. Once a language is in use for a significant period of time, an inquiry into the meaning of some term is commonly prompted by the occurrence of incompatible serious usage. The resul ts sought from the inquiry are firm groundse.g., the truth of the matter for resolving the incompatibility. Why do we think that such grounds might be found? Because, to start with, we are here asking these questions and doing so by resting (or suspecting that we do already rest) on some grounds in many of our activities. In other words, our presence at t he inquiry, our interest in the problem itself, our ability to focus on the issue at hand, and similar factors affirm that our search is grounded or rests on something stable and ongoing, otherwise we would not be able to embark upon it. A discussion c annot proceed unless the most of the terms used in it hold reasonably firm for us, unless the environs are stable, unless we ourselves remain intact over the duration of the exchange, etc. Once these grounds are uncovered, confusion and conflict in usage are more likely to cease, though no one is justified in expecting final guarantees (because we can go astray in innumerable ways often not anticipated). Accordingly, let us briefly contr ast some uses of the term "rationality" with others to see which will yield better results in terms of the standard implicit in our purpose, namely, to discover an unambiguous rendering of what a term means within the context of the rest of our discours e and experience. On Rationality "Rational" is a term with diverse and sometimes incompatible usage in both common discourse and philosophical dialogue. The term is used to characterize what we say and do; but, given the different meanings people attach to it, they will disagree abo ut whether the same course of conduct is or is not rational. Some tend to mean by "rational" that, for example, one is "in possession of his (uniquely human) conscious faculties." Actions that are rational are then supposed to involve competent, uni mpeded, undiluted use of these faculties or what is sometimes referred to as articulable or intelligible accounts. That, in turn, requires a large array of virtues guided by competent, alert awareness of the world around us. In this rendition of "rat ional," both means and ends of action can be subject to evaluation as either rational or irrational. (Some matters, of course, would not be subject to such evaluation, namely, anything not capable of being placed under one's conscious control.) Othe rs tend to mean by "rational" that, for example, some action led efficiently or effectively to satisfactory results, to just what was desired. This, as we have seen, is often designated as the "instrumental" conception of rationalitywhat counts as ren dering some behavior rational is that the most effective (even technically up to date) means are employed to get from some starting point to some desired objective. The meaning here is the one I have associated with the economists and we saw character ized by Mises and Sen. Acting consistently, being (formally) logical, internally consistent in one's course of conduct, as well as employing the most advanced technical resources in one's carrying out of one's policies is rational. Some, in turn, hold that "rational" means whatever is widely acceptedconventionally agreed toin the relevant community as the way to proceed. Or it is argued that this is the most one can expect to mean by the term, given the difficulties with attempt s to defend the sense of it indicated above. Rational or, less strictly, reasonable, is that which conforms to the commonly adhered to standards. (In the law the "reasonable man" standard is sometimes taken to mean this.) It is clear that in certain contexts some of the conceptions described above will conflict. To take "rational" as meaning both "self-consistent" and "widely accepted in the relevant community" is perhaps plausible, yet it assumes that the relevant co mmunity prizes consistency. (Charles S. Pierce seems to have assumed this when he proposed his conception of truth as that which an ideal community's membership will accept.) The intersubjectivist sense of "rational" we find in the early pragmatists als o conflicts with one that takes "rational" to mean: "action flowing from competent use of one's conscious faculties," since the bulk of the relevant group might not use its faculties competently. Here is a warning we might heed from Ayn Rand: "A man's protestations of loyalty to reason are meaningless as such: 'reason' is not an axiomatic, but a complex, derivative conceptand, particularly since Kant, the philosophical technique of concept stealing, of attempting to negate reason by means of re ason, has become a general bromide, a gimmick worn transparently thin. Do you want to assess the rationality of a person, a theory or a philosophical system? Do not inquire about his or its stand on the validity of reason. Look for the stand on axiomat ic concepts. It will tell the whole story." [Introduction to Objectivist Epistemology, 2nd edition (New York: New American Library, 1990), p. 61.] In the present context, however, we have already made clear that any inquiry, any action, and the being of any particular entity or process presupposes the axiom of existence, of the fact that existence exists, that there is a definite something