The Origin of Rational Choice Theory as Propaganda

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Ideas matter. This article explains how, and why, ideas regulate one's life and the formation of common communities. Individualism is part of America's vocabulary and its ideology. We accept the fundamental idea that individuals seek to maximize their preferences, and a society in which individuals are to free make choices which enable them to maximize their preferences is more desirable than those that do not. This concept was further developed by the Rand Corporation in 1951. Algorithms were developed by which rational choices can be made and the result was rational choice theory. During the cold war, rational choice theory was used to prove that a society based upon individualism, and rational choice, was superior to collectivist societies. It quickly became part of the government propaganda apparatus in the battle of ideas that characterized the cold war.

It was picked up in economics as well. Freedom to choose became part of the ideology of economics, and Milton Friedman postulated an essential connection between free market economics and democracy. It was developed further into rational expectations theory by Robert Lucas. He was awarded a Nobel prize for his work, and rational expectations theory, despite the flaws exposed by the financial crisis, is still the dominant theory in macroeconomics. It contains the philosophical assumption underlying Rand's use of rational choice theory as a propaganda tool, but it also enables the use of algorithms and mathematics which are part of its appeal in establishing economics as a science on par with the physical sciences. Individuals preferences, and social welfare, are maximized when governments do not interfere in markets.

One of the problems with rational choice theory is that one's chances of maximizing preferences increase with wealth and power. Individuals and organizations that have access to power win and those who do not are the losers. There is nothing ethically neutral about rational choice theory. Powerful corporations, which ironically operate as command and control systems, are better able to maximize preferences when they can achieve market power which limits the choice of their competitors.

The author leaves us with the thought that individual freedom is of value only when it is guided by a community with a shared value system.