Sociology 304

Notes for February 16, 1999

Political Economic Approaches - I

I. Issues of Collective Action

A. Free Rider Problem

B. False Consciousness

II. Neoclassical Economic Agents

A. Rational Economic Man - REM

B. Imperfectly Rational Person - IRSEP

C. Conclusion

I. Issues of Collective Action

One of the first issues addressed by Folbre is how collective action occurs. Folbre attempts to explain "why individuals identify themselves as members of particular groups, and pursue group interests, sometimes at their own expense" (p. 5). In order to explain how social change takes place and how individuals act individually and together, she attempts to build a model of collective action in Who Pays for the Kids? Social scientists have built many models of human behaviour and these are often used to predict how people will act. For example, Marxists might predict that workers would oppose political parties that support free enterprise, or more conventional social scientists may predict that social change is gradual and nonrevolutionary. Marxists may thus be surprised when workers support a conservative political party and conventional social scientists will be surprised by dramatic upheavals such as mass demonstrations or revolutions.

Since people may not act in the way that social scientists predict they will, and since people often appear to act in ways that are detrimental to their own interests, social scientists have also developed various theories of why this might happen. Folbre notes that the neoclassical economic explanation is that of free riding and the Marxian explanation is that of false consciousness. She considers each of these to be incomplete, and her approach to collective action is that there are multiple interests and coalitions involved, so that there is no simple model that explains collective action. Rather, the combination of structural factors (assets, rules, norms, and preferences) along with different identities and interests result in various coalitions. These are associated with possibilities for collective action, and the form of social change that occurs is a result of these collective activities taking place within societal structures.

For example, why do working people in Canada not unite to oppose the reduction in the employment insurance program (EI). After all, workers have paid for this through payroll deductions, and when they become unemployed, expect to collect from the program. Yet the government has tightened eligibility requirements so that only about one-third of unemployed workers now receive EI. The economist might say that it is not worth any one individual's while to fight this, but if others do reverse federal policy, an individual worker can receive the benefit of this. This is the free rider problem. Let others do the tough political work and you may benefit from this. A Marxian answer might be false consciousness, that is, that it is in the interests of all workers to oppose the EI cuts, but perhaps no one thinks they will become unemployed, or perhaps they think that the program should run a surplus. While not rejecting either of these arguments, Folbre might provide additional explanations. From her composite perspective, it might be argued that EI is not the consideration that is most important for many unemployed people. They might have other sources of support (others in the family), they might use the time to create other possibilities for themselves (further education and training), they might have future job possibilities, etc. That is, while both the conventional and Marxian approaches provide part of the answer, there may be a variety of other considerations.

The notes that follow contain a short discussion of the free rider problem and false consciousness.

A. Free Rider Problem. See Folbre, p. 5. This is the tendency to let others do the work or take the risks and yet benefit from this action taken by others. Economists often use this concept when referring to the provision of a public good, which once paid for is generally available for all. For example, once the cost of making and broadcasting weather forecasts has been met, there is no further cost to providing it to more people. Another case is national defense, where the cost is in the initial provision. In both these cases, no one individual would pay for these and the question that emerges is who should pay for provision of the public good. This problem does not arise in the case of most goods and services that are bought and sold for individual consumption, although it could emerge in any good or service purchased for consumption by a group of people. Lipsey, Courant, and Purvis (LCP) give the example of a group of friends renting a videotape. Who pays for the video and how is the cost of rental distributed? If one individual pays, the others could be considered to be free riders. (LCP, pp. 391-2).

Folbre notes that the same could occur with collective action, and refers to the complexities of collective action (pp. 65-70). Efforts of time, effort, stress, and finances on the part of some in an organization may be necessary to achieve gains for the members. Once achieved, these are available for all, and those who did not assist in achieving these gains might be considered free riders. For example, all students may benefit from new forms of financial assistance that are established as a result of the effort of students leaders and students who undertake political action.

