This page intentionally left blank Satisficing and Maximizing Moral Theorists on Practical Reason How we think about what we will do? One dominant answer is that we select the best available option When that answer is quantified it can be expressed mathematically, thus generating a maximizing account of practical reason However, a growing number of philosophers would offer a different answer: Because we are not equipped to maximize, we often choose the next best alternative, one that is no more than satisfactory This strategy choice is called satisficing (a term coined by the economist Herbert Simon) This new collection of essays explores both these accounts of practical reason, examining the consequences for adopting one or the other for moral theory in general and the theory of practical rationality in particular It aims to address a constituency larger than contemporary moral philosophers and bring these questions to the attention of those interested in the applications of decision theory in economics, psychology, and political science Michael Byron is Associate Professor of Philosophy at Kent State University Nothing is good enough for someone to whom enough is little – Epicurus Satisficing and Maximizing Moral Theorists on Practical Reason Edited by MICHAEL BYRON Kent State University cambridge university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo Cambridge University Press The Edinburgh Building, Cambridge cb2 2ru, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521811491 © Cambridge University Press 2004 This publication is in copyright Subject to statutory exception and to the provision of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press First published in print format 2004 isbn-13 isbn-10 978-0-511-21155-3 eBook (EBL) 0-511-21332-8 eBook (EBL) isbn-13 isbn-10 978-0-521-81149-1 hardback 0-521-81149-x hardback isbn-13 isbn-10 978-0-521-01005-4 paperback 0-521-01005-5 paperback Cambridge University Press has no responsibility for the persistence or accuracy of urls for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate Contents page vii Contributors Introduction Michael Byron 1 Two Views of Satisficing Michael Slote 14 Satisficing as a Humanly Rational Strategy David Schmidtz 30 Maxificing: Life on a Budget; or, If You Would Maximize, Then Satisfice! Jan Narveson 59 Satisficing and Substantive Values Thomas Hurka 71 A New Defense of Satisficing Michael Weber 77 Satisficing: Not Good Enough Henry S Richardson 106 Why Ethical Satisficing Makes Sense and Rational Satisficing Doesn’t James Dreier The Plausibility of Satisficing and the Role of Good in Ordinary Thought Mark van Roojen Satisficing and Perfectionism in Virtue Ethics Christine Swanton v 131 155 176 vi Contents 10 Could Aristotle Satisfice? Michael Byron 190 11 How Do Economists Think About Rationality? Tyler Cowen 213 Bibliography Index 237 243 Contributors Michael Byron is Associate Professor of Philosophy at Kent State University, where he has been teaching since 1997 His research interests include ethical theory, rational choice theory, and the history of ethics; he is the co-author (with Deborah Barnbaum) of Research Ethics: Text and Readings, published by Prentice-Hall, and articles in ethical theory and theory of rationality Tyler Cowen is Holbert C Harris Professor of Economics at George Mason University He has published extensively in economics and philosophy journals, including American Economic Review, Journal of Political Economy, Ethics, and Philosophy and Public Affairs His In Praise of Commercial Culture and What Price Fame? were published by Harvard University Press, and his latest book, Creative Destruction: How Globalization Is Changing the World’s Cultures, was published in 2003 by Princeton University Press He is currently writing a book on the concept of civilization and its relation to political philosophy James Dreier is Professor of Philosophy at Brown University He has been a visiting lecturer at Monash University and John Harsanyi Fellow at the Social and Political Theory program at the Research School of Social Science at the Australian National University His main work is in metaethics and practical reason Thomas Hurka is Jackman Distinguished Chair in Philosophical Studies at the University of Toronto The author of Perfectionism (1993), Principles: Short Essays on Ethics (1993), and Virtue, Vice, and Value (2001), he works vii viii Contributors primarily on perfectionist views