Rational Choice Theory (RCT) and Its Critics PS7740: Political Economy

1. Rational Choice Theory (RCT) and Its CriticsPS7740: Political Economy Susumu Suzuki Department of Political Science Wayne State University

2. Part I: Logic of Collective Actionand RCT

3. Mancur Olson (1932-1998) • Former professor of Economics and the founder of IRIS (Institutional Research and the Informal Sector) at the University of Maryland. • A Father of Political Economy and Pubic Choice • Public Financing and Public Policy • Political Economy • International Relations e.g., Economic Theory of Alliances • Three Major Publications: • The Logic of Collective Action (1965) • The Rise and Decline of nations (1982) • Power and Prosperity (2000) (Source: ttp://www.iris.umd.edu/StaticReader.aspx/About_IRIS/History/Mancur_Olson.htm)

4. Olson’s Collective Action Approach (1) • Olson’s Two Key Questions to Traditional Theory of Rational Group Behavior: Purpose of the organization= Increase in Common Interests • What makes collective action possible? • what is the relationship between group size and the group? • Olson’s Answer: rational and self-interested individuals will not act voluntarily to achieve their common or group interests.

5. Olson’s Collective Action Approach (2) • Why? --Logic of Collective Action“The larger the group, the less it will further its common interests” (p. 36)Free Rider Problem ”The amounts of the collective good that a member of the group receives free from other members will further reduce his incentive to provide more of that good at his own expense” (p. 35) • Olson’s argument of Free Rider Problem become a central concern in public policy, political science or economic theory of politicspolitical economy

6. What is Collective Good? “A common, collective, or public good is here defined as any good such that, if any person X I in a group X1, …..Xn consumes it, it cannot feasibly be withheld from the others in that group” (p. 14) • Two Elements of collective or public good • Excludability in ownership • Rivalrous Consumption

7. Collective vs. None Collective Good Excludability Yes No Yes No Rivalrous consumption

8. Olson’s Two Main Theses • Olson’s Main Thesis #1: “The larger the group, the farther it will fall short of providing an optimal amount of a collective good” (p.35) due to the free rider problem. • Olson’s Main Thesis #2: “In small groups with common interests there is accordingly a surprising tendency for the “exploitation” of the great by the small” (p.35)

9. Group Size and Behaviors (1) • Large Groups: each member gets proportionally smaller benefit from a collective good. • the individual does less contribute because of a smaller return. • One member of a large group is less likely to behave for all unless the individual return is more than its cost of action. • Needs for coercion or some enforcers to provide a collective good. • Small Groups: each member gets proportionally more benefit from a collective goods than one of the larger groups. • The collective good provides by the voluntary, rational, and unilateral action of one or two members who find that their reward for providing the good is easily more than the costs they pay. • Since others pay the costs, some members of small groups see no incentive to provide the good end of the exploitation by the small.

10. Group Size and Behaviors (2) • Two Non-market groups • Privileged group: A few of the members with incentive to provide the collective goods for all. No formal organization is necessary (p.50) • Intermediate group: with group coordination or institutions, some members of the group provide a collective goods. • Latent group: no members of the group have incentive to contribute or act collectively to obtain a collective good. • Separate and selective incentive for selective individuals from the group. • Positive and negative inventive: • Latent group = large group: a latent power or capacity for action, but potential power can be mobilized “only with the aid of selective incentives.”

11. Economic and Social Incentives • Small Groups= privileged and intermediate groups economic and social incentives lead their members to obtain a collective goods • Large and latent groups no incentive and no social pressure lead their members to obtain a collective good • Demands for institutions

12. Part II: Critics to RCT

13. Donald P. Green • A. Whitney Griswold Professor of Political Science since 2001 and Director of Institution for Social and Policy Studies since 1996 at Yale University • Research Interests: Experimental Research, Party, Voting Behavior etc. • Three Books: • Pathologies of Rational Choice Theory: A Critique of Applications in Political Science. (with Ian Shapiro,1994) • Partisan Hearts and Minds: Political Parties and the Social Identities of Voters (with Bradley Palmquist and Eric Schickler, 2002) • Get Out The Vote! How to Increase Voter Turnout (with Alan S. Gerber, 2004) (Source: http://research.yale.edu/vote/resume.htm)

14. Ian Shapiro • Sterling Professor of Political Science and Henry R. Luce Director of the MacMillan Center for International and Area Studies at Yale University. • Research Interests: Political Behavior, party • Thee Major Books • Pathologies of Rational Choice Theory: A Critique of Applications in Political Science (with Donald Green, 1994) • Death By A Thousand Cuts:The Fight Over Taxing Inherited Wealth (with Michael Graet, 2004) • Containment: Rebuilding a Strategy against Global Terror (2006) (Source: http://www.yale.edu/macmillan/shapiro/flash.htm)

15. The Nature of RCT • Core assumptions: • Utility maximization • Structure of preferences (Transitivity) If A likes B, B likes C, thus A likes C. • Expected utility rather than actual utility • Centrality of individuals in the explanation of collective outcomes • Homogeneity across the units or individuals

16. Assumptions in Explanation • Intentions as Causes • Universalism and the Search for Equilibria

17. Methodological Pathologies • Two Shortcomings of rational choice theories Problem 1. methodological defects Problem 2. Universalist aspiration Problem 2 >> Problem 1 • Why? a “method-driven” research rather than a “problem-driven” research.

18. Shortcomings in RCTs • Post Hoc Theory Development • Difficulty with Empirical Test (p. 36) • Formulating Tests • Slippery Predictions (p. 39) • Vaguely Operationalized Predictions (p.41) • Selecting and Interpreting Evidence • Searching for confirming evidence (p.42) • Projecting evidence from Theory (p. 43) • Arbitrary Domain Restriction (p. 45)