On way in which a public good can be paid for is by a tax on all - with the public good being provided by the state and paid for through the tax system. Charging individuals on the basis of their individual use is (i) not possible (national defense, broadcasting), (ii) costly (cost of collection high - roads), (iii) inefficient for allocation (economists' concern with equalizing marginal costs with marginal benefits), or (iv) inequitable (exclusion of those with little income). In this case, principles of taxation come into effect, and the question is what is an equitable form of tax to pay for the provision of the public good. In the discussion of social welfare programs and collective action, these issues become especially important, and are very relevant in understanding political action. Folbre argues for greater equity in paying for the costs of social reproduction, partly by recognizing that some aspects of social reproduction are like public goods - they should be paid for out of general taxation and not provided only to those who can pay for them as private goods and services.

B. False Consciousness. See Folbre, pp. 5, 34, 68. This is a failure to recognize the potential gains from collective action by the group of which the individual is a part. The concept of false consciousness comes from Marxian social theory. In this approach, false consciousness may be why collective action does not occur. The concept is somewhat different than the free rider problem, where people see the benefits, but do not want to pay the costs; that is, individuals may be selfish and find it in their best interests to let others take collective action. In the Marxian approach, the problem is that people do not see the benefits of a particular set of actions, or they see different consequences emerging from collective action. This lack of vision may occur as a result of ideologies that mask the true nature of the structures in capitalist society.

Marxist analysis contrasts class consciousness with false consciousness. Class consciousness is the ability of the members of a social class to see their position within the social structure and act together to work toward achieving what is in the best interests of this social class. For members of the working class, this means organizing collectively to counter the power of the capitalist class. Not being able to recognize the position of the class or not being able to act on these interests is false consciousness.

Folbre's analysis shows that class consciousness may be a slippery concept. In contemporary society, people may occupy multiple positions, with different or even contradictory interests, and this can make false consciousness problematic. In this situation, what is class consciousness and what is false consciousness? On page 68, Folbre gives some examples of interests that might be considered to demonstrate false consciousness, but really show how there are different bases for organizing identification and loyalty. For example, elderly people may attempt to preserve a particular status quo (perhaps to protect pensions or retirement savings), even when action to do this may not seem to be in the best interests of their social class or gender. Working class people with heterosexual sexual preference may unify across gender lines against those with a different sexual preference, and not act in accord with their interests as members of the working class.

II. Neoclassical Economic Agents - REM and IRSEP

A. Rational Economic Man - REM. While economics certainly recognizes structure in the form of scarcity and constraint, the focus of much economic theory is on "rational choices of self-interested agents" (p. 17). It is these models of rational behaviour that form the core of neoclassical economics. There are two parts to the neoclassical economic model, and this may not always be apparent in Who Pays for the Kids? The first part is the model of individual behaviour (at the micro level of the individual or small group) and the second part is what are the results of the model for groupings larger than the individual or for the whole society (at the macro level).

1. Models of Individual Rational Choice. These are the microeconomic models of rational choice by individuals who are attempting to maximize their own utility or satisfaction through these choices, as briefly outlined on the first half of p. 18. That is, these models deal with issues of individual decision-making at the micro or individual and household level. Such models of individual choice focus on how people make rational economic decisions in a situation where there are scarce resources. This approach emerges from the utilitarian approach of Jeremy Bentham (1748-1832) who coined the term "utilitarian" and who made the famous phrase "the greatest happiness for the greatest numbers" popular. Bentham's idea was that individuals make choices that increase their utility or happiness, and reduce their pain or disutility. "Bentham argued that self-interests, properly understood, are harmonious and that the general welfare is bound up with personal happiness." (The New Columbia Encyclopedia, 1975). The latter argument concerning general welfare is the second part of the individual rational choice model - the societal result as discussed next.

2. Societal Result. A second part of neoclassical economic models is the macroeconomic or the result for society when large numbers of individuals and enterprises each make rational choices in their own self-interest. According to the ideal model, the result of such pursuit of individual self-interest is to produce the maximum benefit for society as a whole. Here Folbre refers to the model as eliminating excess profits and unemployment, and even discrimination (last half of p. 18). Discrimination is eliminated because those enterprises who do not make the best economic use of resources are not as efficient as those who do. The less efficient (the discriminators) cannot offer the product at as low a price or with as good service as the more efficient (the non-discriminators), so that the discriminators are driven out of business. This second part of the model is based on a number of restrictive assumptions which may or may not come close to describing markets and societies.