in ethics, political philosophy, and the history of ethics Jan Narveson is Professor of Philosophy at the University of Waterloo in Ontario, Canada He is the author of more than two hundred papers in philosophical periodicals and anthologies, mainly on ethical theory and practice, and of five published books: Morality and Utility (1967), The Libertarian Idea (1989), Moral Matters, (1993; 2nd ed 1999) and Respecting Persons in Theory and Practice (2002); and, with Marilyn Friedman, Political Correctness (1995) Henry S Richardson is Professor of Philosophy at Georgetown University He is the author of Practical Reasoning about Final Ends (Cambridge University Press, 1994) and Democratic Autonomy (Oxford University Press, 2002) and co-editor of Liberalism and the Good (Routledge, 1990) and The Philosophy of Rawls (5 vols., Garland, 1999) Building on “Beyond Good and Right: Toward a Constructive Ethical Pragmatism,” Philosophy & Public Affairs 24 (1995), he is working to articulate a moral theory centering on non-maximizing, non-satisficing modes of moral reasoning David Schmidtz is Professor of Philosophy and joint Professor of Economics at the University of Arizona His Rational Choice and Moral Agency (Princeton University Press, 1995) expands upon his chapter reprinted in this volume He co-edited Environmental Ethics: What Really Matters, What Really Works (Oxford University Press, 2002) with Elizabeth Willott and co-authored Social Welfare and Individual Responsibility (Cambridge University Press, 1998) with Robert Goodin His current projects are The Elements of Justice (Cambridge University Press, 2005) and The Purpose of Moral Theory Michael Slote is UST Professor of Ethics and Professor of Philosophy at the University of Miami, Coral Gables He was previously Professor and Chair of the philosophy department at the University of Maryland, and before that he was Professor of Philosophy and a Fellow of Trinity College, Dublin The author of many articles and several books on ethical theory, he is currently completing a large-scale study of “moral sentimentalism.” He is a member of the Royal Irish Academy and a former Tanner lecturer Christine Swanton teaches at the University of Auckland, New Zealand Her field is virtue ethics, in which she has recently published a book with Oxford University Press, entitled Virtue Ethics: A Pluralistic View She is How Do Economists Think About Rationality? 231 Defenders of the satisficing approach not regard this criticism as decisive In their view, satisficing has more predictive power, even if it does not have well-defined microfoundations Some taxi drivers, for instance, simply may stop taking fares once they have accumulated a certain amount of money for the evening The economists who oppose the satisficing model typically point out that we can always define such behavior as rational in one set of terms or another We could say, for instance, that an “income effect” has kicked in Once the driver has a certain amount of money, he may prefer to consume leisure instead of working Defenders of satisficing, however, may still claim superior predictive power for their approach Some taxi drivers may still behave in closer accord with the satisficing model The mainstream model implies that high income or wealth – regardless of its source – causes the taxi driver to work less But if the taxi drivers receive more money from some other source, perhaps a gift, they often drive their cab just as much So perhaps it is not the “income effect” (or whatever other mechanism might be postulated) at work The taxi drivers may be making context-laden decisions that are best described by the satisficing construct Many drivers might have an inclination to stop once they have accumulated a certain quantity of fares on a given evening They feel they have done “a good night’s work” and feel no need to bring home more money that evening Computation The past two decades have brought increasing interest in computational models in economics Computational models have a number of roots, but in part they attempt to improve on the satisficing concept Satisficing approaches typically postulate an absolute stopping rule at some point Computational approaches attempt to derive the point at which an individual will stop calculating, depending on the complexity of the problem at hand So we can think of computational approaches as providing microfoundations for satisficing Under these microfoundations, however, we