Rethinking our Rationality: How Our Self-Interest Driven Our Act For Good or For Worse

We wonder that, with many natural disaster that occurs and its often driven by an effect of our error in economical activities. Is it true that human are rational as it suggest in many economics assumption? or is it we, human is same as another beast, only driven to survive without thinking that every of our action can driven another person to a worst position.

“ It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”- Adam Smith

As far as we know, that human beings are known as rational animal. An Animal that drives to pursue their goal based on their capacity to think and act rationaly. That thinking is become major philosophical roots and assumption in every economics thinking. In the world of economical analysis, humans are an individual that doing an action that drives to achieve their goal rationally. Because of that, we can see how human behaviour to act is often involving their capacity to choice the act that gives every individual an incentives, while avoiding the risk that limited each of their choice rationally

Each of these act has driven human to explore every resource to achieve their interest. But while our interest and needs are unrestricted. The resource to use are rarely available. It galvanize human to exchange every resource and abilites that they have to achieve their interest. And these activities is making up an complex mechanism, what we often called “Economical Activities”

“We think, each of us, that we’re much more rational than we are. And we think that we make our decisions because we have good reasons to make them. Even when it’s the other way around. We believe in the reasons, because we’ve already made the decision.” ~ Daniel Kahnemann

But in real world, we often see how human behaviour are prone to error. What the human see about reality of the world are often bias, and that thing is driving the capacity of human to act. We are not so rational as we thought. Every human judgment and choice are not flawless. Our misjudgment are often happen by our false sense of memory, statistical analysis and also our failure to observe social condition.

Well its true, that every of human act are rational to achieving their self-interest, but with our limitation to analyze every information that we have about the complexity of the world. Because of that human activities are often prone to error. What we think that we can do good for our individual interest are often turns into disaster for our interest as whole human beings.

William Forster Lloyd an 18th century economist are known with its essay “The Tragedy of The Commons”. This essay is wrote about the problem how our self-interest are often behave contracy with our common interest. He gives an example, when a group of cattle herders share a common resource (example a field of grass), the depletion of the field become more severe and in the end all of the resource are depleted more faster than when its only share individually

“If a person puts more cattle into his own field, the amount of the subsistence which they consume is all deducted from that which was at the command, of his original stock ; and if, before,there was no more than a sufficiency of pasture, he reaps no benefit from the additional cattle,what is gained in one way being lost in another. But if he puts more cattle on a common, the food which they consume forms a deduction which is shared between all the cattle, as well that of others as his own, in proportion to their number, and only a small part of it is taken from his own cattle. In an inclosed pasture, there is a point of saturation, if I may so call it, (by which, I mean a barrier depending on considerations of interest,) beyond which no prudent man will add to his stock. In a common, also, there is in like manner a point of saturation. But the position of the point in the two cases is obviously different. Were a number of adjoining pastures, already fully stocked, to be at once thrown open, and converted into one vast common, the position of the point of saturation would immediately be changed” ~ William Foster Llyold

This example is become an analytical tool to deducted how our behaviour is often prone to gives a disaster to our common interest. We can see another example of how our self interest (added with our prone to error) can drive common-interest into worst position, such as the famous one is The Deforestation. How our behaviour to survive independently (like producting food) in the forest can lead the destruction of the forest and in the end it drive a negative externalities such as Forest fire and flood.

Those problem may changed our basic view about the nature of our behaviour. Human may are not rational as it seems. But the problem is not with out solution

Florian Diekert , an Envinronmental Economist of Oslo University Norway says that our behaviour arent so worse as it seems too. Using an game theoritical analysis of the tragedy of the commons. That using the case that every player (in this case farmer) are bounded to cooperate and if it fail to cooperate they will be punished

From the figure above we can see that there are considerable effect when people are not coordinated to us a natural resource , the stock size of the herds are driven to point where its depleted. While when the people are coordinated, the size of the stock may depleted in the short term, but with a coordinated efforts the stock size are rising in the long terms. Each player can keep pursue their interest in the end

This theoretical research are giving a clear signal that coordination become the solution for our error to achieve our self-interest.The coordination can be see as an act to access more information, that previously arent available due our limitless to access it.A deep understanding in turn is only possible when people with different points of view come together and discuss.

And in the end this discussion showing that how our behaviour as human arent flawless as we think before, and well it no so worse as it seems, as a rational being, we can drive to “redeem” our error by solving the problem with an coordination. Its now depends to our act, to serve our rationality without flaw, or prone to error