Soc Choice Welfare (1989) 6:87-101
Social Choice
dWelfare
© Springer-Verlag 1989
Individual Irrationality and Social Welfare*
Y. K. Ng
Faculty of Economics and Politics, Monash University, Clayton, Victoria 3168, Australia
Received August 6, 1986 / Accepted September 19, 1988
Abstract. Individual preferences inconsistent with personal welfare caused
neither by ignorance nor by a positive consideration for the welfare of others are
defined as (welfare) irrational. Sources of irrationality (rigid adherence to moral
principles, excessive fear of danger, excessive temptation of pleasure, revenge,
inertia, 'faulty telescopic faculty', the fallacy of diminishing marginal utility of
utility, etc.) are discussed. An evolutionary explanation of irrationality is
suggested and some implications for individual decision and social policy
indicated.
In many spheres, including economic analysis and social policy formulation,
individuals (sane adults) are assumed to be predominently rational or at least the
best judges of their own interests. While irrational preference does not necessarily
(or even just usually) justify illiberal policies, knowledge of such behaviour may help
individuals themselves to adjust their behaviour and social policies may be
formulated in the light of its existence, not necessarily in an illiberal direction. Thus,
while not without hesitation, I propose to discuss this much neglected topic. 1
I. The Concept of Rationality/Irrationality
Let us consider a p o p u l a r c o n c e p t o f r a t i o n a l i t y before p r o p o s i n g a m o r e specific
concept for o u r p u r p o s e .
Briefly, the p o p u l a r c o n c e p t o f r a t i o n a l i t y is the consistent p u r s u i t o f a n y
objective. M o r e specifically, it is c o m m o n to require a c o m p l e t e a n d transitive
o r d e r i n g o f all relevant alternatives f r o m which the (or one o f the) t o p alternative(s)
* I am grateful to two anonymous referees for comments.
1 I shall largely gloss over the finer distinctions between behaviour, preference, and choice.
z In addition to the requirement of an order, the necessary and sufficient condition for preference
representation by a real-valued function requires the existence of a countable 'preference-dense' subset
(Cantor 1895). See Fishburn (1970) or Ng (1979/1983, Appendix 1B).
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Y.K. Ng
is chosen. The objective may then be expressed as a (utility) function if the set of
alternatives is countable or if (but not only if) the preference is continuous. 2 The
requirement of acquiring sufficient information (subject to cost) on the range and
consequences of alternatives may also be mentioned. This concept of rationality is
too general for our purpose since any objective is permissible. The consistent pursuit
of objectives completely irrelevant to or even exactly opposite to (individual or
social) welfare is rational according to this concept. Since I wish to relate
rationality/irrationality to social welfare (which is a function of individual
welfares), I shall adopt a more specific concept of rationality (welfarerationality/irrationality), while retaining the popular concept.
First, let us adopt without apology the definition of individual welfare as
individual subjective well-being or happiness which includes both elementary
sensual pleasures and pain (which counts negatively) and higher forms of
satisfaction (such as being pleased with one's achievement, the enjoyment of music,
poetry, etc.) and sufferings (such as hurt feelings).
The preference of an individual may differ from his welfare due to three reasons.
First, his preference may not only be affected by his own welfare, but may also be
affected by his consideration for the welfare of other individuals (or even nonhuman sentients). It is possible for a person to prefer x to y and yet be himself less
happy in x than in y because he believes, e. g., that other people are happier in x than
in y. It it true that the belief that other people are happy and that he chooses
something to make others happy may make him happy. But this may not be strong
enough to outweigh the loss he has to suffer from changing from y to x. For
example, consider an individual who expects to lead a very happy life. When his
country is being invaded, he may volunteer for a mission which will bring him the
certainty of death. The prospect of being a citizen of a conquered nation especially
with the guilt conscience of failing to volunteer for the mission may not be too
bright. But overall he may still expect go be fairly happy leading such a life. Yet he
chooses death for the sake of his fellow countrymen. I.e., he chooes roughly zero
welfare (assuming that the happiness of pride in volunteering for such a mission is
roughly overbalanced by the agony of death) over a fairly large amount of welfare;
he is not maximizing his own welfare. (This source of divergence between preference
and welfare due to a consideration for others has been discussed by Ng (1969), Sen
(1973). For a fuller discussion, see Ng (1983, 1979/1983, pp 7-10.)
Secondly, preference may differ from welfare due to ignorance and imperfect
foresight. While an individual may prefer x to y believing he will be better off in x
than in y, it may turn out to be the other way round. This is the question ofex-ante
estimate versus ex-post welfare. While the ex-ante concept is relevant for explaining
behaviour, it is the ex-post one which is his actual welfare.