not always generate a fixed stopping rule, as under satisficing Rather than allowing all solutions to a problem, the computational research agenda focuses on which of these solutions might be computable to rational agents with limited abilities Kenneth Binmore has applied this point to the choice among solution concepts in game theory (see the discussion of game theory above), and Thomas Sargent has tried to integrate the idea of computability into monetary theory and macroeconomics 232 Tyler Cowen Sargent has also worked to integrate the idea of economic computation with the theory of artificial intelligence.23 Computational theories, like experimental economics, have not arisen in a vacuum In part they are designed to address some of the weaknesses in previous accounts of rationality For instance, Binmore’s computational approach tries to resolve the problems of game theory, as discussed previously Sargent’s computational work attempts to work around the limits of rational expectations in macroeconomics Note that the work on computation moves closer to what philosophers sometimes call procedural rationality Rationality now becomes defined in terms of some computational algorithm Most work in computational economics is new and highly mathematical, still resists easy summary, and is relatively inaccessible to non-experts (which includes this author) Nonetheless it is easy to see how the emphasis on computability puts rationality assumptions back on center stage and further breaks down the idea of a monolithic approach to rationality The choice of computational algorithm is not given a priori but is continually up for grabs Furthermore, the choice of algorithm will go a long way toward determining the results of the model Given that the algorithm suddenly is rationality, computational economics forces economists to debate which assumptions about procedural rationality are reasonable or useful ones The mainstream criticism of computational models, of course, falls right out of these issues Critics believe that computational models can generate just about “any” result, depending on the assumptions about what is computable This would move economics away from being a unified science Furthermore, it is not clear how we should evaluate the reasonableness of one set of assumptions about computability as opposed to another set We might consider whether the assumptions yield plausible results, but if we already know what a plausible result consists of, it is not clear why we need computational theories of rationality To make matters even more difficult, human beings appear to have vastly different computational abilities in different activities and different spheres of life To give a simple example, most individuals have relatively good abilities to remember faces and voices and to sort through various aspects of interpersonal relationships It has proven difficult to get computers to perform these same tasks as well In more abstract, less personal contexts, individuals not have nearly the same abilities Few can perform complex long division unaided This point implies that How Do Economists Think About Rationality? 233 computational theories of rationality will probably fail to settle on a single, simple account of how computational rationality proceeds Currently computational theories of rationality are an open box It is not clear how they will develop Nonetheless, they illustrate the growing diversity of rationality concepts within economics Conclusion Our examination of how economists use the rationality postulate suggests diversity more than anything else Economists accept no single set of assumptions about rationality, nor any one set of attitudes about the role of rationality assumptions in economic theory and practice Rather, we have seen the rationality postulate – and attitudes toward it – evolve in different directions in different fields of economics Some fields view the rationality postulate quite broadly, whereas other fields identify it with some particular assumptions (macroeconomics) Some fields regard rationality as a tautology (consumer behavior under certainty), whereas others regard it as potentially testable (consumer behavior under uncertainty) Game theory places great importance on the rationality concept, as does computational economics, whereas empirical labor economics and experimental economics imply that the rationality concept does not matter so much We therefore need an