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Rationality and Utility: Economics and Evolutionary Psychology

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Evolutionary Psychology in the Business Sciences

Abstract

Economics has always prided itself on having a unifying theoretical framework based on rational choice theory. However, data from controlled experiments, which often provide theory the best chance to work, refute many of the rationality assumptions that economists make. The evidence against rational choice, as traditionally defined, has forced economists to rethink their traditional models. However, despite the investment of many brilliant minds in the pursuit of better behavioral models of choice, behavioral economics has so far made little progress in providing an alternative paradigm that would be both parsimonious and accurate. In this chapter, we review the evidence against rational choice and the ways in which behavioral economists have responded. In addition, we put forward the idea that evolutionary psychology can give economics back its overriding paradigm. Evolutionary psychology can place structure on the utility function and provide content to rationality. By doing so, it can explain many of the behavioral anomalies that behavioral economists and psychologists have documented. If economists are willing to use the evolutionary psychology paradigm, then they can regain theoretical consistency of their discipline and have models that are better descriptors and predictors of behavior.

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Notes

  1. 1.

    See Tversky and Kahneman (1974; 1991, and 1992) and Kahneman and Tversky (1979)

  2. 2.

    See Conlisk (1996) for an extensive review of departures from rational predictions in games

  3. 3.

    Deal or No Deal is a game show broadcasted in the U.S. on NBC. It consists of a contestant selecting one briefcase of 26, each containing a cash value from $.01 to $1,000,000. Over the course of the game, the contestant eliminates the other cases in the game, periodically being presented with a “deal” from The Banker to take a cash amount to quit the game. Should the contestant refuse every deal, they win the value of the case selected at the start

  4. 4.

    High acceptance rates of low offers have been observed in underdeveloped, isolated communities and among very small children. Anthropologists argue that these choices reflect culture (see Camerer 2003 for a review of experiments done in small societies)

  5. 5.

    According to (Damasio 1994), emotions are cognitive representations of body states that are part of a homeostatic mechanism by which the internal milieu is monitored and controlled, and by which this internal milieu influences behavior of the whole organism

  6. 6.

    In a dictator game, one subject is given the task to split a given amount of money with another anonymous subject. The participant who receives the offer has no power to either accept or refuse the offer (as is the case in the ultimatum game)

  7. 7.

    See Joseph Henrich et al. (2009) for an interesting critique of the over-representation of Western and educated subjects in behavioral studies

  8. 8.

    Eileen Chou et al. (2009) interviewed subjects after the experiment and found that many of the subjects simply did not understand the structure of the simple game when the instructions utilized abstract language. This is remarkable, as their subjects were very intelligent Caltech students. Furthermore, subjects’ understanding of the task was not responsive to the financial remuneration associated with performing well in the game

  9. 9.

    See also Netzer (2009) for an evolutionary perspective on risk and time preferences

  10. 10.

    We emphasize experimental data here because in the real world, many behavioral differences between men and women may be influenced by variables that are difficult to control for. The laboratory environment provides researchers with the ability to control the environment and more effectively isolate the variables of interest

  11. 11.

    See also Arthur J. Robson’s website for many other publications in this vein

  12. 12.

    The literature also provides explicit discussions of the link between utility and fitness in the context of modern marketing (see Saad 2007; Miller 2009)

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Authors and Affiliations

  1. Department of Economics, Emory University, 1602 Fishburne Drive, 30322, Atlanta, GA, USA

    C. Monica Capra & Paul H. Rubin

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  1. C. Monica Capra
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  2. Paul H. Rubin
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Correspondence to C. Monica Capra .

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  1. John Molson School of Business, Concordia University, De Maisonneuve Blvd. W. 1455, Montreal, H3G 1M8, Québec, Canada

    Gad Saad

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Capra, C.M., Rubin, P.H. (2011). Rationality and Utility: Economics and Evolutionary Psychology. In: Saad, G. (eds) Evolutionary Psychology in the Business Sciences. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-92784-6_12

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