Deep Rationality: The Evolutionary Economics of Decision Making

Abstract

What is a "rational" decision? Economists traditionally viewed rationality as maximizing expected satisfaction. This view has been useful in modeling basic microeconomic concepts, but falls short in accounting for many everyday human decisions. It leaves unanswered why some things reliably make people more satisfied than others, and why people frequently act to make others happy at a cost to themselves. Drawing on an evolutionary perspective, we propose that people make decisions according to a set of principles that may not appear to make sense at the superficial level, but that demonstrate rationality at a deeper evolutionary level. By this, we mean that people use adaptive domain-specific decision-rules that, on average, would have resulted in fitness benefits. Using this framework, we re-examine several economic principles. We suggest that traditional psychological functions governing risk aversion, discounting of future benefits, and budget allocations to multiple goods, for example, vary in predictable ways as a function of the underlying motive of the decision-maker and individual differences linked to evolved life-history strategies. A deep rationality framework not only helps explain why people make the decisions they do, but also inspires multiple directions for future research.

Figures

Figure 1

Marginal utility of income in a mate varies with sex of the decision-maker.

Figure 2

Relative valuation of gains and losses. The dark line shows the typical function in which a given sized loss has more disutility than a comparable gain has utility. The lighter line is a hypothesized case in which these valuations might reverse (for men under mating motivation).

Figure 3

Indifference curves of various types. Note: The line U1, U2, and U3 desribe three increasingly desirable (and increasingly expensive) utility functions (utility level U3 > U2 > U1). For example, imagine that Good Y refers to brownies and Good X. Figure 3a depicts the state of affairs when a person prefers a combination of goods, as when increasing numbers of brownies without additional mochas would bring very little additional expected satisfaction (hence the convex shape in the curve). If x and y are perfect complements (e.g., left and right shoes), an increment in one without an increment in the other brings no increased utility (as in Figure 3b). If they are perfect substitutes (a mocha from one neighborhood Starbucks vs. another, for example), then the lines would not curve (as in figure 3c). If the person only values one but not the other (loves brownies, but hates all coffee drinks, for example), then the line would runs parallel and flat with respect to the devalued commodity (as in Figure 3d).

Figure 4

Indifference curves and budgets.

Figure 5

Sex differences in proportion spent on physical attractiveness, status/resources, and other characteristics as a function of budget. Positive numbers denote females spending relatively more than males. Thus, on a low budget, women spent much more than men on resources and much less on attractiveness. This sex difference was reduced at high budgets. Reproduced from Li et al. (2002).