account of the rationality postulate that can explain its varied uses across fields and subfields of economics To return to our list in section 2, the first three views (tautology, transitivity only, and descriptive) must appear incomplete They may account for how rationality is used in particular instances, but without providing an account of rationality in economics more generally The most serious contender thus remains the pragmatic view that rationality and various rationality assumptions serve as useful organizing categories Given the plurality of investigative methods in economics, this result will imply that particular rationality assumptions take numerous forms This look at the rationality postulate may not satisfy those critics who, in any case, not like the content of economic theory But at the very least the rationality postulate is a less vulnerable target of criticism than is usually thought I not mean to suggest that economic uses of the rationality postulate cannot be improved upon I have, however, attempted to revise the picture of the rationality postulate as an easy whipping boy for critics Economic practice, in this regard, is more sophisticated than the 234 Tyler Cowen views of any single economist This is an appropriate result for a science that emphasizes invisible hand mechanisms and the limitations of central planning I see many things wrong with contemporary economics, but the rationality postulate is not near the top of my list I hope that this chapter induces some of the critics of economics to be more blunt and more specific about their objections I believe that economists hold a default view about their own use of rationality concepts, although they seldom articulate it They see the rationality concepts in use as the result of a competitive process – and thus the best available practice, at least given our current state of scientific information A rationality concept, in this regard, is like a market price or a management practice Not every price or practice is optimal when compared with full information, but the competitive process nonetheless gives us as good a menu of choice as we are likely to have It provides the best available options, relative to the imperfections in our information I believe this optimistic view, whether right or wrong, is the underlying reason why practicing economists pay so little heed to methodology.24 This underlying model of economic science has a surface simplicity If we refer to rationality postulates as “inputs” into scientific research, a competitive process (under certain conditions) allocates inputs efficiently Economists, who tend to accept efficiency as a relevant standard, therefore believe that this competitive process yields an approximation of good science, and this belief involves the rationality postulate in its diverse forms I not raise this possibility to evaluate it but rather to note that any effective criticism of economics must start with the institutions that produce (and evaluate) economics Methodological criticisms alone, especially if they focus on rationality, are unlikely to be persuasive In the meantime, we should de-emphasize monolithic attempts to characterize (or criticize) the method of economics and recognize the strongly plural character of research practice Notes The author wishes to thank Bryan Caplan, Robin Hanson, and Alex Tabarrok for useful comments For relevant treatments and surveys, see, for instance, Bruce J Caldwell, Beyond Positivism: Economic Methodology in the Twentieth Century, New York: Routledge, 1994; and Daniel M Hausman, The Inexact and Separate Science of Economics, Cambridge University Press, 1992 How Do Economists Think About Rationality? 235 Melvin Reder, Economics: The Culture of a Controversial Science, University of Chicago Press, 1999, lays more stress on practice than most writers on economic method For a presentation of this view, see Shaun Hargreaves Heap, Rationality in Economics, New York: Blackwell, 1989 The moral general philosophic literature on rationality is vast For some recent perspectives, see David Schmidtz, Rational Choice and Moral Agency, Princeton University Press, 1995; Robert Audi, The Architecture of Reason: The Structure and Substance of Rationality, Oxford University Press, 2001; and Elijah Millgram, Varieties of Practical Reasoning, Cambridge: MIT Press, 2001 See, for instance, James C Cox, “Testing the Utility Hypothesis,” Economic Journal 107 (1997): 1054–78 