3. Example Economic Model with Rationality - Consumer Choice. How do you decide how much of any one good you will purchase and consume? While there may be some consumer goods over which you have little choice (like tuition, textbooks and supplies if you are enrolled at university), there are many consumer choices each of us makes. Of course, those with a high income have much more flexibility and choice, since necessities are a small portion of their budget and this allows them to use their discretionary income as they choose. But other than people at a bare minimum subsistence, each individual as a consumer has some choices concerning what to purchase.

The main constraint is the total income or budget available, assuming of course that the individual does not increase their debts during the time we are considering their choices concerning what to purchase. The neoclassical model is that of an individual with a budget constraint, deciding how to spend this money. This individual is informed concerning the prices of the different commodities available. The individual also is aware of their own preferences or tastes. That is, the model assumes that the individual is aware of the satisfaction that he or she will obtain by consuming the products that are purchased. The basic model then is one of balancing costs and benefits or satisfaction. The cost of any commodity is the money cost of that commodity. The individual will purchase more or each product until the extra cost associated with the next unit of that commodity is not worth what it costs. For example, consider how many cups of coffee you purchase in a day. Suppose each cup costs $1. How much would you pay for the first cup of coffee? You might pay $2, if there was no alternative, but you probably would not pay $5. That is, the first cup of coffee returns a certain satisfaction to you that may exceed what the actual cost is. After your first cup, you may want another cup a little later, and that one is still worthwhile, but perhaps you would not pay more than $1.50 for it. By the time you get to the third cup, it may be worth exactly the dollar it cost. That is, you would not be willing to pay more than $1 for that third cup. What about a fourth cup. If one is available for 50 cents, you might pay that, but by this time, you are facing what economists call diminishing utility. If the cost is still $1, you say it is just not worth it at this point. So if the cost of coffee is $1, you purchase three cups that day. But if the cost was lowered to 50 cents, you might buy 4 cups. Or if the cost was $2, you might buy only one cup. That is, you consume each product up to the point where the extra cost of purchasing that product is just balanced by the satisfaction or benefit received by consuming the last unit of that product. These are rational, individual choices where you have the knowledge concerning the price of the product and the satisfaction you will obtain by consuming the product.

Another way of considering such choices is to consider trade-offs or opportunity costs. That is, the cost of any product is what you have to give up in exchange for that product. Purchasing more coffee means fewer chocolate bars. Say you have $5 to get through the day and you figure it can be on the basis of coffee and chocolate that you get through the day. How do you divide the money? Suppose a cup of coffee costs $1 and a chocolate bar costs $1. You start the day by buying a cup of coffee, reducing your budget to $4. Then you get hungry so you buy a chocolate bar, reducing your resources to $3. Now you have to make choices, and you probably consider carefully how you are to balance the remaining $3. Each extra cup of coffee costs one chocolate bar. Or each extra chocolate bar costs one cup of coffee. If you are an individual with a strong preference for chocolate, you may spend the other $3 on chocolate bars. Or if you really like coffee, all the rest may go toward coffee. More likely you balance off the extra costs of each so you gain maximum satisfaction. This may lead toward purchasing 3 cups of coffee and 2 chocolate bars. If you have made the correct allocation of your budget, that will maximize your satisfaction, subject to the budget constraint of having only $5 and subject to the prices that are given.

4. Costs of Social Reproduction

a. Costs. What are the costs of caring for the kids, and more generally the costs of social reproduction? The costs may be actual monetary costs, they may be opportunities foregone, or they may be expenditures of time and energy. They may be at the level of the individual, family, group, social institution, or society as a whole.

1. Monetary: food, clothing, day care, education, health, recreation, housing.

2. Opportunities foregone: These are the economists' opportunity costs.

Short term costs: Travel, leisure, recreation, luxuries, individual choices.

