Some Unresolved Problems in the Theory of Rational Behaviour

Abstract

"In an article written in 1977 the author offered a survey of unresolved problems in rational choice theory. The present paper is an attempt to rethink this issue. On the one hand, it emphasizes the question of indeterminacy, i.e. situations in which the rational choice is not well defined. The paradoxes of backward induction find their place here, as do the existence and importance of genuine uncertainty (as distinct from risk). On the other hand, the article discusses the question whether preferences can be said to be rational. Examples include time preferences, attitudes to risk, regret and the 'taste for fairness.' The examples are chosen with a view to showing that rational choice theory is not a predictive theory, hut essentially a hermeneutic one. As part of the enterprise of self-understanding, the construction of rationality is partly discovery and partly decision. There is no right answer to all questions."