13 Stability and Invariance

Two critical assumptions are frequently made, often implicitly, when using models of rational choice.

First, it is typically assumed that a person’s preferences remain stable throughout the course of an experiment or decision-making process.

Stability: Individuals’ preferences are stable over the period of the investigation.

Second, it is assumed that individuals’ preferences are unaffected by irrelevant factors, such as how a decision is framed or the environment in which it is made.

Invariance: Individuals’ preferences are invariant to irrelevant changes in the context of making the decision.

These assumptions are fundamental to applying rational choice models to decision-making scenarios. Unlike formal axioms like Transitivity, Completeness, and the Independence Axiom, which ensure internal coherence of preferences, Stability and Invariance are substantive axioms. They go beyond internal consistency, imposing constraints on what decision makers should or should not care about.

This brings us to a critical dilemma for rational choice theorists (sometimes referred to as the “Economist’s Dilemma”):

Only Assume the Formal Axioms of Rational Choice: One option is to adhere strictly to the formal axioms of Completeness, Transitivity, Independence, and other principles without assuming Stability and Invariance. This approach preserves the internal coherence of rational choice theory but limits its practical applicability. It would consider preferences rational even if they constantly change or are influenced by irrelevant contextual factors, thereby reducing the theory’s effectiveness in explaining and predicting real-world behavior.
Assume Stability and Invariance: The alternative is to assume that preferences are Stable and Invariant, which enhances the theory’s practical relevance for prediction and explanation. However, this assumption imposes substantive expectations on decision-makers’ behavior, aligning the theory more with the perspectives of theorists rather than accurately reflecting how individuals actually behave. This approach risks making rational choice theory prescriptive—dictating how people should behave—rather than being purely descriptive of how they actually (should) make decisions.

Navigating this dilemma is crucial for developing a more accurate and applicable theory of rational choice, one that acknowledges the complexities of human decision-making while still providing a meaningful framework for understanding rational behavior.