Saturday, April 05, 2003

The Brain of the Rational Actor

One of the classic "puzzles" in economics is why people break diets. By starting a diet, they have clearly expressed a preference to eat less and therefore lose weight, but then they snack in the middle of the night. In economics, people are modeled has having some combination of preferences and a budget, and then they maximize the "utility" they get from these preferences by moving around their resources. As breaking a diet is clearly contrary to stated preferences, some economists belive that the "utility maximizer" model is not useful.

Winterspeak reader NP writes in:
Anyway, you mentioned you were ruminating over a problem about how people sometimes seem to have conflicting preferences -- you gave the example of a person who says explicitly that they want to lose weight, yet consistently exhibit behavior contrary to that goal.

The problem is that said person has a dissonance between his conscious and unconscious desires. The classic method of demonstrating this is to take a subject, hypnotize him and give him the post-hypnotic suggestion to kick his leg when he hears a certain bell ringing. Then, the subject is taken out of hypnosis, and in a little while somebody rings that bell. He kicks his leg.

Then, they ask the subject: "Why did you kick your leg?" and without taking a breath, he responds "Oh, well I had an itch" or "My leg was falling asleep" or "I needed to stretch." Never an "I don't know." Their conscious mind plays poodle to the unconscious and makes something up.

Now, there's the basic problem of the labeling -- whether the actors should be limited to two things called the "unconscious" and "conscious" -- but there seems to be a great deal of evidence that the human mind has different "parts" which can want completely different things at the same time, and that it also appears to have faculties which attempt to compensate for the conflicts, sometimes yielding puzzling results.

I don't know if this actually helps you with your problem. Now we're into philosophy -- where is the "real" economic actor in there?
DP is right -- the real economic actor is both the "concious" and "unconcious" desires. People don't think in math, which is all that models are, so they might disagree with the model if it does not seem to fit with their "word" interpretation of the world, even though it really remains consistent and useful. Gary Becker's work extending the standard econ models to the family, emotions, addiction etc. shows how effective this can be.

People's "word" model of the rational economic utility maximizer posits a ghost in the machine, an essential self that sits in control and makes decisions (the "concious" actor interpretation). And since people are a jumble of imperatives, some cognitive and some biological, this detached ghost seems to be a bad way of thinking about things. But there is nothing in the math that requires a ghost in the machine. People's preferences can be a jumble of conflicting values that are pretty stable over time, but still emotional as well as clear headed, and mathematically it still all operates comfortably within the standard economic models. People declare diets because they want to lose weight. They cheat because fatty food tastes good. Nothing mathematically irrational there, just an honest observation that people's desires come from biology as much as logic. The utility function is broad, it can welcome all kinds of things.


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