№ XXIII
The twelve plates
At the center of economics stands a figure of remarkable simplicity: the rational chooser, who knows what he wants, ranks his options, and from those his means allow selects the one he most prefers. This volume examines that figure — the spare and powerful model of rational choice on which the whole discipline is built. What it claims, why it has conquered, and the two great doubts it must answer: that no one truly chooses this way, and that the wants it begins from may not be the chooser's own.
whose wants does the chooser maximize — his own, or those made for him?
The other volumes of this work begin with a thing — a price, a quantity, an institution — and ask what lies behind it. This one begins with a person: the chooser, who stands at the center of every market the other volumes anatomize, and without whom none of them would stir. For beneath the wage and the rent and the rate, beneath the firm and the money and the cycle, there is always someone deciding — to take this job or that, to buy or to abstain, to spend now or to save against later — and economics has, at its foundation, a single and remarkably spare account of how that someone decides. He has preferences; he faces constraints; he chooses what he most prefers among the things he can have. That is the whole of it, and from that little the discipline contrives to build very nearly all the rest. The figure has been present in every volume so far, only unremarked — the worker bargaining over his wage, the buyer weighing one more at the margin, the saver reckoning against the cycle were each, beneath the surface, this same chooser, ranking and selecting. Here at last he steps forward as the subject rather than the instrument.
The account is worth stating in its full strength before it is doubted, for its strength is real. Rational economic man is supposed to possess a complete and consistent ranking of all the alternatives before him — able to compare any two, and never so muddled as to prefer the first to the second, the second to the third, and the third back to the first. Faced with the options his budget and his circumstances leave open, he selects, without error and without regret, the one that stands highest in that ranking. This is constrained maximization, and its reach is what astonishes. The same principle that explains why a shopper takes apples over pears explains how a worker divides his day between labor and rest, how a household splits its income between spending and saving, how a firm settles its output — all of it one act of maximizing-subject-to-constraint, performed over and over by everyone at once. It was this generality that allowed Lionel Robbins, in the nineteen-thirties, to define the whole of economics not by its subject but by its form: the study of conduct as a relation between ends and scarce means that have alternative uses. Wherever something scarce must be parcelled among competing ends, the economist's chooser is at work, and the economist has something to say.
Two defenses have made the model nearly impregnable. The first answers the obvious objection — that no real person performs these feats of ranking and reckoning. He need not, runs the reply: the model does not claim to describe the deliberation in anyone's head, only to predict the choices that issue from it, and it predicts them as well as if people reasoned so — much as a skilled billiards player sinks his shots as though he were solving the equations of motion he has never in his life been taught. Friedman pressed this to its edge, holding that the realism of a theory's assumptions is simply beside the point, and the accuracy of its predictions all that counts. The second defense goes further and dispenses with the inner wanting altogether: since we can never observe a preference but only a choice, let us define the preference by the choice — say that a man prefers whatever he is seen to take, and read his whole ranking, by Samuelson's device of revealed preference, straight off the record of his conduct. Between them the two defenses armor the model against refutation: it cannot be undone by showing that people do not think as it says, for on this telling it never said they think at all.
And yet the doubts have come, and from two directions. The first is empirical, and it grants the model its logic while denying its truth: people do not, in fact, choose as it says, and they fail to in ways far too regular to wave off as noise. Herbert Simon argued that they cannot maximize at all — that the information and the computation the model demands lie beyond any finite mind — so that real choosers satisfice, settling for the good enough and breaking off the search. Kahneman and Tversky went further, charting the biases that warp even the simplest decisions: the dread of a loss that outweighs the hope of an equal gain, the anchoring of judgment on numbers known to be irrelevant, the flat reversal of a preference by the mere words in which the options are dressed. Tell people a treatment will save two hundred of six hundred, and they embrace it; tell them the same treatment will let four hundred of the six hundred die, and they shrink from it — though the two descriptions report one identical fact, and a chooser attending to outcomes rather than phrasing would not flinch between them. These are not the random errors a model may safely wash out in the averages; they are biases with a direction, departures that lean the same way every time. The chooser of the laboratory proved a different creature from the chooser of the textbook — and a behavioral economics has grown up to study him, the subject of a later volume of this table.
The second doubt cuts deeper, for it strikes not at how the chooser ranks his options but at where the ranking comes from. The model takes preferences as given — fixed data about a person, carried into the analysis and never themselves explained, on the comfortable maxim that of tastes there is no disputing. But a moment's reflection shows that tastes are made quite as much as they are found. They are shaped by the family and the country one is born into, by the age and its fashions, by all that forms a person before ever he steps into a market to choose. And they are made, more pointedly still, by those with an interest in the making: the advertiser's whole trade, as Galbraith insisted, is the manufacture of wants — the conjuring of the very desires the product is then sold to satisfy, so that the want and the thing that stills it come from the one hand. If preferences can be produced to order, then the sovereignty the model so gallantly grants the chooser — its deep respect for whatever he happens to want — starts to look less like deference than like credulity. A choice freely made among manufactured wants is free in a sadly shrunken sense; and a science that reads a person's welfare off such choices may be measuring, with great exactness, only the success of the persuasion practised on him.
Here is the stake the volume plays for, and it is the master question of this table carried to the root of conduct. The model presents the chooser's preferences as bedrock — the given facts about him from which all his choosing flows, and against which, by the logic of revealed preference, the very goodness of outcomes comes to be judged. But the wants may be no more bedrock than a price is. They may be verdicts in their own right — handed down by upbringing, by circumstance, by persuasion — and merely mistaken, like so much else in this work, for data of nature. A price is a verdict on a hidden contest, mistaken for a fact of nature; and the want, which feels like the most private and original thing about a person, may be the least his own. The deepest question the volume asks is therefore not whether the chooser is rational but whether he is sovereign — the author of his preferences, to be respected, or their subject, furnished with them by forces he never chose and cannot see. The twelve plates pursue it: from the maximizer and the taste through the formal axioms of choice and the long catalogue of its biases, the weighing of risk and the reckoning of opportunity cost, the bounded mind and the divided self, the others we are not supposed to care for and the nudge that quietly steers us, the welfare we presume to read from choice and the closing question of what manner of creature the chooser really is. Where the other volumes look behind a thing for the contest it conceals, this one looks behind the wanting itself. The argument remains open.