"Rationality plays a more minor role in economic theories than you’d probably think."

Becker's intention with that paper was that many of the conclusions of economics are robust to alternative assumptions, including the two forms of "irrational" behavior modeled there.

Becker was my dissertation advisor in the late 1980s and I was debating these issues with him then, coming to pretty much the same place you come to here. Becker was extremely pragmatic and empirical. He was open to the possibility of irrational behavior being influential in human behavior, and followed behavioral economics closely. But his take was that the vast majority of critiques of rational choice were lazy. If one could obtain testable predictions from an assumption of stable preferences and rational choice, then given Becker's extraordinary track record of obtaining new insights using such a framework, one should do so. If that framework led to empirically false conclusions (as, indeed, behavioral economists could occasionally demonstrate), then that was interesting.

But despite Becker's analytical rigor and commitment to empiricism, there has remained a vast cottage industry critiquing economics for "assuming rationality." I've never seen any of these critiques recognize Becker's sophisticated analysis as summarized above. For instance, David Sloan Wilson is often criticizing the assumptions of economics, without (to my knowledge) ever recognizing Becker's nuance on this issue. Becker would have Wilson show exactly how a specific assumption of irrationality would change predictions and then ask whether those predictions were, in fact, more accurate. Again, in some circumstances they are more accurate. But rational choice is a remarkably good empirical approximation in most circumstances. Moreover, there is also a literature via experimental economics showing that in some circumstances individual irrationality is irrelevant in a market in which some rational agents move markets towards rational outcomes, as you note. I'd love to have you educate Wilson if you have the time. He means well but he really does not understand these issues clearly.

As an aside, if academic research were an "efficient market" in information, there would not be a need to recall arguments from 70 years ago which have been widely forgotten. They would have been incorporated into all subsequent research. I estimate there are many thousands of peer reviewed papers criticizing economic rationality which show no awareness of this line of thought at all. David Sloan Wilson is only one of many.

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So why do economists still need utility theory?

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I’d say we don’t need it. It just makes life a lot easier to work with.

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Economics has an uncanny valley problem. If you wanted to model how ants find food, it would make sense to model their choice by maximizing the potential food energy and minimizing effort needed to access it. Obviously ants don't do any calculations, but they like food and don't like effort so it's a reasonable approximation. But when it comes to human behaviour it's impossible not to imagine one's self as the thing being modeled. Dawkins can talk about genes wanting to reproduce, and we understand that genes can't actually "want" stuff, it's just a metaphor. But human beings do want things, so we can't separate the metaphorical wanting of an agent in a model from our own personal experience with wanting.

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