Thirdly, an individual may have welfare-irrational preferences. The preference
of an individual is here defined welfare-irrational if he prefers x over y despite the
fact that his welfare is higher in y than in x, and his preference is not affected by
positive (but non-excessive; see below) considerations of the welfare of other
individuals (or non-human sentients), or by ignorance or imperfect foresight.
This definition of welfare-irrationality is such as to make the three factors
discussed here exhaustive causes of divergence between preference and welfare. It
may be questioned whether the concept of welfare-irrationality here is an
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89
appropriate one or just a catch-all basket not worthy of any name. If we accept the
tradition of regarding social welfare as a function of and only of individual welfares
(welfarism), our definition of welfare-irrationality is appropriate for our purpose of
discussing irrationality in relation to social welfare. While welfarism has been
vigorously attacked by Sen (1979), I have provided a defence elsewhere (Ng (1981,
J985)).
Some finer points regarding our concept of welfare-irrationality may be noted.
First, if we allow the welfare of non-human sentients in our objective (social welfare)
function, then the divergence between preference and welfare due to a consideration
for the welfare of these non-human sentients will not be regarded as irrational.
Personally, I certainly do not regard the vanguards of animal welfare as necessarily
irrational but have more doubts as to whether certain religious practices can be
regarded as rational on the ground of God's or Gods' welfare. To simplify matters, I
shall ignore non-human sentients (on which see Ng (1983)) in this paper.
Secondly, a negative consideration for the welfare of other individuals
(preferring less welfare for others) is defined above as welfare-irrational. This does
not mean that instances of envy, malice, revenge, etc. are necessarily welfareirrational. For one thing, people may derive satisfaction (i. e. increase their welfare)
from taking, say, revenge against their enemies. Furthermore, revenge may help to
reduce malicious behaviour in the future. However, the exclusion of negative
considerations means that the preference for revenge over and above welfare
considerations (direct and indirect, present and future) has to be regarded as
welfare-irrational according to our definition. Being a pure welfarist, I find this a
natural position to take. But I understand that many people may find this position
rather extreme and wish to include negative considerations under rational
preferences.
Thirdly, irrational preferences include excessive considerations. A person is said
to have excessive consideration for the welfare of others (specific individuals or
generally) if he is willing to forego more of his own welfare than the resulting
increase in the welfare of others. This type of welfare-irrationalityis probably not of
much practical importance except for: (i) parents' sacrifice for their children, (ii)
people in love, (iii) indoctrinated persons (e.g. political or religious fanatics). It
should be noted that, even for these three groups of persons, excessive considerations are rarer than what might be mistakenly believed. For example, person
A may be thought to sacrifice more of his welfare (say by Xunits) to increase person
B's welfare (by Y units). But A himself may be made happy (by Z units) knowing
that he has improved B's welfare by Y units. That X> Y does not imply excessive
consideration which implies (and is implied by) X> (Y+ Z).
II. Sources of Irrational Preferences
Some people may object to our concept of irrationality and the sources of irrational
preferences discussed below. But I think many will agree with some of the following.
First, an individual may stick rigidly to some habit, custom, 'principles', or the
like even if he knows that this is detrimental to his welfare and the welfare of others
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even in the long run, taking account of all effects and repercussions. Customs, rules,
moral principles, etc. have a rational basis as they may provide simple guides to
behaviour which may be, at least on the whole, conducive to social welfare. It would
be too cumbersome and time-consuming if an individual were to weight the gain and
loss in terms of social welfare or his own welfare each time he has to make a decision.
Thus he may stick to his routine, rules, principles, etc., without thinking about the
gain and loss. If this results occasionally in decisions inconsistent with promoting
his welfare and the welfare of others, it may be regarded as a cost in pursuing
generally good rules. If, say, there is a change in circumstances, the adherence to
some rules may result in persistent net losses in welfare, taking everything into
account. An individual may stick to these rules without knowing that they no longer
are conducive to welfare. Then the divergence between preference and welfare can
be traced to ignorance. If he knows this and yet sticks to the rules, he is welfareirrational.
For example, suppose a person sticks rigidly to the principle of honesty and
would not tell a lie even if that would contribute both to his welfare and the welfare
of others, taking everything into account. According to our definition, he is being
welfare-irrational. But he may be rational if he values honesty highly. However, if he
agrees that welfare is his more important or only ultimate objective and yet refuse to
tell a lie in the above situation (e. g. to an invading army), he is being irrational even
according to the general definition. This relation between welfare-rationality and
general rationality applies also to the following discussion and hence we will not
make the distinction between the two concepts too pedantically.