Long term costs: Career, job opportunities, job advancement, cost of women not in work force.

Time issues: Time with others, peers, partner, social life. Personal time, privacy.

Educational opportunities restricted.

Opportunity costs are the result of scarcity, or the fact that choices must be made within the context of scarcity.

Scarcity means need for Choice and each Choice has a Cost associated with it.

Lipsey, Courant, and Purvis (p. 4) define the opportunity cost of using resources for a certain purpose as the benefit given up by not using them in an alternative way; that is, it is the cost measured in terms of other commodities that could have been obtained instead. They conclude that "Every time a choice must be made, opportunity costs are incurred" (p. 5). This is a very basic concept of neoclassical economics - that choices within the context of scarcity imply opportunity costs.

Sociology. While we sometimes discuss choices or opportunities foregone, this seems a less central concern than in economics. Perhaps this is because:

  1. Sociology is not so concerned with costs and may not be so concerned with scarcity. Economic models may assume full employment, so that one result cannot be achieved without giving up something else.
  2. Structures may be very constraining and imply limited choices so that there are few alternatives.
  3. Sociology may be concerned with choices that are possibly expansive - interaction, collective action. Having children presents many rewards and other opportunities. Focus on both the patterns and structures of opportunities and constraints, and the consequences of choices made may be a useful approach from Folbre, so that sociologists should pay more attention to opportunity costs.

Other Costs

These latter costs are even less quantifiable. Note though that these form a basic part of Folbre's arguments. She tends to introduce these through her emphasis on norms and preferences, and the forms of approval and disapproval that go along with those. These are often very constraining so that people who follow the ordinary patterns may not always be all that aware of these.

In addition, sociologists may be less concerned with the process of choice. That is, the models of economists concentrate on the choices made, seeming to imply that everyday life is concerned with continually making these choices in a well thought out and rational manner, with the individual attempting to maximize his or her satisfaction or utility. In fact, the choices may be more implicit and less calculated than implied in economic models, and the process of choice may be relatively infrequent and governed more by norms and preferences than is implied by many economic models.

b. Who Pays Costs? Who pays for these costs? What is the usual situation and what are some of the different patterns? These may be quite varied within and across societies. E.g. individual, family (and distribution within family), taxpayers.

Note: much of the following will form the basis for discussions throughout the book. There is considerable variation in who pays the costs - individual choices, norms, patterns, and also depending on the type of cost.

Note with respect to the latter that while everyone pays taxes, these are certainly not uniformly distributed nor the benefits from these uniformly received. To say that the state pays for some parts does help explain the distribution between individuals and families on the one side, and the society as a whole on the other. But the patterns of state expenditures, rules concerning qualifications and eligibility, and the incidence of taxation all need to be considered. These can raise complex poltical-economic and policy issues and we will not be able to address all of these.

c. Costs Not Met. Are there costs that should be paid, but are not? These may be costs that are not met, in the sense that the care does not take place. Distribution of this may differ considerably across individuals and families in society.

Note that while some of these are ultimately paid by some in society, others are opportunities and potential that may be missed entirely. Some involve changes in systems of taxation or government programs, and others involve the changes in the norms and preferences which would lead to different patterns and structures. Some might require even more radical changes in the structures of society. These may also differ considerably by social class, ethnicity and society.

5. Evaluation of the Neoclassical Model of Choice

a. Positive aspects. The model is concise, relatively simple, and strips away many issues that may confuse the question of how choice is made. It focuses directly on the main element of choice - between time and money, and produces a quick and understandable set of results. In principle the model is testable, as are each of the implications noted in section 4. The model can be widely applied, across space, time, social groups, and societies, and it is not specific to any one time or place. The explanation provided by the model is reasonable and provides an example of the power of some of the neoclassical economic models.

