To see the force of these questions, we have only to think of the events that
precipitated the global economic recession of 2008-2009. There was at the time
what seemed, and in hindsight may still seem, rationally profit-maximizing
behavior by those who sold subprime mortgages and made much money in
so doing and, even more, by those financiers who bundled these mortgages
into securities (including the notorious “derivatives”), again making huge sums
at the time. The result, though, was a colossal financial bubble that collapsed
with consequences that proved subversive for those who had previously profited
from it, such that a few years after their “successful” run in the market,
they and their institutions had incalculable debts and went bankrupt or had to
be bailed out. I am at the moment drawing attention not to any directly moral
considerations involved but only to purely economic ones in order to bring out that some seemingly fixed or clear-cut notion of instrumental rationality,
in this case of economic rationality, as an objective or “ideal” model of behavior
is itself a variable and questionable conception as to its rationality. The
interesting further twist to the matter, however, is that this very sort of unexamined
or unchallenged conception of instrumental rationality was indeed at
work as the mindset of the agents mentioned, and often is at work elsewhere.
This means that if Rational Economic Man (to continue with the old and
familiar label) is called upon as a model for explaining market behavior, what
must be seen from an external standpoint is not only that erroneous deviations
from the model are in need of special explanation by way of additional factors
(of emotions, special value considerations, and the like), but also that the model
itself is in need of being explained or contextualized with regard to its particular
assumptions and focus at any time. Referring to a specific claim about alleged
economic optimization, Weber comments critically:
To see the force of these questions, we have only to think of the events that
precipitated the global economic recession of 2008-2009. There was at the time
what seemed, and in hindsight may still seem, rationally profit-maximizing
behavior by those who sold subprime mortgages and made much money in
so doing and, even more, by those financiers who bundled these mortgages
into securities (including the notorious “derivatives”), again making huge sums
at the time. The result, though, was a colossal financial bubble that collapsed
with consequences that proved subversive for those who had previously profited
from it, such that a few years after their “successful” run in the market,
they and their institutions had incalculable debts and went bankrupt or had to
be bailed out. I am at the moment drawing attention not to any directly moral
considerations involved but only to purely economic ones in order to bring out that some seemingly fixed or clear-cut notion of instrumental rationality,
in this case of economic rationality, as an objective or “ideal” model of behavior
is itself a variable and questionable conception as to its rationality. The
interesting further twist to the matter, however, is that this very sort of unexamined
or unchallenged conception of instrumental rationality was indeed at
work as the mindset of the agents mentioned, and often is at work elsewhere.
This means that if Rational Economic Man (to continue with the old and
familiar label) is called upon as a model for explaining market behavior, what
must be seen from an external standpoint is not only that erroneous deviations
from the model are in need of special explanation by way of additional factors
(of emotions, special value considerations, and the like), but also that the model
itself is in need of being explained or contextualized with regard to its particular
assumptions and focus at any time. Referring to a specific claim about alleged
economic optimization, Weber comments critically:
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