The reader who wishes further detail should consult Hal Varian, Microeconomic Analysis, New York: Norton, 1992 On revealed preference, see Paul Samuelson, “A Note on the Pure Theory of Consumer’s Behavior,” Econometrica (1938): 353–4 On relaxing assumptions behind existence proofs, see, for instance, Andreu Mas-Colell, “The Price Equilibrium Existence Problem in Topological Vector Lattices,” Econometrica 54 (1986): 1039–54 The Allais paradox provides the best-known counter to the independence axiom In the Allais paradox, individuals are first asked to rank gamble A against gamble B If the individual chooses A, the independence axiom implies that same person should prefer C over D Yet we systematically observe individuals preferring A over B, and D over C See Mark J Machina, “Expected Utility without the Independence Axiom,” Econometrica 50 (1982): 277–324 See Machina, “Expected Utility without the Independence Axiom.” For a discussion of different forms of rational expectations, see Tyler Cowen, Risk and Business Cycles: New and Old Austrian Perspectives, New York: Routledge, 1997, 8–9, which also provides more detailed citations to the literature 10 See, respectively, Robert B Litterman and Laurence Weiss, “Money, Real Interest Rates, and Output: A Reinterpretation of Postwar U.S Data,” Econometrica 53 (1985): 129–56; and Paul Evans, “Interest Rates and Expected Future Budget Deficits in the United States,” Journal of Political Economy 95 (1987): 34–58 11 See Robert J Shiller, Irrational Exuberance, New York: Broadway Books, 2000 Richard H Thaler, Quasi Rational Economics, New York: Russell Sage Foundation, 1994, presents many behavioral themes 12 By its very nature, empirical labor economics cannot be presented in any canonical form, nor is it typically found in book-length treatments The best source is the articles published in the American Economic Review in the last fifteen years, under the editorship of Orley Ashenfelter, himself an empirical labor economist 13 The so-called “folk theorem,” which allows for cooperation, kicks in only when the number of rounds is large and the discount rate is small 236 Tyler Cowen 14 These attempts have spawned a huge literature See, for instance, John C Harsanyi and Reinhard Selten, A General Theory of Equilibrium Selection in Games, Cambridge: MIT Press, 1988 15 On experimental economics, see, for instance, John H Kagel and Alvin E Roth, eds., The Handbook of Experimental Economics, Princeton University Press, 1995 16 See David M Grether and Charles R Plott, “Economic Theory of Choice and the Preference Reversal Phenomenon,” American Economic Review 69 (1979): 623–38 17 See Gary S Becker, A Treatise on the Family, Harvard University Press, 1993 For a more general treatment of economic imperialism, see Gerard Radnitzky and Peter Bernholz, eds., Economic Imperialism: The Economic Approach Applied Outside the Field of Economics, New York: Paragon House, 1987 18 On these points, see Theodore C Bergstrom, “A Fresh Look at the Rotten Kind Theorem – and Other Household Mysteries,” Journal of Political Economy 93 (1985): 1045–76; and Douglas B Bernhaim, Andrei Shleifer, and Lawrence H Summers, “The Strategic Bequest Motive,” Journal of Political Economy 34 (1985): 1045–76 19 See George S Stigler and Gary J Becker, “De Gustibus Non Est Disputandum,” American Economic Review 67 (1977): 76–90 20 On some of these ideas, see Fischer Black, Exploring General Equilibrium, Cambridge: MIT Press, 1995; and Robert Barsky and Jeffrey Miron, “The Seasonal Cycle and the Business Cycle,” Journal of Political Economy 97 (1989): 503–34 21 Bryan Caplan, “Stigler-Becker versus Myers-Briggs: Why Preference-Based Explanations Are Scientifically Meaningful and Empirically Important,” working paper, George Mason University, 2001, argues that economists should be willing to consider varying 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Economics, Neoclassicism, and the Market Test.” Journal of Economic Perspectives 11 (1997): 153–65 Zagzebski, Linda, Virtues of the Mind: An Inquiry into the Nature of Virtue and the Ethical Foundations of Knowledge New York: Cambridge University Press, 1996 Index adequacy descriptive, normative, akrasia, 205–206 Allais Paradox, 235 Anderson, Elizabeth, 105 Antiperfectionism, 204–208 Anscombe, G.E.M., 162, 210 Aquinas, Thomas, 210 Aristotle, 19–21, 24, 27, 28, 62–64, 65, 75, 86, 161, 181, 184, 191 Arrow, Kenneth, 114 Becker, Gary, 227, 229 