The rationality of valuing moral principles over and above or irrespective of
their (direct and indirect) contributions to welfare is rather questionable. Hypothetically, suppose no lie caused any harm and we all enj oyed telling and listening to
lies (as we enjoy jokes now) and regarded persons who never or seldom tell lies as
rather dull. Then, it seems most likely that telling lies would be regarded as a moral
virtue. It seems clear to me that valuing moral principles (or anything else)
irrespective of their welfare contribution is difficult to justify. However, I am not
advocating giving up good moral principles such as honesty lightly since they are
conducive to welfare and since their violation in specific instances will produce
unfavourable indirect effects (such as weakening people's trust in each other and
their willingness to adhere to moral principles) and is likely to be detrimental to
long-term welfare despite any short-term gain. The world needs a lot more honest
people, not less, because honesty is good for welfare.
Another source of irrational preference is the excessive fear of danger or pain
and the excessive temptation of pleasure. For example, consider a person with an
aching tooth which, if not treated, will cause nagging pain for a long time but whose
treatment by a dentist will cause an acute but short pain. Out of fear of the agony,
the person may refuse to go to the dentist, thus subjecting himself to a greater
amount of pain (assuming that the length of the nagging pain over-balances the
intensity of the short pain). His refusal to go to the dentist may be due to the
ignorance of the greater amount of pain or to the ignorance of the fact that the
agony of dental treatment is not really so bad. Then the cause of his preference that
does not contribute to his welfare is classified under ignorance. But if he knows that
very well but just cannot have the determination to undergo a once-and-for-all but
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91
present agony, he is being irrational. For another example, a drunkard may vote in
favour of prohibiting Sunday drinking not for the sake of the public, road safety or
the like, but for forcing himself not to drink too much. But before the new law is
effective, he may yet go out drinking on Sundays.
The above source of irrational preference touches on the tricky philosophical
question of the existence of free will. If an individual will be better off with x than
with y but chooses y as x is not attainable, then obviously we would not call this an
irrational preference. Thus a relevant question is whether x is within his attainable
set. For example, one may argue that the individual in the first example above may
have a psychological make-up that makes him incapable of deciding to go to the
dentist before a few more days of pain help him to free himself of this incapability.
Pursued to its logical conclusion, this line of argument will end up with the result
that everything is predetermined and the feasible set open to any decision-maker
consists only of one single point (or action). Little scope would be left for any theory
of choice. To avoid this unpalatable prospect, we will not introduce too many
constraints so as to leave an individual with some scope for exercising his
preference. (This does not imply that the determinist view of the world is wrong.
This is a matter of different types of problems; but I do not want to go into the depth
of this philosophical problem. Currently, many philosophers are inclined towards
the reconciliatory Hume-Mill theory which accepts both determinism and free will,
but not uncaused phenomena, despite Heisenberg's principle of uncertainty.)
A very prevalent form of (individual) irrationality is the excessive fear of death,
or expressed more positively, the powerful will to avoid death. Few people will
commit suicide even put in situation of enormous sufferings with little hope of
improvement. This is true even for those who are not against suicide as such due say
to the belief that suicide will adversely affect the welfare of one's after-life. From
personal experiences, casual empiricism, and happiness surveys, one can be fairly
confident that in many countries there exist many people in persistent misery with
little hope of significant improvement. But the will to live persists. Moreover, this
individually irrational will to live is almost universally encouraged socially. This
encouragement need not be socially irrational. For one thing, while suicide may
resolve all miseries for the individual himself, it seldom does so for the society and
usually compounds the problems. Secondly, a society has much longer 'life'
expectancy and may hope to improve welfare for the majority of its member after
perhaps a number of generations.
The irrational fear of death is probably involved in the incident of an experiment
by McNeill, Pauker, Sox, and Tversky (1981) reported by Arrow. Groups of
physicians were asked to rank surgery (which has a distinct risk of mortality during
the operation but a better survival rate thereafter) and radio-therapy. They were
presented with probabilities of survival during treatment for one year and for five
years for each of the two therapies. With these data, 84 per cent of the physicians
preferred surgery. Another group was given the same data expressed in terms of the
probabilities of dying. Physicians choosing surgery dropped from 84% to 50%,
despite the fact that "the probability of dying is, of course, merely 1 minus the
probability of survival, so that the two formulations are not merely logically
equivalent but can be transformed into each other by a trivial calculation" (Arrow
1982, p 7). It seems that the very mention of death causes a bias in people's choice.
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Y.K. Ng
The inclination to seek revenge may be another source of irrationality. Revenge
can be rational even if the individual suffers in the attempt, for two reasons. First,
revenge discourages opponents from inflicting injuries on the individual. Secondly,
most individuals gain real subjective satisfaction from revenge. However, it is not
unusual for an individual to incur enormous costs in seeking revenge not justified by
the two rational factors combined.
Another source of irrational preference is inertia. This does not include the
inertia due to the real welfare cost of overcoming it. For example, to get up from a
comfortable position watching television usually involves a welfare loss and hence
there is a rational inertia. However, many people are prevented from doing
something much more important in comparison to the welfare loss of getting up.
