Financial Times FT.com

In magic or in markets, it is never rational to be wrong

By John Kay

Published: September 1 2009 20:25 | Last updated: September 1 2009 20:25

Last week the anthropologist Keir Martin described on this page how Papua New Guinea farmers would plant only half their land, believing that envious neighbours might employ witchcraft if they did more. This behaviour was evidently not profit-maximising, yet made sense in the context of the beliefs and customs of Papua New Guinea.

I knew what the response would be, and it was not long in coming: Martin Cox explained in a letter that economists would regard such behaviour as wholly rational. Modern economics – and the rational choice theory that has now spread throughout the social sciences – defines rationality not as wealth maximisation but as consistency. If the tribesmen plant half their fields where there is bad juju, and all their fields when there is good juju, their behaviour is rational – so long as they adhere strictly to that principle.

John Kay, columist

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