b. Negative features. At the same time, such model may be too simplistic, especially when applied to the trade-off between time and jobs. That is, in reality other factors impinge - types of jobs, varied sets of responsibilities, limited incomes, coercion, limited opportunities, and discrimination. This choice is not one that is available to most individuals. Employers often dictate the number of hours of the job, and the only choice is one of whether to take that job or not. The model does not consider reasons for different preferences. For example, poverty or low income may dictate very long hours worked, regardless of preferences. Unemployment may mean that an individual faces the possibility of no hours of employment being available. Trade unions and employers each act as organized groups, dramatically affecting the structure of the labour market and the choices available for individuals and employers.

c. Relation to Structure of Theory. (Refer to schema of January 6 and 8, 1998). The model of choice of hours worked illustrates an ideal type model of the central panel in the diagram. The model makes assumptions about preferences and wages; uses concepts such as utility, wage, job; constructs statements (written or diagrammatic); puts these in formats like the diagrams shown; and yields hypotheses and explanations. It appears to illustrate all the aspects of the middle panel. Where the model is weaker is in relation to what is noted on the left and right panels, such as the fact that most employers do not offer work on this basis. Some hypotheses and conclusions from the model can be verified (overtime paid at a higher than normal rate of pay, backward bending supply curve of labour), other hypotheses such as the different preferences of male and female for household as opposed to market work may also seem to be verified, but also are consistent with other models. In addition, the policy and practice portion of the model may be weak. But the model is internally consistent, makes sense once the assumptions are adopted, and yields some useful conclusions.

6. Terms Associated with Models.

Exogenous - originating from without. Rules, norms, preferences. In the model of hours at the job, the wage rate is exogenous. Rules that do not allow a worker to choose the number of hours to be worked and modify the contract between worker and employer are exogenous to the above model. That is, they are based on social practice that is set out in laws or agreed upon practice.

Endogenous - originating from within. In the model of hours at the job, the number of hours at the job chosen by the worker, the number of hours of free time resulting, and the costs and benefits obtained from this decision are endogenous to the model.

B. IRSEP - Imperfectly Rational Somewhat Economic Persons.

The model of rational economic man (REM) is the model that typifies the neoclassical economic approach. This is the model of many textbooks in economics, and it emerges from the classical liberal economic model. In stylized form, Folbre summarizes the model succinctly as follows:

REM - Traditional Neoclassical Stylized Model (p. 24).

Exogenously given factors: rules, norms, preferences

Agents: individuals

Processes: exchange

Sites: markets

In recent years, the REM model has come under considerable criticism, because it seems quite different from the experiences of people and differs from the institutional features that exist in the economy and society. As a result, economists have modified their models and Folbre describes some of the modifications on pp. 20-25. She labels this model the imperfectly rational somewhat economic person (IRSEP). In summary form, this model is described as follows (p. 24):

IRSEP - Neoclassical Institutional

Partially endogenous and partially exogenous factors: rules, norms, preferences

Agents: individuals, interest groups

Processes: exchange, bargaining, coordination

Sites: markets, social institutions

The IRSEP model brings the theoretical economic approach closer to the institutional reality that people experience in contemporary society. But the result of the modifications is that IRSEP "undermines any strong claims about the inherent efficiency of a pure market economy" (p. 24). That is, the very strong positive social and economic result of the REM model may no longer hold. For example, if there is not perfect, costless information, with reasonable certainty about the future, there is no assurance that consumers will select those products that maximize their satisfaction. They may instead consume products on the basis of habit and custom, ease of availability, or advertising.

Assumptions and Modifications. The following notes contain a discussion of the assumptions associated with the REM model, and the changes to these assumptions that appear in the modified IRSEP models.

1. Individual. The model focuses entirely on the individual. The individual is isolated, with no reference to interaction with other individuals. This is sometimes referred to as an atomistic model of society, whereby the individual is the basis of society (Hunt, p. 41). A decision is made by an individual without any reference to others, with that individual considering only his or her own choices, opportunities, monetary gain, and disutility. This is the basis of a liberal model of society - i.e. a society constructed from the set of all the individuals, although in the original liberal model, the individuals were all male. These individuals have a certain equality with each other, although there may be much debate about what the nature of that equality is.