This inertia is irrational. This is quite prevalent because some will power or
determination is needed to overcome the inertia. Not everyone has sufficient will
power to overcome the inertia whenever the welfare gain is marginally above the
welfare loss. This source of irrational behaviour is acknowledged by many people.
Yet another source of irrationality is due to 'faulty telescopic faculty' (Pigou
1929, p 25), arising from 'weakness of imagination' (Ramsey 1928, p 543) or from
the 'conquest of reason by passion' (Harrod 1948, p 40). This refers to the tendency
not to take full account of future gain or loss for decisions having effects far in the
future such as savings. Part of this tendency may be explained by ignorance but the
irrational part cannot be excluded.
It may be quite rational to discount future gain (or loss) in income because the
same marginal dollar (in real term) may give rise to less utility in the future due to say
diminishing marginal utility of income and a higher expected income level. The
discount of future utility or pure time discount is regarded by many people
(including all the three authors quoted in the preceding paragraph) as either
irrational or due to the fact that individuals are mortal. For the society as a whole,
'there ought not to be a time preference' (Harrod 1960, p 274). This conclusion is
based on the implicit assumption that the society is immortal. However, we 'may be
sacrificing present consumption for future use, but a hydrogen-bomb war may settle
all problems before that future arrives' (Sen 1968, p 75). Besides nuclear wars, we
may also be destroyed by celestial collision, swallowed by a black-hole, or destroyed
by some other causes we are unable to imagine now. Owing to this uncertainty
regarding our future, it is only rational both for an individual and the society to have
a positive time discount rate (more appropriately termed 'uncertainty discount'),
though the rate should probably be very small (especially for the society). But even a
tiny rate resolves the paradox of optimal growth due to the non-convergence of the
integral.
HI. Rationality in the Presence of Uncertainty:
The Fallacy of the Diminishing Marginal Utility of Utility
Our discussion of rationality/irrationality in Sect. I above does not cover the issue
of risk and uncertainly. According to our concept there, a welfare-rational person
will choose x over y if his welfare is higher with x than with y unless he mistakenly
believes it to be the other way round and/or unless he is prepared to sacrifice his own
Irrationality and Social Welfare
93
welfare for the sake of increasing the welfare of others. But what if the outcome of
the choice is uncertain such that choice o f x over y may result in higher welfare but
the reverse may also be true?
A standard distinction is made between risk and uncertainty (Knight 1921).
Both involve a number of possible outcomes, none of which is certain (100%
probability). Risk is where there is a simple objective way of assigning the
probability distribution of the various outcomes. A simple example is the result of
tossing an unbiased coin. Uncertainty is where the assignment of probability
distribution has to be made on subjective opinions. The probability distribution for
the same situation so assigned may thus differ over different decision-makers. A
possible type of irrationality here is the failure (due to say inertia as discussed in the
preceding section rather than costliness) to obtain relevant information to form a
better probability judgment. (With the amount of information as a variable, the
distinction between risk and uncertainty becomes a little blurred.)
Even given the same information, different decision-makers may still assign
different probability distributions. This cannot be regarded as irrational as one can
make mistakes. But there seem to be decision-makers who are persistently or
predominantly over-optimistic and those who are over-pessimistic (see Hey (1984)
for a formal analysis), both being irrational. This must not be confused with riskpreference and risk-aversion, though there may be a psychological connection
between the two concepts (e.g. risk-preferers may tend to be over-optimistic as
well). Over-optimism (pessimism) refers to the assignment of excessive probabilities
to outcomes favourable (unfavourable) to the decision-maker concerned, not to the
evaluation of the outcomes. (This latter evaluation defines a version of riskpreference versus risk-aversion.) However, where the objective and subjective
probability distributions are not distinguished, over-optimism may be lumped with
risk-preference. For example, a person who prefers to toss a coin and get $100,000 if
head turns up to the certainty of $ 50,000 may be said to be a risk-preferer. But if his
preference is due to his over-estimate of his chance of winning rather than to say
increasing marginal utility of money to him, he is being over-optimistic. It is true
that, for simplicity, this example refers to a case of risk rather than uncertainty. But
the principle involved can be generalized to the case of uncertainty. With
uncertainty, it becomes more difficult to determine whether one is being overoptimistic (pessimistic) or not for any particular probability judgment. It is however
much easier to do so for a large number of probability judgments. 3
Once the amount of information is given and a judgment (based on the given
information) on the probability distribution of outcomes is made, uncertainty and
risk become equivalent and may thus be discussed together. It is true that the
probability (e. g. 50%) of an outcome (e. g. head turning up in tossing a coin) in the
case of risk is definite while that in the case of uncertainty is just an average of all
possible probability weighted by the probability density distribution of the
a See Arrow (1982), and Cohen (1981) and the ensuing commentaries for surveys and discussions of
reports of apparently irrational preferences for choices involving risk or probability judgments. Also,
Hey (1984, pp 182-183) defines an optimist as one who revises up (down) the probabilities of favourable
(unfavourable) events. For the s a m e event, an optimist tends to allot a higher probability if it has more
favourable outcomes.
