Economics relies on the assumption that individuals make rational choices. But if that’s the case why do so many of those choices seem irrational? Michael Huemer makes a distinction between epistemic rationality and instrumental rationality.
Instrumental rationality (or “means-end rationality”) consists in choosing the correct means to attain one’s actual goals, given one’s actual beliefs. This is the kind of rationality that economists generally assume in explaining human behavior.
Epistemic rationality consists, roughly, in forming beliefs in truth-conducive ways—accepting beliefs that are well-supported by evidence, avoiding logical fallacies, avoiding contradictions, revising one’s beliefs in the light of new evidence against them, and so on. This is the kind of rationality that books on logic and critical thinking aim to instill.
David Friedman confirms that what Huemer calls instrumental rationality is indeed an underlying assumption of economics.
The rationality assumption in economics is that individuals have objectives and tend to choose the correct way of achieving them.
Huemer explains why instrumental rationality dominates politics and how it produces irrationality.
The theory of Rational Irrationality holds that it is often instrumentally rational to be epistemically irrational. In more colloquial (but less accurate) terms: people often think illogically because it is in their interests to do so. This is particularly common for political beliefs. Consider one of Caplan’s examples. If I believe, irrationally, that trade between myself and other people is harmful, I bear the costs of this belief. But if I believe—also irrationally—that trade between my country and other countries is harmful, I bear virtually none of the costs of this belief. There is a tiny chance that my belief may have some effect on public policy; if so, the costs will be borne by society as a whole; only a negligible portion of it will be borne by me personally. For this reason, I have an incentive to be more rational about the individual-level effects of trade than I am about the general effects of trade between nations. In general, just as I receive virtually none of the benefit of my collecting of political information, so I receive virtually none of the benefit of my thinking rationally about political issues.
The theory of Rational Irrationality makes two main assumptions. First, individuals have non-epistemic belief preferences (otherwise known as “biases”). That is, there are certain things that people want to believe, for reasons independent of the truth of those propositions or of how well-supported they are by the evidence. Second, individuals can exercise some control over their beliefs. Given the first assumption, there is a “cost” to thinking rationally—namely, that one may not get to believe the things one wants to believe. Given the second assumption (and given that individuals are usually instrumentally rational), most people will accept this cost only if they receive greater benefits from thinking rationally. But since individuals receive almost none of the benefit from being epistemically rational about political issues, we can predict that people will often choose to be epistemically irrational about political issues..
I could quibble with the formulation but I don’t think Huemer much overstates the case when he writes: “The problem of political irrationality is the greatest social problem humanity faces.”
Huemer’s analysis is good but his prescriptions for alleviating the problem of political irrationality are not very helpful. They really amount to simply advising individuals to apply epistemic rationality consistently. But this does nothing to address the source of the problem which Huemer has already identified: “…it is often instrumentally rational to be epistemically irrational“. Huemer’s advice will only be marginally useful for those who already value epistemic rationality highly enough. It’s fruitless to attempt to persuade most people to use better judgment (to use epistemic rationality instead of instrumental rationality) when it is not in their immediate interest to do so.
It was always too late for a political solution. The problem of political irrationality cannot be addressed by political means.