Rational choice and economic behavior

This paper discusses several concepts that can be used to provide a foundation for a unified, theory of rational, economic behavior. First, decision-making is defined to be a process that takes place with reference to both subjective and objective time, that distinguishes between plans and actions, between information and states and that explicitly incorporates the collection and processing of information. This conception of decision making is then related to several important aspects of behavioral economics, the dependence of values on experience, the use of behavioral rules, the occurrence of multiple goals and environmental feedback.Our conclusions are (1) the non-transitivity of observed or revealed preferences is a characteristic of learning and hence is to be expected of rational decision-makers; (2) the learning of values through experience suggests the sensibleness of short time horizons and the making of choices according to flexible utility; (3) certain rules of thumb used to allow for risk are closely related to principles of Safety-First and can also be based directly on the hypothesis that the feeling of risk (the probability of disaster) is identified with extreme departures from recently executed decisions. (4) The maximization of a hierarchy of goals, or of a lexicographical utility function, is closely related to the search for feasibility and the practice of satisficing. (5) When the dim perception of environmental feedback and the effect of learning on values are acknowledged the intertemporal optimality of planned decision trajectories is seen to be a characteristic of subjective not objective time. This explains why decision making is so often best characterized by rolling plans. In short, we find that economic man - like any other - is an existential being whose plans are based on hopes and fears and whose every act involves a leap of faith.This paper is based on a talk presented at the Conference, New Beginnings in Economics, Akron, Ohio, March 15, 1969. Work on this paper was supported by a grant from the National Science Foundation.     

Actor's Status and Conformity to Norms: A Study of Students' Evaluations of Instructors*

The relationship between behavior and interpersonal evaluation is examined from the perspective of role theory. We hypothesize that others' evaluation of a role actor–his or her status–is related to the actor's conformity to their norms. Students in 50 university classes were asked (a) to indicate their expectations for a “typical university instructor” by filling out a 55-item questionnaire which incorporates Jackson's Return Potential Model for measuring normative role phenomena, or (b) to judge the frequency of the class instructor's behavior on the same 55 items. An index was constructed which indicates the degree to which each instructor's behaviors conform to students' expectations for a typical instructor. This index correlated with students' mean evaluation of each instructor: his or her status (r=.64, p<.001). We demonstrate, however, that this relationship between conformity and status holds more strongly for intense, powerful norms, and only for instructors with a moderate rather than a relatively high reputation, that is, estimated status.