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probabilities. But since it is only the average probability that counts, this distinction
does not make any difference. 4
Faced with choices involving risk (and uncertainty with a given probability
distribution), a natural rational objective function is to maximize the expected
average value of whatever ultimate objective one has in the absence of risk. If we call
this ultimate objective 'utility', it is just expected utility. If we accept the concept of
rationality for the case of certainty discussed in Sect. I above, and abstract from
the issues of imperfect knowledge and the concern for the welfare of other people
and sentients, expected utility for an individual is just his expected welfare.
In Ng (1984), it is shown that a set of reasonable axioms (no stronger than the
axioms for the expected utility hypothesis except for our recognition of finite
sensibility) implies that the only rational objective in the presence of risk is to
maximize the expected utility. This result must not be confused with the expected
utility hypothesis which shows that, if certain axioms are satisfied, there exists a
utility function unique up to a positive affine transformation such that the choice of
a decision-maker is consistent with the maximization of the expected value of this
utility function. There are economists (e.g. Baumol 1951, 1958, 1977, p 431) who
believe that it is generally agreed that the utility function of the expected utility
hypothesis has nothing in common with the subjective utility or welfare as used here
and by the neoclassical economists. I have argued elsewhere (Ng 1985) that, if we
accept the Expected Subjective Utility Premise ("faced with choices involving risk,
an individual chooses to maximize the expected value of his subjective utility"), the
utility index of the Expected Utility Hypothesis measures the subjective utility,
except that the former leaves the zero point undetermined. In contrast, my 1984
paper takes the Expected Subjective Utility Premise as the end point rather than the
starting point or as the theorem rather than a premise.
Essentially, it is recognized that human beings are not infinitely sensitive or
perfectly discriminative. Under mild conditions, a same positive number k can then
be used to measure the utility difference of a maximal indifference. With the crucial
axiom of Preference Dominance (A5 in Ng 1984) that the same (50-50) probability
4 This is easy to prove though it may not appear to be intuitively obvious. (In fact, as I tried this on a
colleague, he came up with an opposite intuition, i. e. the distinction does make a difference.) The proof is
general in the sense that it covers any number of outcomes, any distribution of probabilities, and any
objective function as long as it is the expected value of something, including expected monetary pay-offs,
expected utility of the outcomes, etc. since 'utility' can be interpreted in a general sense, we will use the
expected utility formulation. The expected utility of an alternative is thus
{ U(x) ~p(x)f(p) dp} dx
for the case of uncertainty, and
el(x)~(x)dx
for the case of risk, where U=utility, x = o u t c o m e , p(x)=probability that x will occur, f ( p ) = t h e
probability that p(x) is right, n ( x ) = the definite probability that x will occur, and the integral over p is
from zero to one and the integral over x is for all possible values of x (all possible outcomes).
Since
~{U(x) ~p(x)f(p)dp}dx=~ U(x)fi(x)dx,
where/7(x) =-~p (x)f(p) dp is the weighted average probability of x, it is thus only the average probability
6(x) and not the distribution ofp (x) that is relevant. Once the average probability distribution (for all x's)
is given, uncertainty can thus be analysed as risk with ~(x)=fi(x).
Irrationality and Social Welfare
95
of obtaining an explicitly more preferred outcome and an indifferent outcome must
be an intrinsically more preferred prospect, it can then be established that the
choices involving risk of a rational individual is the maximization of the expected
value of the subjective cardinal utility function (i. e. one that uses the same utility
number to measure all subjective unit of preference - Edgeworth's "minimum
sensibile" or our maximal indifference).
It may be objected that an individual may not only be risk-averse (or riskpreferring) with respect to objective things such as income, but also with respect to
his subjective utility such that he may not be maximizing the sum of his subjective
utilities weighted by probabilities but rather some strictly quasi-concave function of
these. However, this violates our reasonable axiom of Preference Dominance. That
some people are prone to raise such an objection (despite its violation of Preference
Dominance) may be due to a fallacy similar to what I called "utility illusion" (Ng
1975) which is the tendency to double-discount the income of the rich. With
diminishing marginal utility of income, the income of the rich is already discounted
when reckoned in terms of utility. To discount the utility of the rich further involves
double-discounting and cannot be justified on the ground of diminishing marginal
utility. Here, no interpersonal aspects (the rich vs. the poor) is concerned but
different income levels (in different outcomes) of the same individual are
considered. Since the various outcomes in a prospect are mutually exclusive (hence
allowing no room for any interdependency effect) and since subjective utility is by
definition what the individual is ultimately interested in, risk-averseness with
respect to utility involves the fallacy of diminishing marginal utility of utility. One
can rationally be risk-averse with respect to income or other objective things since
one does not value income for income's sake. Rather, one values income because it
contributes to one's ultimate objective (defined as utility). If the rate at which
income contributes to utility diminishes with income, risk-averseness with respect to
income has a rational basis as the maximization of expected utility implies riskaverseness with respect to income. But since utility is itself the ultimate objective,
risk aversion with respect to utility cannot be so rationalized. The fact that many
individuals may have risk aversion with respect to utility should in my view be
classified as irrational preference in the presence of risk.