One way in which this model has changed is that economists have introduced a wider range of types of decision makers. In the IRSEP model, the decision makers could be individuals, households or families, or interest groups.

a. Household and family. There is now a whole new household economics, considering factors such as choices within the family, choices concerning the number of children, the benefits of love and sex, and the costs of exit from the model (divorce or separation). It is not clear in the REM model why REM would even want to form a family.

There are many within household strategies. An example of how changes in social and economic conditions changes the relationship between children and family (middle of p. 23). In societies where the child depends on a bequest from the parents, then within family solidarity may be strong, and children contribute to family income and maintain the elderly parents. This could be characteristic of many agricultural societies, or groups that have family enterprises. As industrialization occurs, with the development of a more jobs and activities outside the household, children may become less committed to the family of origin, and contribute little to the parents. Education, jobs and incomes are part of the market economy and the child has little choice but to become committed to finding a place there.

b. Collectivities. Trade unions. Individuals may take actions that impose considerable cost on themselves, without any assurance of immediate gain, other than some promise that if all in the same situation act together, all are likely to gain. Strikes impose many costs on not just the individual workers but family members and other individuals. But in the end this may be worthwhile for the trade union members. Because these choices involve discussion and strategizing with other members, these cannot be individually based decisions, but must be collective in nature. At the other end, those who decide to become racists, discriminating against certain types of other individuals, may themselves bear costs.

Individuation. Folbre (p. 28) asks how collective action occurs. People start as individuals and become socialized into a certain group. Folbre argues that the process of individuation may be a collective one. As individuals develop links and commitments to others, this helps them define their identity - so that one is not just a female, a worker, a lesbian - rather, the individual may be none or all of these, and her view of her own identity is one that develops as a result of a complex of interactions and processes involving these. The process of socialization of children, whereby children become individuals, but simultaneously become part of a peer group shows that the process of development of the individual cannot be considered apart from the collective.

c. Boundaries. For Folbre, this also raises the issue of where the individual ends and where the collectivity begins. This is clear cut for REM and probably IRSEP, but not so clear in practice. These boundaries may shift depending on the context in which the individual is in, they are likely to change over time, and they imply difficulty defining the utility or interest of the individual. For example, the model of choice of hours might have made sense at one time, but if an individual is part of a family, the decision concerning hours worked is likely to be a joint one, between partners (how many hours each will work), and perhaps with respect to child care responsibilities (how much time to devote to those). The individual is no longer clearly able to make decisions in isolation - some decisions may occur this way, others are made jointly with partner, children, parents, or friends, so the boundaries shift depending on what decision is being considered. Many of the decisions may interact, so that there are both shifting boundaries and interacting decisions, making simple models such as the choice of hours worked less clear cut.

2. Economic Self-Interest. The decision in the model is a self-centred one, in that there is no reference to the feelings, utility, or well-being of other workers, associates, friends, family, or household. In addition, the focus of the model is on economic or monetary self-interest. Other variables may be considered as being present, in terms of preferences, but do not form a central role in the decision-making process. For example, in the case of choice of hours worked, the individual balances monetary gain against the value of the loss of free time. While this is reasonable, there may be a more complex process involving non-monetary characteristics of the job, relationships with co-workers, family commitments, and norms concerning work behavior. These latter variables might be captured by the shape of the curves of equal preference (see item 6 below), but there is little explicit analysis of these.

The modifications in the IRSEP model may recognize love, caring, help for others, or altruism: "unselfish devotion to the interests and welfare of others" and altruistic behaviour: "thoughtful of welfare of others" "unselfish" (Gage). Folbre questions how someone could be so narrowly self-centred in market behavior and so altruistic in the home (p.20). The two forms of motivation seem at odds with each other and it is not clear that individuals can act so differently in different situations. What Folbre proposes is that families can be considered to be sites where there are "shifting and somewhat unpredictable mixtures of selfishness and altruism" (p. 23). Both of these are reasonable explanations of what we consider to be types of household behavior, and each is rational. At the same time, these two forms are always being considered, balanced, re-considered, or re-negotiated. These two are somewhat reminiscent of Talcott Parsons pattern variables.

