The following piece was initially composed for a 2007 course on Political Theory at the University of California, Berkeley.
Overview
Neo-liberalism is a constructed narrative, theory and interpretative mode employed to account for and make sense of people and events in political history. As a tradition of political thought, it purports to account for, explain and offer solutions as to how individual desires can result in (or at least be compatible with) collective political goals and welfare.
The question of whether or not Neo-liberalism is “true” or “false” is not an efficacious question, so much as whether or not what it assumes and relies upon about humans and rationality ultimately discredits its goals and renders it useless.
Ultimately, it appears that the Neo-liberal conception of human rationality is a reductionist project that fails to incorporate and contextualize its “rational” subject, and which invariably leaves a great deal of questions surrounding the collective good and democratic norms unanswered.
Rational Choice Theory & Markets
Rational choice theory adopts a methodological individualist position and attempts to explain all social phenomena in terms of the rational calculations made by self-interested individuals. It is a theory that sees social interaction as social exchange, modeled on economic action, whereby people are motivated by the rewards and costs of actions and by the profits that they can make. The assumption is that actions are the product of strategic, utility-maximizing individuals.
Central to Neo-liberal theory and symbiotically bound with these rational principles is the claim that states should turn to markets because they are inherently efficient. The belief is that markets automatically lead to optimal results whenever they are allowed to operate without interference.
Besides being analogous at the ideological level, this framework also advances the neo-liberal mode of government, acting through both internalization and uniformization of market-based rationality. Neo-liberalism casts the political and social spheres both as appropriately dominated by market concerns and as themselves organized by market rationality. That is, more than simply facilitating the economy, the state itself must construct and construe itself in market terms, as well as develop policies and promulgate a political culture that figures citizens exhaustively as rational economic actors in every sphere of life.
Familiar here are the many privatization and outsourcing schemes for welfare, education, prisons, the police, and the military, but this aspect of neo-liberalism also entails a host of policies that figure and produce citizens as individual entrepreneurs and consumers whose moral autonomy is measured by their capacity for “self-care.” The market mechanism best allows individuals to exercise their “rational choice” in the form of purchasing power.
It is this reliance on the market metaphor and belief in intrinsic, almost fetishized qualities about it that leads many neo-liberals to align themselves with the conception of inherent rationality.
Rational Choice Theory & Institutions
What this view fails to take into account is that markets function properly if and only if a suitable set of background institutions are already in place within the context of government. In the absence of adequate laws enforcing competition, privatization will result in monopolies that harm the interests of consumers.
Similarly, what rational choice theory fails to take into account in its discussions of the “preferences” it derives from goal oriented behavior are the contexts, institutions and qualities of life that may be contributing or that allow sense-making rationality to occur. Just as the market functions in a particular historical context, so too is rationality constructed, and any intrinsic worth applied to it must be scrutinized.
Rational choice theory and neo-liberalism are essentially reductionist projects. Because individual preferences are seen as assumptions of the model, they do not, as Adam Smith tried to do, explain the preferences themselves. Within rational choice theory, the “origin and nature of these preferences is exogenous to the model.” Individuals became autonomous actors whose diverse emotional motivations for behavior and their need for regulation are masked behind the static theory of rational choice.
“The problem is that if there are no clearly defined collective goals in the political world or if there is no regulatory mechanism to harmonize self-interested maximizing behavior with such goals, it is no longer clear that self-interested maximizing behavior should be considered rational or that unconstrained individual preferences should be granted sovereignty, as they are in the rational actor model.” — Bevir, M. “Narratives of Thatcherism.” University of Newcastle Department of Politics, Newcastle: 1998, pg. 4
Attempts at bounded or procedural rationality as a modification of assumptions, accept that rational choice as a method is only as effective as the actors’ decision-making and problem solving means permit. This model is more concerned with the mental process of decision- making itself than with behavior, putting emphasis on process not outcome. This does take into account certain “computational limitations,” uncertain or limited information, yet as a theory does not structurally address why these limitations occur.
Identity can be so strong that there is no conscious choice for an actor to make in the traditional sense of assessing options and choosing the best one for them. Instead, their perception of themselves in relation to others can limit the options available to them.
Rational actor theory contains no discussion about the nature of actors’ particular preferences and assumes little about the way in which actors make probability estimates of uncertain events, or the compounding of unintended consequences that produce social phenomena that individuals may be only partially aware of and that they experience as constraints.
It seems that all rational economic actions occur within an institutional framework of norms that cannot itself be explained as the result of rational action alone. The norms of fair exchange and reciprocity, for example, cannot be explained in terms of specific contractual acts of exchange. Self-interested rational actors cannot generate a stable social order on an economic (or coercive, political) basis. Social order can be explained only through the recognition that there is a normative, non-rational element in individual contracts.
Rational Choice Theory & Altruism
The related quandary is that of why individuals should ever feel any sense of obligation or wish to act in altruistic ways. Rational choice theorists tend to respond that norms are simply arbitrary preferences. Individuals may be socialized into all sorts of value commitments and will then act rationally in relation to these, whatever they may be. If people want to help others and get a sense of satisfaction from doing so, then giving help is an act of rational self-interest. And yet, cooperative and altruistic behaviour is so often sensed as a normative matter, as a matter of obligation and commitment.
Attempts have been made to counter the problem by suggesting that people are willing to incur costs and imbalances in their exchange relations when they are formed into long chains of actions. In these circumstances — which are normal in all societies — they anticipate that any loss can be traded in for a counter-balancing profit at some time in the future. People anticipate a long-term reciprocity that is in everybody’s interest and so becomes accepted as a norm. However, this solution assumes that individuals will trust each other, and yet within the rational framework, individuals have no incentive to build this trust in the first place.
The framework of norms and commitments that sustain such trust relations cannot themselves be explained through rational action processes — for norms are not ‘outcome-oriented’ but are internalized, and so acquire a compulsive character that cannot be explained in purely rational terms. While rational considerations may explain why particular individuals introduce and enforce social norms, they cannot explain how these norms come to be internalized.
Conclusion
Perhaps the market is only one metaphor that we should use.
It must be remembered that Neo-liberalism as a political rationality constitutes a specific and consequential organization of the social, the subject, and the state. A political rationality is not equivalent to an ideology stemming from or masking an economic reality, nor is it merely a spillover effect of the economic on the political or the social. Rather, a political rationality is a specific form of normative political reason organizing the political sphere, governance practices, and citizenship that governs the “truth” criteria of these domains.