IV. Towards a Theory of Irrational Preferences
We all know that a small percentage of the population is quite insane. The degree of
sanity (related to rationality) is probably roughly normally distributed. Thus, even
if people on the opposite side of the distribution are perfectly rational, the majority
have various degrees of irrationality.
The failure to come to terms with irrational preferences is partly due to the
following two methodological views : Watsonian behaviourism and the assumption
of rationality in economics. Behaviourism insists on only analysing observable
behaviours, rejects completely the use of introspection, and refuses to use any
subjective language. Orthodox economic analysis is predominantly based on the
assumption that individuals are rational in their pursuit of utility maximization
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Y.K. Ng
where utility may be defined in the sense of welfare or as whatever the individual
pursues. In the latter sense, it is consistent with behaviourism. In either case,
irrationality is ignored. Thus, even with the welfare interpretation of utility,
whatever the individual prefers is taken as of higher welfare to him. This
methodological assumption may be a reasonable approximation for many
economic problems but not when we want to analyse irrationality itself.
Simple common sense suffices to convince us that an individual is neither a
machine which 'behaves' without subjective consciousness nor a completely
rational actor, all of whose actions are to maximize a certain goal. Does one
maximize anything when one frowns, blushes, or laughs ? (Kwang's laughs are wellknown to be uncontrollable.) It is true that one may distinguish between behaviour
conditioned mainly by instincts and purposive choices based on conscious
deliberation, and confine rational maximizing choice as referring only to the latter.
While this distinction is meaningful, it is unlikely to be a black-and-white division.
Rather, human actions fall more-or-less continously over the whole spectrum, with
completely instinctive actions on the one hand and quite purposive and deliberative
actions on the other, and with the majority of actions being affected by both
instinctive and purposive factors. In fact, I would go further in believing that, while
purely instinctive behaviours exist, no human actions are purely deliberative in the
sense of being completely independent of genetic factors. While an individual may
believe that he is making a decision based on purely purposive deliberation, the way
he chooses and why he makes a particular choice, etc. cannot escape the imprint of
genetic factors. However, it suffices for our purpose here to agree that most human
actions are affected to varying degrees by genetic factors.
That an action is affected by genetic factors does not necessarily mean that it
must be irrational. But the presence of genetic (or any other non-purely deliberative)
factors allows room for irrationality. Genetic factors are shaped in the short
(relatively speaking) term by random factors and in the long term mainly by the
survival factor (i. e. whatever attributes that help the species to survive better tend to
be preserved through natural selection). After the evolution of sentients, attributes
that contribute to the welfare of these sentients (at least for homo sapiens) probably
also have survival value. This is so since animals with higher welfare may be more
prepared to preserve their lives. If you expect to lead a fairly miserable life anyway, it
may not be worth your while undergoing major hardships to preserve your life. This
probably partly explains why sentients evolved and survived. Once a reward and
punishment centre in the brain is created by mutation, it tends to be preserved by
natural selection provided the reward-punishment system is consistent with
survival, e. g. reproductive activities are rewarded and injuries to the organism cause
pain. Thus, behaviour that contributes to survival need not necessarily solely be
directly conditioned by pure instinct, but can be left to the choice of the organism,
with the survival factor ensured through the way the reward and punishment system
is "wired" in the organism. As we move up the evolutionary ladder, more and more
actions are delegated to choice than rigidly conditioned by instinct. This general
transition has survival value due to the high degree of flexibility allowed (though
this need not be an unmixed blessing). At the highest stage of homo sapiens, many
actions can be decided on the spot, weighing up the costs and benefits. While these
costs and benefits are predominantly in terms of the welfare of the individual, the
Irrationality and Social Welfare
97
actions so taken are by-and-large consistent with the survival of the gene due to the
"wiring system" that affects the welfare of the individual.
