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
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
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.
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:
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
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
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
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
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
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
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
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
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,
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
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.
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.
Back to Sociology 304 - Winter, 1999.