3. Perfect information. In the above model, the wage rate is known to the worker. Also implicit in the model is that the worker knows the wage rates of other employers and the state of the labour market. Utility or disutility of work is also known, or the individual finds it possible to balance these two. In models of commodity markets, consumers know prices and qualities, and there is no cost of obtaining information about these.

The IRSEP model recognizes that (i) the future is not known with certainty, but is uncertain, (ii) obtaining information is costly, so that decisions are likely to be made on the basis of very limited and partial information, and (iii) the process of making a decision may take time and be a difficult and costly process. (p. 20) As soon as these modifications are recognized and included in a model, the decision-making process may be much less clear-cut and difficult to conduct in a rational manner. For example, in terms of daily activities, people may continue with their usual course of action because they have inadequate information to make a rational decision about changes in these actions.

4. Rationality. In order to reach an equilibrium point in the model or to undertake an activity, the individual must make a decision. The models assume that the decision-making process is rational, that is, the individual carefully weights the advantages and disadvantages of any course of action, making this process considered and deliberate. The result of the decision is to produce the best course of action for the individual.

There are many circumstances where it may be difficult for an individual to be so rational. For example, a worker may wisely save hard earned income for retirement, and then go on a gambling or spending binge for a short time if a windfall comes his or her way. For the REM model, this is clearly irrational. But money is a social good, with different forms of money having different meanings for individuals - in violation of the rational principles of the model.

Again, the IRSEP model may recognize irrationality (p. 21), or the individual may be rational in some aspects of behavior, but may be irrational in others. Forms of behavior such as religious activity, love, discrimination against others all could be considered irrational in the REM model, because each of these could result in not being able to obtain the greatest economic benefit for himself or herself.

Folbre discusses some of the meanings of rationality (pp. 26-28) in a manner similar to some of the meanings of rationality discussed by Max Weber. Within the REM model, rationality is assumed to be a clearly delineated self-interest, and no more. Folbre notes that (i) rationality may involve something more than self-interest, and could include care for others or a decision to act in concert with others, and (ii) that self-interest itself may be a fuzzy concept, with shifting and contradictory meanings. For example, more goods for self leave less for children or partner, more time working at trade union means loss of family time. How are all these to be balanced. Folbre proposes what she calls substantive rationality or purposeful choice (p. 28). This means that we "ask how people define and pursue their desires, but avoids any implicit dichotomy between rational and irrational" (p. 28). Certainly economic self-interest is part of this, but this is only part of a larger set of motivations for decision-making.

5. Inert. In the REM model, the individual is inert in that the individual does nothing unless some utility can be obtained it. The above model would have people working no hours, and essentially doing nothing, unless they are rewarded monetarily. This idea emerged in nineteenth century liberalism by those who thought of people as lazy and unwilling to work. (Hunt, p. 41). While this is not an aspect of the models noted by Folbre in REM or IRSEP, it was part of the original liberal economic and political model.

6. Tastes and Preferences Given. While the REM model recognizes that there may ve very different sets of preferences among different individuals, the models themselves are not particularly concerned with the different sources of these. In the model of hours worked, the slopes and shapes of the lines of equal preference are determined outside the model, or are exogenous to the model. These are based on norms and preferences, which are part of sociology, not economics.

The IRSEP model recognizes some of this as a problem, and may attempt to incorporate the idea that norms are slow to change (p. 22), or that the economy, through advertising or other cultural activities may influence the individual and result in changed preferences. That is, more than prices and incomes are involved in determining choices. An IRSEP model might permit certain norms such as "a good day's work for a good day's pay," or the "family wage" to be instituted within the labour market. Note that the main modification Folbre makes here is that the rules, norms, and preferences become partly endogenous factors, rather than purely exogenous factors. This makes the analysis much more sociological in that norms, preferences, rules, and culture all form an essential aspect of sociological analysis.