The above consideration makes an individual predominantly rational in his
choice despite the influence of genetic factors. Thus he chooses to eat, to make love,
etc .... which make him happy but such acts also contribute to the survival of his
genes. However, the above consideration does not make him perfectly rational for
two reasons. First, since mutation is determined by random factors, some trace of
the random effect must remain even in the long run when natural selection has
operated to allow mostly only factors beneficial to survival. Secondly, natural
selection works only in accordance with the survival principal. Even if certain
tendencies are not contributory to the welfare of the individual, they may be
naturally selected and "wired" into the genetic make-up of the individual. If such
genetic factors are so compelling as to leave the individual with no choice, we would
not call it irrational choice as it is no choice at all. For example, ejaculation at sexual
climax is wired into our genes such that we have no control over it once climax is
attained (though we may control whether to proceed to climax or not). It may be in
the interest of the welfare of the individual to prolong the climax and delay the
ejaculation. But as long as the sexual pleasure is sufficient for the individual to seek
repetition of it, it may be in the interest of survival of the gene to have a relatively
short climax. While a prolonged climax may increase the enjoyment of the
individual, it has two negative effects on survival. First, a prolonged climax is
wasteful in terms of bodily functioning and maintenance. Secondly, while a
prolonged climax may increase the attempt to repeat it due to its higher enjoyment,
it m a y also reduce the attempt due to a higher level of fulfilment or satisfaction of
sexual desire or need. Thus, natural selection has resulted in sufficient sexual
enjoyment and a relatively short climax to ensure a high desire to repeat the sexual
act.
Other genetic influences are less compelling and do not leave the individual with
no scope to exercise his choice. (Determinists are referred to p 5.) For example, the
tendency to avoid death has a clear survival value. Thus, individuals who inherit
genes that tend to make them willing to endure enormous sufferings in order to
survive may be defined as irrational here but will be favoured by natural selection.
Similarly, those who are over risk-averse (i. e. more risk-averse than demanded by
the maximization of expected subjective utility) towards death, such as the
unwillingness to gain a candy bar no matter how small is the increased probability of
death involved (Alchian 1953), are regarded as irrational here, but may survive
better than the rational expected utility maximizers. Determinism notwithstanding,
the decision not to take the extra candy bar is clearly regarded as within the domain
of free choice in any theory of choice.
The excessive inclination to seek revenge, though irrational, may also help the
survival of the genes of the individual or at least that of the species. By being willing
to undergo enormous sufferings to revenge an injury, the individual may reduce his
expected utility but increase his chance of survival by discouraging injuries. The
operation of natural selection is such that a trait may be selected even if it reduces
the chance of survival of the individual but increases the chance of survival of the
genotype through 'group selection' (Wilson 1975, Chap. 5). Thus a strong
inclination to seek revenge may be detrimental both to the expected utility and the
98
Y.K. Ng
survival of the individual, and may be beneficial or detrimental to the expected
utility of the species or sub-species, etc., but may be naturally selected if it is good for
the survival of the gene. Genes that increase the subjective satisfaction of individuals
that successfully revenge their injuries and genes that incline individuals to seek
revenge over and above rational considerations may both be preserved once
generated by random mutation. (How such inclinations are effected through the
generation of desires, attitudes, etc. are beyond our scope.)
I wrote the section on the sources of irrationality before thinking about a
possible theory. After coming to believe that the theory of evolution provides a good
explanation of irrationality, we may use it to discover or predict further sources or
types of irrationality. One fruitful area for such a speculation is reproduction since it
is essential for evolution. It is well known that, as a rule, men are more promiscuous
in their sex life than women. While this may be partly explained by cultural attitude
(which itself need to be explained), the best explanation is again natural selection.
Since it is the woman who becomes pregnant and who is mainly responsible in the
care for the young, her success in increasing the chance of survival of her genes lie
(relatively to men) less in having sex with many men, but more in having a partner
who can help her take care of the offspring. On the other hand, a man's potential to
pass on his gene is not hampered by a pregnancy and nursing period and hence
promiscuity increases the chance of the survival of his gene spectacularly. This much
is well-known ABC. Our suggestion here is that men are prone to be so promiscuous
as to be irrational. Natural selection ensures that most men derive high satisfaction
from being promiscuous and hence a man can be rationally promiscuous. However,
a trait that inclines a man to be irrationally promiscuous will also be preserved.
Since in evolution, variation is created by random mutation, an irrational trait is as
likely created as a rational one. Thus one of the predictions of our evolutionary
theory of irrationality is that men are prepared to go through more troubles, take
more risks, etc. in their adventures in seeking sexual partners than is justified by
(expected) welfare maximization. While an objective confirmation of this prediction
is difficult (but it will be interesting to see studies on this), casual empiricism seems
to support it. Witness the prevalence of man who are prepared to risk their fortune,
fame, family, and even their life in order to seek additional sexual encounters even if
they are happily married and have much to loose.
V. Some Implications
Since the issues discussed below involve many other problems not tackled here, the
discussion must not be taken as definitive but mainly as illustrations to show how
the concept and the theory of irrationality above can be used to derive certain
suggestions which may affect our decisions over related issues. In particular, other
considerations may overwhelm the implications of irrationality discussed here.
The acceptance of (some of) the sources and explanations of irrationality
discussed above has implications both for individual choice and for social choice.
