Criteria for individual rationality

In Chapter 3 we saw the inadequacies of the economist's version of rationality and in Chapter 4 we developed a more sophisticated concept of cognitive complexity, one that seems to give a superior account of economic behavior. That later chapter also introduced us to some ways of thinking about emotional responses to economic stimuli and showed the interdependence of cognition and emotion in economic life. Now, following the analysis of the way money facilitates, and hinders, cognition in the market I seek to continue this treatment of money and to integrate several of these themes.

Economic rationality is a thin and unsophisticated version of cognitive complexity; it clearly enlists complicated cognitions but it is ignorant of the grounds for preferences, their relation to the deepest trends in a person's psyche, the way they change, and the way people match means to ends. Yet we need a realistic standard for decision making in the market, one that is judged not only by psychological standards but also on grounds of its efficiency in guiding a person to get what he or she wants. Here, for the limited purposes of this chapter, I take the liberty of devising such a standard and, so as not to sacrifice a useful word, will name it insightful rationality.

This invention permits us to get on with the substantive purpose of the chapter: to analyze how attitudes toward money affect the (insightfully) rational decisions that people make in their economic transactions. In Chapter 5 we saw how money, taken in its denotative sense as a sign, altered and usually improved people's cognitions about the market.