Is it Efficient to be Irrational?

An argument that Beckers belief

Forget about truth. It’s an airy-fairy philosophical concept that even the experts can’t satisfactorily define. In practice, what most people demand from an idea is that it’s useful for something. And like other consumer products, the supply of ideas depends on demand. The ideas that are most useful to large numbers of people fly off the shelves while the least useful ideas languish on the pages of unread books and unvisited web pages. Marketing can help but very few truly useless ideas will survive for long.

No doubt you’re thinking that this is one of those useless ideas that’s best left on the shelf. After all, don’t lots of people believe in idiotic ideas about astrology, UFOs, and pyramid power? What use are irrational ideas like that? Well… the only way to answer that question is to find out what people are using them for.

Back in 1973 economist Gary Becker published a paper titled ‘On the New Theory of Consumer Behavior.’ He argued that, in many cases, people didn’t derive utility directly from the goods and services they bought. Instead they combined their purchases with their own skill and time to produce the things that gave them satisfaction. For example, few consumers get satisfaction from their microwave ovens or vacuum cleaners just by looking at or operating them. What gives a consumer satisfaction is hot food and the confidence that if the Mormons were to show up on the doorstep they wouldn’t think she or he was a a slob.

Becker’s approach allows economists to extend the reach of their theories. He explains that:

Decisions about the allocation of a consumer’s nonmarket time and decisions about his choice of a religion, a marriage mate, a family size, a divorce, a political party, or a "lifestyle" all involve the allocation of scarce resources among competing ends. Yet these choices are related to non-monetary factors and have often been ignored by economists.

On Becker’s account it is possible to use economic methods to explain all these decisions. We just need to consider a broader range of costs and benefits.

Psychologist Robert P Abelson has an intriguing suggestion. In a 1986 paper ‘Beliefs are Like Possession’ he argues that it’s

naïve to think that people choose their beliefs solely on the basis of evidence and reasons. People can do all sorts of things with their beliefs in order to produce satisfaction. That’s why it’s so hard to argue people out their beliefs about religion, UFOs, and mandatory sentencing.

People use their beliefs the same way they use consumer goods like cars and breakfast cereal – to produce satisfaction and protect against dissatisfaction. For example, some beliefs are like small Korean hatchbacks – they are purely practical commodities. Similarly having a belief about the shortest way to the shopping mall or the consequences of adding too much chili to a stir fry have fairly direct effect on well being. But other beliefs are more like flashy urban four wheel drives. Although they look like they’re designed to tackle outback tracks their owners are actually using them to signal status, make them feel confident and comfortable on the road, and deal with anxiety about accidents. Consumers might not know exactly why they feel better driving their luxury hatchback-crushing living room on wheels, but they do know they feel better.

In the same way, consumers of ideas might find that they feel better consuming some rather than others. The idea that our boys at Gallipoli fought bravely in horrendous conditions might produce satisfying sensations of pride. But the idea that our settler ancestors massacred Indigenous people and stole their land is likely to produce unpleasant feelings of shame or guilt. Not surprisingly there is a demand among Australian conservatives for historical accounts which enhance the reputation of the ANZACs and reduce the culpability of the settlers.

Just as many four wheel drive consumers can’t bring themselves to admit that they bought their truck for the cup holders and the commanding view of the road, many idea consumers can’t admit to themselves or others that they belief things just because it makes them feel better. Four wheel drive owners are always planning to take the kids on an outback adventure just as people who consume dubious ideas from think tanks are constantly reassuring themselves with the copious footnotes and academic qualifications of the authors. Four wheel drive sales staff know better than to turn to the man of the house and say "You’re never going drive this thing off road are you?" and think tankers know better than to say to business people "You don’t really care if tax cuts and IR reforms help low income families do you?"

Consumers are constantly juggling the costs and benefits of their beliefs. Beliefs about the effectiveness of homeopathy or magnets might be produce a sense that you understand what’s going on with your body (without having to study difficult science subjects at uni) and have some control, but they may also provoke ridicule from skeptical friends and family. The consumer’s self image is at stake.

When most people talk about ‘truth‘ they’re thinking about ideas that help people predict and control their environment. For example, many ideas from the hard sciences are extremely useful for getting bridges to stand up and to keep satellites in orbit. Believing that an oncoming bus is just a relativistic social construct that can be wished away is likely to result in a trip to hospital. But how many of our beliefs do we use in practical ways like these?

When was the last time you saw a believer in the afterlife run a red light because they were impatient to get to heaven? How many fundamentalist Christians who read the Bible literally are keen to give up all their worldly wealth? People use their religious ideas in quite subtle ways. The inconvenient rough edges are smoothed away so that the beliefs can do what they are meant to do more effectively. It is often enough that religious belief reduces anxiety about death and the meaninglessness of life. When it provokes impatience for death most people think it has become dysfunctional. Heaven’s Gate style cults are not all that popular (demand is low).

For welfare economists this creates an interesting problem. If the satisfaction of preferences is the bottom line the many of the people who hold seemingly crazy beliefs are actually behaving perfectly rationally. They have found a way to maximize utility. Arguing with them would lead to inefficiency.