Conjoint-rational-irrational

I’m a big fan of Russ Roberts’ podcast Econtalk. While technically about economics he covers a variety of subjects with his guests and it always gives me something to think about. Recently he welcomed Mary Hirschfeld of Villanova University to talk about her book “Aquinas and the Market”. She challenges some of the fundamentals of modern Economics.

Economists typically see “rational” behavior as one in which a person attempts to maximize their wealth. This leads to the behavioral economic principles that see choices that don’t maximize wealth as “irrational”. For example, an unemployed baseball fan catches a multi-millionaire player’s 500th home run ball. The baseball is likely worth tens of thousands of dollars so if the fan gives it back to the player that is deemed “irrational”.

Dr. Hirschfeld might see this differently. She feels that economics itself is irrational…it fails to recognize the value of non-monetary aspects of a transaction. The fan might think the player actually deserves the ball more than the fan and thus puts value in doing the right thing…returning the ball to its rightful owner.

She repeatedly makes the point that wealth is a means to an end and that focusing on it will not maximize your value as a human being. The rational human thinks about what they really need materially, spiritually and emotionally. They can then make the trade-offs necessary to maximize their overall well-being. They might decide that teaching math in a disadvantaged area, even though they will make less, is a better fit for them than say taking a job on Wall Street.

I have to say that this philosophy lines up well with the thinking that has kept me happy as a researcher for these many decades. I also think that techniques like conjoint analysis allow us to take a full range of factors into account. After all, trade-offs are trade-offs and part of what respondents are telling us when they choose a cheaper less feature-rich product is that coming up with more money isn’t worth it to them. Whether that means they get joy from accumulating wealth OR that they get it from not having to work as hard doesn’t matter.