Bentham, Jeremy, 8, 66, 136 Binmore, Kenneth, 231 Black, Fisher, 229 Bradley, F H., 75 Bratman, Michael, 129 Brown, Grant, 67–69 Broome, John, 127, 153, 174 budget, 61–62 Byron, Michael, 56, 98, 102, 110, 175 choice situation dynamic, 31 Christian ethics, 184 Coleman, Jules, 56 computation, 231–233 consequentialism, 6, 8–10, 164–169 consumer behavior, theory of, 216 Cyert, Richard, 230 Dancy, Jonathan, 210 Daniels, Norman, 101 decision theory, 112–113, 216 crude, 135 true, 136–141 demandingness objection, 176–178, 187 deontology, desires, second-order, 67–69 Dreier, James, 174 economic imperialism, 227–228 efficient market hypothesis (EMH), 221–222 elevationism, 20–22 Elster, Jon, 55 empirical labor economics, 223 Epicureanism, 16, 20, 28 equilibrium, reflective, 80 EverBetter Wine, 42–43 expected utility, experimental economics, 226–227 finance, theory of, 220–222 Foot, Philippa, 130, 131, 142–145 game theory, 223–225 Gauthier, David, 56, 69, 127 Gibbard, Allan, 57 goods appetitive, 22–24 Griffin, James, 128 Hampton, Jean, 128 hedonism, 17 Herman, Barbara, 105 Horney, Karen, 182 Howard-Snyder, Frances, 148 Humbolt, Wilhelm von, 76 Hume, David, 136, 188 243 244 Hurka, Thomas, 152, 179 Hurley, S L., 130 Hursthouse, Rosalind, 179 incommensurability, 10–12, 46–48, 109–111 independence axiom, 217–219 Jackson, Frank, 169 Kagan, Shelley, 80, 103 Kahneman, Daniel, 81 Kant, Immanuel, 19–20, 28 Korsgaard, Christine, 192 Leibniz, G W., 113 Levi, Isaac, 45 Luxor, 29 MacDonald, Scott, 203 MacIntyre, Alasdair, 101, 211 macroeconomics, 219–220 March, James, 230 Martineau, James, 28 maximizing, 18 McDowell, John, 120 Mendola, Joseph, 172 Mill, James, Mill, John Stuart, 9, 58 moderation, 6–8, 32, 194–200 Moore, G E., 66 Morgenbesser, Sidney, 57 Mozart, W A., 22 Mulgan, Tim, 188 Index Pettit, Philip, 57, 100, 128, 172 picking, 57 Plato, 19–22, 24–27, 191 Gorgias, 24–25, 26 Philebus, 25–26 Republic, 64 Pollock, John, 42 preference, fixed, 229–230 Prisoners’ Dilemma, 224 Railton, Peter, 128 rational expectations (RE), 219–220 Rawls, John, 18, 28, 86, 145 Raz, Joseph, 74, 128 representation theorem, 138 Resnik, Michael, 153 Richardson, Henry, 12 objective list theory, 21 optima global, 33 local, 33 optimizing straightforward, 30–32 subtle, 31 sainthood, moral, 108 Sargent, Thomas, 231 satisficing, 30–32 absolute-level, 71–75 comparative, 71–75 instrumental conception, 14 intrinsic conception, 15, 16–19 postulate, 230–231 Scheffler, Samuel, 86–87, 99, 174 Schmidtz, David, 8, 70, 102, 104, 108, 109, 134, 139, 191, 193–194, 202, 208 Sen, Amartya, 111, 173 Shiller, Robert J., 222 Shleifer, Andrei, 228 Simon, Herbert, 1, 2–4, 27, 55, 100, 106, 113–115, 190–191, 230 Sisyphus, 23, 28 Slote, Michael, 5, 8, 9, 35, 38–39, 40–41, 55, 69, 72, 81, 103, 107, 117, 135, 141, 159, 178, 179, 191, 192–193, 204, 208 Smith, Holly, 58 Smith, Michael, 120, 122 Sobel, David, 128 sophrosune, Sosa, David, 163 Stigler, George, 229 stopping rule, 31 Stoicism, 19–22, 25, 27, 28 Stocker, Michael, 55, 58, 94, 127, 196, 204, 208 supererogation, 5–6, 7, 147–152, 207–208 Swanton, Christine, 93–94, 153, 160, 173, 191, 194–200, 204–206, 208 perfectionism, 177, 181–184 permission moral, 87–91 rational, 11, 88–91 Tantalus, 23, 28 teleology, 18 Tolstoy, Leo, 184 transitivity axiom, 215 Nagel, Thomas, 84–87, 95, 170, 174 Nash equilibrium, 224 Nietzsche, Friedrich, 72, 184, 185 nonconsequentialism, 162–164 Norcross, Alistair, 148 Nozick, Robert, 76, 174 Nussbaum, Martha, 76, 123, 181 Index Ullmann-Margalit, Edna, 57 utilitarianism classical, 19–20 utility, principle of, axiomatic theory of, see “decision theory” von Neumann-Morgenstern theory, 217–219 values objective, 73 subjective, 72 Velleman, David, 81, 84, 99 virtue, 6–8 ethics, 19–22 Walzer, Michael, 170 Weber, Michael, 11 Williams, Bernard, 57, 127 Wolf, Susan, 103, 127, 149 Zagzebski, Linda Trinkaus, 188 245 ... Richardson is Professor of Philosophy at Georgetown University He is the author of Practical Reasoning about Final Ends (Cambridge University Press, 1994) and Democratic Autonomy (Oxford University Press, ... articulate a moral theory centering on non -maximizing, non-satisficing modes of moral reasoning David Schmidtz is Professor of Philosophy and joint Professor of Economics at the University of Arizona His... a maximizing conception of the good If right action is the best, how could one go “above and beyond” that? We might understand rationality to impose certain cognitive and practical duties on