that exi sts. So we must grant that in our inquiry about the nature of rationality rests on the existence of some common framework arising from this axiom. But at this level the standard is extremely broad and will not help with such special areas of inquiry as economics and ethics. What we are after in inquiring whether human institutions, policies, goals, etc., are rational is a narrower common standard. That is why the decision theorists' or economists' rendition of "rational" is of little use here. But could we use the other, intersubjectivist sense just discussed? A common standard implies a framework for evaluating judgments, actions, etc., of such matters as distance, time, size, speed, quality, kind, in all sorts of areas such as the sciences, arts, humanities, and personal life. It presupposes some shared capacity on people's part by reliance on which they can (even if they do not do so) identify the standard as indispensable, binding, and universal within the context of the inquiry or endeavor at hand. In judgments as such, independently of the speci fic subject matter (but not of any subject matter), the context would be seeking knowledge or learning what exists or ought to be done, or why. Given the purpose of gaining knowledge, therefore, there would be a common standard by which judgments or conclusions can be evaluated (at least concerning a minimum degree of success so that, for example, explicit contradictions are ruled out from the start). "Rational" would thus mean abiding by such a standard. Clearly, inquiry into the meaning of "rational" produces at least two mutually exclusive answers. Why should we select one over the other? (Although we perhaps should, some may still refuse.) Can we give an answer to this question without encounter ing vicious circularity? If adopting one of the answers (to "What does "rational" mean?") implies that it is impossible to make ourselves clear about what exactly the answer is, then the answer should be rejected. At this fundamental level of inquiry, accepting the criterion of internal consistency is necessary, for inquiries as such make no sense without it. Seeking solutions itself presupposes that the standard is fully applicable. (With other terms, such as "pleasure," "love," and "happiness," or "alienation," it may not b e so obvious that an internally consistent meaning is a must, but it is no surprise with the term "rational".) Some conceptions of rationality do allow contradictory procedures in the same context to be rational. When widespread acceptability in the relevant community is used as a substitute for "rational," too many matters are left ambiguous to yield the absen ce of avoidable conflict. Therefore, we cannot consistently, reliably make use of the economic nor of the conventionalist idea of rationality. They fail to provide us with any common ground, the main purpose that we appear to expect to be achieved when the term is employed. The economist and the conventionalist can take us closer to settling on common means or methods, but most often what concerns us are goalsespecially, for example, in guiding our own lives or, especially, in public policies that are being recommended to an entire nation. Rational as Working from Objective Standards We are left now with "rational" as "established by reference to common standards for judging choices or decisions in some specific context." When someone correctly asserts that "'X is right' is the rational evaluation," he must mean that "'X is right ' is established by reference to common standards in a given context (e.g., chemistry, metaphysics, ethics, or public choice theory inquiry)." We can already see that within the context of human conduct, the common standard is going to be human nature. But now we need to consider whether this result begs the question. If one believes that the method for establishing the proper meaning of "rational" is itself employed because it is considered rational, then one will think the result empty. This is especially relevant in ethics, because human nature includes as a central feature the capacity for rationality. Although the concept of "rational" here has a different sense from "rational" as applied to the characterization of specific conduct, the two are not separable, only distinct. That human beings are by nature rational means they have as one of their central, defining aspects their capacity to think conceptually, to form ideas, theories, identify principles, consider long range plans, etc. And it is this capacity that enables them to detect and assess whether some course of conduct is rational, i.e., conforms to principles that are based on relevant facts of reality such as human nature itself. Reason and Choice We need can now to turn to a brief examination of the concept "choice" since it is a central component of not only of rational capacity but also of human nature. First, let me note that the same points concerning methodology apply here as when we exami ned what "rational" means. Second, the relationship between rationality and a certain kind of (initial) choice has been recognized as a very strong one by many philosophers, beginning with Aristotle (who identified as the central virtue of human life rig ht reason and linked moral virtues to choice quite unambiguously), through Spinoza, Kant, Wittgenstein and Rand. The