Kaiser and I had the following discussion of rationality, following my earlier discussion of the rationality of voting. I wrote:
Any given behavior can be analyzed by economists either in a way as to show why it’s really rational (even thought it doesn’t look that way) or really irrational (even if it looks normal enough). I haven’t quite figured out the rules for how they decide which way to lean in any given case.
Kaiser then wrote:
As for rational/irrational, I’m confused by the Kahneman work: he’s saying irrationality is an anomaly which seems to indicate he thinks people should be rational but then if everyone is “irrational,” could it be the theory is wrong in which case we shouldn’t call that anomalous?
I replied:
Regarding rationality, my impression is that psychologists, unlike economists and political scientists, don’t care so much about “rationality.” Psychologists think of rationality as a process–as a way of thinking and making decisions–not as a particular algorithm. In that sense, Kahneman et al. are pointing out that much of our everyday rational thinking has systematic problems. It’s no surprise that any particular form of rationality will be imperfect. What’s interesting is the ways in which people make mistakes.
I think you have the basic distinction right. For economists, rationality is normative — it's what should happen in the world, and (in their view) what will happen, ceteris paribus.
For a humorous commentary on man-as-rational from the point of view of an economist, see
http://www.youtube.com/watch?v=VVp8UGjECt4
Psychologists are more interested in what actually DOES happen.
Visual illusions are one example. A rational person knows the moon is the same size at the horizon as overhead, and can measure that it has the same visual angle. This is not even remotely interesting as an economic problem.
Psychologists are fascinated with why and how we perceive the moon to be bigger when it's near the horizon. It's the actual mental processes that are of interest to them (and to neurosurgeons, of course).
I agre with ZB, you have it right. I study psychology as an undergrad and I still wish more psychology was introduced into the thinking of poli sci and econ thinkers these days. Psychological theories are often based on no assumption of "rationality" or even some start from the idea that people are large balls of walking irrationality (or "rationalizers"). At most, you might find some behaviorists that see people/animals as goal seeking things that learn what works along the way and retain those behaviors that do work.
As an economics PhD student, I have to disagree. Economists neither believe rationality is what should happen, nor that it is what does happen in reality. The rational-agent framework is merely an approximation that can be used to generate testable conclusions. Sometimes these conclusions hold up empirically, and sometimes they don't. When they fail, behavioral economists search for more appropriate models incorporating ideas from psychology.
But the most important thing to remember is that these are only models, not a literal description of how things really are. It doesn't matter if people are "really" rational. If assuming rationality allows us to accurately predict the path of the economy, we should not hesitate to do so.
I'm no psychologist, as is obvious. But would like to pose this question in light of the above answers: are there testable theories in psychology? sounds like it's all descriptive. How would I know if researcher A is right and researcher B is less right if they describe the same thing in different terms?
Kaiser, there are testable theories in psychology, but they are, unfortunately, 'theories' rather than 'Theories' — smaller scale than, say, Quantum theory.
Frank is correct that one of the beauties of 'rationality' is that it does generate testable hypotheses in a wide variety of circumstances.