Karl Popper and the Social Sciences

RATIONALITY AND ECONOMIC THEORY

theory, and while situational analysis even in its latter formulation still bears a passing resemblance to economic method, in the main Popper’s theory offers a rather different approach to social explanation. In particular, I contend that Popper’s notion of rationality with regards to situational analysis, despite superficial similarities to economic models of rationality, is in fact quite different from the generally accepted notions of rationality developed by economists .This has significant implications for the types of explanations produced by situational analysis as compared with economics. In fact, despite Popper’s claim that situational analysis is merely a generalized version of economic theory , I will show that it is unlikely that he would have supported current attempts to expand the application of economic methods into the other social sciences. RAT IONALI T Y AND ECONOMIC T H EORY Before we assess Popper’s claim that situational analysis in fact generalizes the method of economic science, we need to pause to consider what the standard economic theory is. While there is no single method that all economists employ, economics is more unified methodologically than any other social science. As such, it is not too difficult to locate some central features of the discipline. Moreover,“marginal utility theory”or utility maximization, the particular aspect of economic theory that Popper apparently wished to emulate, is a well-developed concept that clearly lies at the heart of mainstream economics . Utility maximization, in turn, is the core assumption of rational choice theory. In fact, economic theory is widely regarded as an application of rational choice theory. So we might start our examination of economic theory by first considering the key elements of rational choice. Minimally, rational choice theory conceptualizes humans as intentional agents who act instrumentally, that is, as agents whose actions are goal directed and calculating. Following Jon Elster, we can say that instrumental behavior essentially adheres to the formula “If you want to achieve Y, do X” (Elster 1989, 113). Instrumental, goal-oriented behavior should be distinguished from noninstrumental behavior, such as tradition-guided behavior, habitual behavior, and, perhaps most importantly, norm-guided behavior. At least in its pure form, such noninstrumental behavior is not goal directed; it is simply done, as it were, for its own sake. Citing Elster again, norm-driven behavior follows the simple formula “Do X” (Elster 1989, 113). By focusing on the instrumental dimensions of human action, the social world described by rational choice theory appears significantly different from the natural world, at least as it is perceived from the standpoint of natural science. From the rational choice perspective, events in the social world are largely the aggregate outcome of intentional human behavior, rather than solely the product of objective forces or laws of nature that are, so to speak, imposed on humans and other things in the universe. 62 KARL POPPER AND THE SOCIAL SCIENCES But standard rational choice theory requires more from a person than instrumental action. It also requires that a person’s goal-directed, calculating action be rational in some sense. The utility maximization assumption of rational choice theory functions as the most fundamental requirement for assessing the rationality of an action (Arrow 1951, 3). Utility maximization stipulates that, given a range of options for attaining a desired end, a rational person will choose the option that he or she believes will be most effective in achieving that end. This does not require that the person prefer the actions that will in fact prove most effective in attaining her preferences; it merely stipulates that the person should perform the action that she believes will be most effective in attaining her desired end. In the real world, many decisions take place in uncertain or ambiguous circumstances, and in such situations it may be too difficult or too costly for a person to determine which action will be most effective. Given this, most rational choice theorists believe that it is too constraining to require a person to choose the action that is in fact the best. However, some rational choice theories do assume “perfect information” on the part of actors. Rational choice theory faces a similar problem in determining the rationality of beliefs, as opposed to the rationality of action. Establishing criteria for optimality of beliefs is notoriously difficult. This is because typically costs are associated with gathering information that informs beliefs, and it may be impossible to determine how much cost a person will be willing to incur in seeking out information. For instance...