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Rationality and External Reference

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  • Wulf Gaertner
  • Yongsheng Xu,

Abstract

This article is about rationality conditions underlying individual choice and questions the universal applicability of the `standard conditions'. It is argued that when making choices and decisions, an individual appeals to external references. As a consequence, the issue of rationality can be sensibly analyzed only if external references are spelled out. Utility maximization, menus, private and social norms are some of the examples of external references. In important cases, utility maximization of the standard form is not adequate for explaining individual rationality. Two such cases are analyzed and axiomatically characterized: the choice of the second largest element and the choice of the median. In both situations, the external references are norms. The characterizing axioms in each case are compared to the standard axioms of rational choice theory.
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Suggested Citation

  • Wulf Gaertner & Yongsheng Xu,, 1996. "Rationality and External Reference," Discussion Papers 96/17, University of Nottingham, School of Economics.
    • Handle: RePEc:not:notecp:96/17
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    References listed on IDEAS

    as
    1. Wulf Gaertner & Yongsheng Xu, 1999. "On rationalizability of choice functions: A characterization of the median," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 16(4), pages 629-638.
    2. Amartya Sen, 1997. "Maximization and the Act of Choice," Econometrica, Econometric Society, vol. 65(4), pages 745-780, July.
    3. Baigent, Nick & Gaertner, Wulf, 1996. "Never Choose the Uniquely Largest: A Characterization," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 239-249, August.
    4. Sen, Amartya K, 1977. "Social Choice Theory: A Re-examination," Econometrica, Econometric Society, vol. 45(1), pages 53-89, January.
    5. Frank, Robert H, 1987. "If Homo Economicus Could Choose His Own Utility Function, Would He Want One with a Conscience?," American Economic Review, American Economic Association, vol. 77(4), pages 593-604, September.
    6. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    7. Plott, Charles R, 1973. "Path Independence, Rationality, and Social Choice," Econometrica, Econometric Society, vol. 41(6), pages 1075-1091, November.
    8. Sen, Amartya, 1993. "Internal Consistency of Choice," Econometrica, Econometric Society, vol. 61(3), pages 495-521, May.
    9. Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
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    Cited by:

    1. Keith Dowding, 2002. "Revealed Preference and External Reference," Rationality and Society, , vol. 14(3), pages 259-284, August.
    2. Antoinette Baujard, 2006. "Une critique opérationnelle du welfarisme dans la prise de décision publique," Post-Print halshs-00155130, HAL.
    3. Gaertner, Wulf & Xu, Yongsheng, 1997. "Optimization and external reference; a comparison of three axiomatic systems," Economics Letters, Elsevier, vol. 57(1), pages 57-62, November.
    4. Lanzi, Diego, 2011. "Frames as choice superstructures," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(2), pages 115-123, April.
    5. Andrew McKay & Oliver Morrissey & Charlotte Vaillant, 1998. "Aggregate Export and Food Crop Supply Response in Tanzania," Discussion Papers 98/4, University of Nottingham, CREDIT.
    6. Sebastiano Bavetta & Marco Del Seta, 2001. "Constraints and the Measurement of Freedom of Choice," Theory and Decision, Springer, vol. 50(3), pages 213-238, May.

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