Thus an individual in his more calm and reflective moments, may critically assess
Irrationality and Social Welfare
99
whether he is prone to be irrational in one way or another, in the light of his
understanding of the sources and explanations of irrationality. After such a critical
examination, a man, e.g., may decide that his promiscuous tendency is not
conducive, at least at the margin and in net terms, to his welfare or to anything else
he really values. He may thus decide to be less flirtatious. This is likely to be a social
improvement as well as an individual improvement as any external costs are likely to
be more than offset by the external benefits. This is especially so because
promiscuous sexual activities are largely divorced from reproduction these days.
Before this divorce, promiscuity (especially rational promiscuity) may have been
conducive to the improvement of social welfare in the long run, as it is likely that the
more promiscuous are those who enjoy sex more. Natural selection thus results in a
higher proportion of individuals with a higher capacity for sexual enjoyment. In
fact, this is the reason why a high level of capacity for enjoyment has evolved, and
probably culminated in homo sapiens, the highest stage in the evolutionary ladder.
The selection in favour of genes with a higher enjoyment capacity does not only
operate through the higher promiscuity of the more highly sexed, but also through
the higher willingness to endure hardship to survive of those with higher enjoyment
capacity, and also due to the likely positive correlation of the enjoyment capacity
with survival fitness as both are positively correlated with the health of the
individual.
It may seem that the irrational fear of death may make the encouragement of
suicide appropriate at least for cases where the death of the individual would not
impose a high cost on the society (including his relatives) but would eliminate his
sufferings. However, the issue is complicated here. For one thing, an individual may
undergo temporary hardships or depression. Despite this, the expected welfare of
his life may still be positive. However, in his depressed state, he is likely to make a
very pessimistic estimate of his future welfare. This will worsen if he has irrational
pure time preference (faulty telescopic faculty) to begin with. He may thus
incorrectly estimate his expected welfare to be so negative as to overcome his
irrational fear of death. He may thus commit suicide while he should not have done
so for expected welfare maximization. Thus the consideration of pessimism and
irrational time preference may overbalance the consideration of the irrational fear
of death. Nevertheless, for cases of permanent sufferings with little chance of
improvement such as the terminally sick, it seems that suicide and euthanasia (with
consent) should be viewed more favourably.
The existence of irrational individual preferences may also seem to justify
illiberal social policies. 5 In fact, this is a major consideration biasing many people
against the concept of irrationality. For example, criticizing my distinction between
welfare and preference, Boadway writes, "To say that a person's [welfare] and his
preference orderings are different can, I think, be used to justify all sorts of (illiberal)
policy judgments" (Boadway /981, p 54/). Those against the use of individual
irrationality as a justification for illiberal policies may argue: (i) that the
undesirable side-effects (including long-run effects) of such policies overbalance
5 See, e.g., Mirrlees (1987) where it is shown that, when the degree of irrationality is sufficiently great,
it m a y be optimal to allow no choice even if the government is unable to discriminate a m o n g individuals.
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Y.K. Ng
t h e i r b e n e f i t s ; (ii) t h a t we s h o u l d m a x i m i s e p r e f e r e n c e s i n s t e a d o f w e l f a r e ;6 (iii)
t h a t i r r a t i o n a l i t y is i n s i g n i f i c a n t in p r a c t i c e . B u t t o deny the c o n c e p t o f i r r a t i o n a l i t y
to save l i b e r a l i s m is to a d o p t t h e p o l i c y o f a n ostrich.
P e r s o n a l l y , I believe in t h e m a x i m i z a t i o n o f social w e l f a r e as a s u m o f i n d i v i d u a l
w e l f a r e s ( N g 1975), b u t I also believe t h a t the c o n s i d e r a t i o n o f (i) a b o v e are so
o v e r w h e l m i n g t h a t social p o l i c y w i t h r e s p e c t to i n d i v i d u a l i r r a t i o n a l p r e f e r e n c e s
s h o u l d m a i n l y c o n s i s t in p r o v i d i n g b e t t e r i n f o r m a t i o n ( i n c l u d i n g d i s c u s s i n g
i r r a t i o n a l i t y o p e n l y ) e x c e p t in v e r y special cases s u c h as a d d i c t i v e d r u g s w i t h serious
h a r m f u l effects. C o m b i n e d w i t h t h e p r o b a b l e existence o f i m p e r f e c t k n o w l e d g e a n d
i r r a t i o n a l p u r e t i m e p r e f e r e n c e , a d d i c t i o n p r o v i d e s a p o w e r f u l a r g u m e n t in f a v o u r
of banning certain hard drugs especially for the young.
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6 However, see Brandt (1979, Chap. XIII) on the conceptual difficulties of maximizing an objective
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one we think we need attend to in planning to maximize his lifetime well-being. Notice that we pay no
attention to our own past desires. Are we then to take into account only the desires we think my son will
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