7. Free Choice. In the REM models, the individual has choice, but within the context of scarcity. Note that no one dictates the hours of work, and this can be freely chosen. Choice is freely selected, no one is telling the worker how many hours to put in at the job. Coercion, discrimination, treatment on the basis of race, ethnicity, or sex play no role in this model

Folbre notes that IRSEP has developed a number of models to deal with some aspects of this. On p. 21, she notes that employers may make hiring decisions on the basis of superficial characteristics such as skin colour or sex, using these as a proxy for what they think may be the abilities of workers, without ever attempting to find the true ability of each worker. Institutions also promote people within the institution, either because there is an internal labour market, or because of union seniority rules, or both. These again limit individual choice and lead to models such as bargaining models and game theory. Marxist structural models make a more systematic and thorough critique of this assumption.

8. Personal and Financial Assets Given. This may not be so apparent in the above model, but is an assumption of the microeconomic REM models. While the size of an individuals assets may change over time, through decisions concerning education or starting a business, the choice models often do not question the amount of these at any one point in time. In addition, these models do not usually consider the consequences of great differences in assets.

The IRSEP models address these concerns by considering that there is not always equal opportunity, or by examining the distribution of income and wealth that occur in society. An examination of this usually shows great inequality, with a few very wealthy, considerable numbers of poor and disadvantaged individuals, families, and groups, and the bulk of the population between these two extremes.

9. Competition. For the general positive economic and social results of the REM model to occur in society, there must be competition, that is, large numbers of producers and consumers, with no one able to influence the price, and with no barriers to entry or exit from the market.

In practice, there are many ways in which this is violated in the REM models and a large part of the IRSEP approach is to build models that show how imperfect competition, oligopoly, and monopoly affect decision-making. Some of these models use bargaining and coercion, rather than free choice, as means of reaching a solution. There are models that incorporate barriers to entry (financial barriers such as inability to raise capital or high entry fees). Contracts may be broken or may not work as anticipated. Discrimination, unemployment, and boom and bust cycles all interfere with the ideal workings of competition.

Folbre points out though that once all these elements are introduced into the model, the very positive social and economic consequences of the REM model are unlikely to occur. That is, if the REM model works properly, production using the scarce resources is maximized and individual satisfaction is also maximized, so that there is economic efficiency. But if the modified IRSEP models produce very many deviations from the original equilibrium solution, there is no way to judge the efficiency of the outcome. Different outcomes may be evaluated against each other, but there is no assurance that there is not some other outcome that might be a lot better.

C. Conclusion.

Folbre concludes the section on neoclassical economic models by noting that there have been many modifications and improvements in these models. Her analysis builds on these changes, but she also notes that a feminist approach must go beyond the rational choice models. In addition to the detailed modifications she notes, her discussion of (i) purposeful choice, and (ii) strategies, are both worth considering (p. 28).

Purposeful choice is a concept that looks on individuals as making choices. However, these choices need not be characterized as rational or irrational, individual or collective,

or so decisive as in the REM model. For Folbre, people make choices in the context of others, with more than pure individual economic self-interest being the chief consideration. There may be a range of motivations, some selfish and some altruistic; there may be shifting boundaries among individuals and groups; and there may be imperfect information within which to make decisions. Choices do occur, but it is necessary to consider "how people define and pursue their desires" (p. 28).

A related concept is that of strategy, whereby purposeful choice defines a range of actions that an individual might take. For example, Folbre notes how collective action may be a "defensive strategy for protecting against a public 'bad' being imposed from without" (p. 28). It may be that there is a range of choices, but (i) each set of choices involves aligning the individual with others in different ways, and (ii) each choice may have a longer term set of consequences. Folbre does not really develop the implications of this idea, but it seems implicit in her analysis.


Hunt, E. K., Property and Prophets, sixth edition, New York, Harper and Row, 1990.

Lipsey, Richard G., Paul N. Courant, and Douglas D. Purvis, Microeconomics, eighth Canadian edition, New York, HarperCollins, 1994.

Notes from February 16 and 18. Last edited on February 16, 1999.

Back to Sociology 304 - Winter, 1999.