relationship is worked out in detail by Boyle et al. [in their book Free Choice (Notre Dame, IN: University of Notre Dame Press, 1976).] Third, we should take note of the fact that decision theorists and economists often use the concept "choice" in a way that brings the sense of the term relevant to the above relationship together with its sense when used to mean selecting from among a lternatives. For instance, when economists speak of choice, they usually mean revealed preference, that is, the action or behavior of someone who is exposed to an existing range of alternatives. The sense of the term in its strong relationship to ra tionality, however, concerns initiating one's actionsas when we speak of freedom of choice/free will. With the decision theorists' or economists' idea of rationality, so long as a given long or short-range goal is efficiently achieved, the selection t hat is made from the available alternative would be rational. With the conception of rationality developed above, however, the choice of a goal or end, too, could be either rational or not. Given that a choice can involve both selection from among alternatives and the initiation of some (possible) course of conduct, which sense of the term is appropriate for our purpose? Since we are speaking of rational choice, we are concerned with bot h possible uses, as well as with uses that indicate both aspects of choice within one particular phenomenon. Thus, if someone chooses to learn to play an instrument, he would both initiate some available (but not existent) course of conduct and selec t from (existent) alternative kinds of conduct (e.g., learning an instrument, learning skiing, taking a vacation). Only where the possibility of initiatingi.e., being the fundamental or first cause ofone's conduct exists can the possibility of non-instrumental rational choice arise. This explains in part why it does not make sense to speak of a dog making a ration al choice, although dogs make many selections. (Again, the prevalent economic conception of rationality would not rule out considering a dog's selection of one dog food over another a rational choice! Nor the behavior of computers. That is one result of the view that many economists embrace, namely, that all internally consistent behavior patterns are rational.) It needs also to be noted that even when a choice is made in the sense that someone makes a selection from among alternatives, there is init iation involved, as well. To do anything, in fact, involves initiative. The judgment that forms the plan of action, as it wereor the intentionthat culminates in the overt behavior, had to have been initiated by a person. Yet, such an initiative is often nearly automatic. For example, when a concert pianist performs, the behavior is guided by a rather grand plan the details of which are not intended one by one. Instead, once the pianist embarks upon the performance, the rest pretty much follows. Yet, even here a difference exists between someone who focuses intensely and someone who is merely drifting along. Certainly this would be evident enough when one pianist is inebriated while the other is sober. But it is just as true when one pianist is lax in his or her concentration, while the other chooses to be in sharp focus. The free will position involved here is indispensable for purposes of understanding human action. The exact mechanism of the process is not something I can discuss here in full, although I would wish to draw on the work of Roger Sperry, who accounts for free will in terms of the human brains composition as a self-monitoring organ that makes self-governance or self-determination possible. Keeping all this in mind, we can propose as a definition of the concept "choice": Either the initiation of some course of conduct, or the selection from among alternatives, or both. Rational conduct, in turn, would mean: Initiation of a course of c onduct or selection from alternatives or both in accordance with a common standard appropriate to the context, the broadest of which is human life, that is, the human life of the individual who the agent is. Accordingly, when we speak of rational action in the context of ethics, we are referring to what someone ought to do based on the best information he or she can obtain about human nature and oneself. It needs to be noted that when we speak of invoking principles in ethics, we are in something of a bind. For the most important ethical step comes before any principles could be known to the agent. This is when the agent embarks upon rational thought, when the agent initiates and sustains his or her thin king process. But one would already have to be thinking in order to become aware of the truth and relevance of principles of living. So the most fundamental principle of living is acted on not from conviction or belief but as a matter of will. It is, a s it were, the will to live that is the ignition of the rational process which, in turn, brings to awareness more of what one requires for living and flourishing, namely, ethical principles or virtues. One will not become aware and apply these if one fa ils to think, other than accidentally, haphazardly. A person, to be ethically good, will require the policy of rational thought to carry himself or herself forward in an integrated fashion. Economics and Ethics Reconciled Whereas in