In a rather thought-provoking article by John Cassidy of the New Yorker entitled Rational Irrationality, the question of whether or not reason can culminate into irrationality is raised. I think this is a very important question, and its also a disturbing question for the philosopher. Philosophers tend to believe that reason is something of a good, that when we live rationally we will live better lives. But when Cassidy reviews the buildup to the economic collapse, his analysis shows that quite rational behavior on a micro scale can lead to irrational behavior at the macro level. So what went wrong with the economic crisis? – was it namely a situation in which very rational people, making rational decisions, created an utterly irrational mess or was it that those people were simply reckless and irrational to begin with? The easy,and I think reckless, sort of answer to this question is to affirm the latter possibility and deny the former. The difficult task is to come to grips with this notion of rational irrationality; and this is the task for the philosophical inquirer.
There are of course a number of reasons for the culmination of the economic crisis that has cost so many so much – from the types of derivatives sold, to periodic rollback of economic regulatory mechanisms over the past thirty years, to the compensation practices of investment corporations, and a thousand other important factors that went unnoticed – but none of these are reasons to explain how irrationality arises from rationality. In order to better grasp the problem, lets think about the problem of the commons.
In his pivotal essay, The Tragedy of the Commons, Garrett Hardin discovers the problem of rational irrationality. In short order, Hardin states that when the benefits of an action are individualized and the risk is generalized, such that everyone shares the loss, social groups lock themselves into a tragedy of ruin. For example, imagine a hypothetical community in Texas, let’s say, that is allotted a certain amount of water to be used per month. Yet when the community uses more water than allotted, the extra cost of each 100 gallons ($1) is divided evenly between each of the communities’ 1000 residents; the city leaders believe this will be an equitable way for everyone to share the burden of the water shortage. Yet in this community there are three businesses which make ice tea, coffee, and lemonade respectively. When the water alarm goes off signaling that the community has used their monthly allowance of water, each of the business owners must decide if using more is worth the price that the entire community must pay. What will they decide? For every 100 gallons that they use they will receive 100% of the profits gained, while they will only be forced to pay .1% of the total tax incurred by their own activity. It is clear – the most rational thing to do for the business owners is to keep making their drinks and let everyone else pay for the damage. And if we multiplied this situation throughout all of the communities in Texas, the water source would surely run dry and everyone is ruined. Here a purely rational choice leads to utterly irrational and damning consequence. Is reason to blame?
Yes and no. The tragedy of the commons depends upon the division of reasons between an individual and a whole society (the micro and macro levels). When these divisions in the reasons for action are not balanced with each other, ruin is the consequence. Another term for an unhinged reason for action that takes no other reasons into consideration is ideology. An ideology consists of a set of reasons for action that always dominate other reasons for action, such that the micro reason (profit in this case) subordinates the macro reason (conserve water). This definition of ideology is not mine. Philosopher Hannah Arendt writes, “An ideology is quite literally what its name indicates: it is the logic of an idea… The ideology treats the course of events as though it followed the same “law” as the logical exposition of its ‘idea’. Ideologies pretend to know the mysteries of the whole historical process – the secrets of the past, the intricacies of the present, the uncertainties of the future – because of the logic inherent in their respective ideas.” (from The Origins of Totalitarianism, p604) In the case of our economic crisis, when profit always superordinates other reasons for individual action we end up with an ideology that quite obviously acts to destroy itself. The characters of the crisis, the bankers, the fed, the congress, etc. acted rationally; but the problem was that they acted only with the idea of profit in their minds – for either making profit or speeding it along the way. They become blind ideologues who like superstitious creatures from another age, believed that hidden mystery behind life was as simple as an economic principle. The rational becomes irrational when it becomes ideological. Reason is no guard from itself.