economics the sort of rationality that is usually referred to concerns only select virtues, in particular, the virtue of prudencewhereby one, in essence, does not waste one's life on irrelevancethis virtue cannot be sufficient to guide someone to living and flourishing. It can, in fact, misguide one if the practice of other virtues is lacking. One can become, for example, a superbly rational criminal, if one fails to be a rational person vis-a-vis such matters as how one ought to live in the company of other persons. Rationality in ethics has a far broader scope than rationality in any special are of human conduct, be it commerce, art, science, politics, parenting, education, etc. Although there is the likelihood that someone who is narrow ly rational will eventually be irrational even within his or her narrow domain, it is at least possible to excel in such a domain, while seriously neglect others by way of failing to be in focus when confronted by or attending to them. If, however, one has a balanced or integrated character, and sustains a consistent practice of all virtues, then one may well act exactly as the economist assumes we all act when addressing our commercial concerns. Thus, the economist's assumption that we act rationally is probably not far from the truth, especially when we embark on market behavior, both in the sense in which the economist means "rational" as well as in the sense in which "rational" is best understood within ethics. But now what we fa ce is that actually, once the story is told in full, the economist means (if only implicitly) by "rational" that if we go to market, then we will most likely seek to make a good deal. It is false, however, that wherever we are, whatever we do, we are ma king good deals, since we may very well have other rational objectives that rank making a good deal lower in our hierarchy of values than it ordinary is when we go to market. If, for example, one is embarking on identifying and acting upon what is true i n economics or ethics or politics, that usually would rank as more important than making a good deal in the narrow sense so that one would not sell out one's convictions in order to receive a higher salary or one would not betray a friend to get a better job. Yet, it needs also be noted that very often a rational person, one who is ethical through and through, would act rationally in the sense meant by the economist. An ethical individual does not squander his wealth, tries to enrich himself to the degree that this is conducive with how he ought to live as the human individual he or she is. And this could often involve very sensible, conscientious attention to making a good deal in the market. Indeed, it is arguable that in order to make economic behavior morally defensible, this view of the matter would have to be embraced. And when critics of capitalism and free market economics reject the homo economicus approach to human behavior, they ar e hoping that they will have undermined a lot more than just this approach to understanding human affairs. They pretty much hope that discrediting the economic approach will have as one of its consequences the discrediting of a rational egoist approach t o life as a whole. If the admittedly vacuous selfishness identified, albeit confusedly, with the free market is misguided, then a step has been taking in the direction of rejecting rational egoism. The economist's futile attempt to defend his value-free economic man approach to understanding human behavior play into the hands of capitalism's critics who wish to discredit the terms rationality and self-interest. Only if one first appreciates the soundness of the broader ethics of rational egoism, can th e more narrowly focused idea of economic rationality be defended. Let me end by noting that from the rational egoist viewpoint it is morally upright to act effectively, prudently in the course of market transactions. But there is no guarantee that we will all do this, throughout such transactions. Yet, because ethics is a matter of individual responsibility, even if one embarks on economic rationality in an unbalanced fashion, so that one neglects other personal responsibilities or virtues, there is nothing that any third party is authorized to do about this apart fr om attempting to convince the agent of his or her wrong doing. Attempting to interfere simply removes the element of ethics from the realm of economics. So called remedies of market failures are, in fact, nothing less than the demoralization of the mark et place. The free society and free market offers no guarantee of rationality. But it is most hospitable to rationality, both in economics and in ethics, by placing what Nozick called side constraints around individuals, by means of the instrument of the law of t he land. By this means the irrationality that does obtain both in economics and in the broader realm of ethics is most likely to impact those who perpetrate it and those freely associated with the perpetrators. No other system offers this kind of promis e for a largely prosperous and ethical human community. *Some of the work in this presentation is drawn from Chapter 2 of my book Private Rights & Public Illusions (New Brunswick, NJ: Transaction Books, 1995) [A slightly expanded version of this paper is forthcoming in the INTERNATIONAL JOURNAL OF SOCIAL ECONOMICS.]