"LTN

2o

ON RATIONAL DECISION MAKING

I

C. WEST CHURCHMANUniversity of

California,

Berkeley

I Reprinted

from

ManagementTechnologyVol.

2,

No.

2, December,

1962Printed in

U.S.A.

»

♦

»

71

Reprinted

from

Management Technology

ON RATIONAL DECISION MAKING 1

C. WEST CHURCHMAN

University of

California,

Berkeley

1. What is rational behavior?The occasion of this meeting marks one more incident in peaceful international

existence. The very spirit of the meeting itself, in which intellectuals and man-agers of different nations meet to discuss their mutual problems, is a sign of ourtimes. We of Canada and the USA have learned to develop sound internationalrelationships just as we are learning to establish sound relationships betweenscience and management.

Management science and the profession of operations research are both basedon the general supposition that sound relationships between different parties in adecision making situation do exist and can be found by diligent search and re-search. We follow the pathway of a great historical precedent, which generallygoes under the name of rationalism. The precedent says that sound relationshipsbetween different parties in a decision making situation can be established bymeans of reason. It goes on to say that reason is something that all men share,and that when men come to understand clearly, they inevitably will decide inthe same ways.

It is worthwhile exploring the concept of reason nowand again, because as welearn more about our world, we learn to define reason in better ways. In societieswith powerful ruling classes it was easy to define reason. Reason was the set ofprinciples that kept the ruling class in power, much as reason in any patriarchalhousehold is the principle that "father knows best." But as exploitative ruler-ship dwindles in a society, it becomes more difficult to say exactly what reasonis supposed to be. We sense that its meaning changes as we learn more fromexperience, and therefore it is important to reassess its meaning from time totime.

Suppose we look at three different attempts to define reason. The first is interms of a set of fundamental precepts that are invariant over all behavior. Thesecond is more modest, and simply says that reason is understanding man. Thethird tries to take a quite different approach, in which the intellectual sacrificessome of his value in order to get along with theproblem.

1 Delivered before the joint meeting of the Canadian Operational Research Societyand The InstituteofManagement

Sciences,

Toronto,

Canada,

May, 1962.

Vol.

2,

No.

2, December,

1962Printed in

U.S.A.

72

C. WEST

CHURCHMAN

*

>

*

It is important to discern the spirit of this discussion, which is frankly intel-lectual. The intellectual is the fellow who wants to understand objectively. He'svery proud of the concept of objectivity and willing to defend it at all costs. Hecertainly tolerates managers and others who make non-objective decisions, be-cause he sees that often they can't do much else. But in the end he'd like to seeall decisions made objectively, just as he'd like to have us all reach an objectiveunderstanding of our environment.

Hence, the purpose of our exploration is to arrive at an objective basis forresolving conflicts between parties, and more generally, an objective basis forreaching correct decisions.

2. First answer: rational behavior is based on fixedprinciples of conduct

Exploration number one says thatreason is a set of basic principles of conduct.It means by this that all conduct can be examined and classified under the head ofeither the rational or the non-rational. The classification, furthermore, neverchanges—i.e., rationality is invariant with respect to time, place or situation.

Three examples will suffice to illustrate this meaning of rationality. An ancientexample is a set of moral precepts such as one finds in the Ten Commandments."ThouShalt Not Lie" is a precept that clearlyclassifies all behavior of a certaintype as irrational. The Ten Commandments are ten necessary conditions fordetermining whether conduct is rational. Such precepts are still with us today.They tell us how decent citizens ought not to cheat on their income taxes, oughtnot to fix prices in collusion, ought not to entertain Communists.

However, the intellectual has trouble with these precepts. He doesn't object topeople holding strong views on this orthat aspect of conduct. But he can't under-stand how the precepts can be justifiedobjectively. He finds, for example, thatcheating is perfectly all right in some societies (even our own in some situations),that price fixing is standard operating practice in some places, and that Com-munists like to entertain Communists.

Hence, the cautious intellectual tries to find a more satisfactory set of fixedprinciples. This has led him in the past to find some "reason" for all the moralprecepts that men in different societies hold so dear. Thus he came up with amarvelous way toexplain thedivergencies of belief. All rational men seek to max-imize their "happiness." This, he said, is the basic precept of all conduct.

This second example of a moral precept sounds very plausible, but it's foreverrunning the risk of toppling into anutterly vague platitude. What is happiness,after all? If we'renot careful, we'll end upby saying that it's what all men seektomaximize. This is thereason that economists found it more satisfactoryto modifythe precept toread "all men seek to maximize profits." But then the precept lostits moral tone altogether. A prophet uninterested in profits could hardly be ex-pected to comply with the command; the more holy a man, the less likely wouldhe be to assert that the economist's precept was rational.

The third example is a very important one in contemporary thinking. It is theattempt to find rules of rational behavior in situations when the conflict between

ON RATIONAL DECISION MAKING 73

M

'.

the parties is governed by rule. This is the so-called "game-theory" approach torationality. In a constant sum two-person game, neither party has any "right"to expect more than the "value" of the game to him. He may get more if hisopponentacts stupidly, but he must admit that a min-max strategy is therationalchoice of both players. It is, in fact, "fair."

Having found a criterion of rationality that seems to work in a simple situation(the two-person, constant-sum game), game theorists are anxious to find similarcriteria in more complicated and "realistic" situations. For many of us, it isdoubtful whether Nash equilibrium points and the like are rational strategies,not because some "better"strategy clearly exists, but because the whole approachseems defective. The defectsoccur at the very outset, in the so-called simple two-person, constant-sum games. The rational strategy in this case is rational onlybecause it must be by definition. Given that there are only two players, given theexact pay-offs, given that the result of any game is constant, given that the pay-offs represent the rational objectives of theplayers, it follows that minimax is therational strategy. But if one player wants to lose, or to give the other something,or wants only tobe ahead, shall we say that he is therefore irrational? Theanswer,as everyone knows, is rather subtle. In effect, game theory does insist that ra-tional players follow arational structure in their choices, but not in theirutilities.In other words, it makes good sense to say that if choice A is preferred to B andB to C, then A will be preferred to C by a rational person. But to many gametheorists, it makes no sense to assert that it is "rational" to prefer A to B. Forexample, it makes no sense, they say, to assert that it is "rational" to preferpeace to war, or honesty to dishonesty. Hence, minimax strategies at best deter-mine a set of means given the ends.

On these grounds, it is simply a mistake to think that game theory, or much ofso-called decision theory, is an analysis of rational behavior. The work in thesefields is undoubtedly very important, but it has very little to do with our learn-ing more about rationality. This is because the problem of rationality is not todefine rules of behavior, given the goals, but rather to define rational goals. Torelegate rationality to the study of means only is to trivialize it. It is to lose thewhole traditional spirit of the concept of rational behavior to say that a man may"rationally"murder his friends in cold blood, aslong as he structures his choicesaccordingto "rational" rules.

3. Second answer: rational behavior is based on theevolution of Nature

Suppose we say that the search for rationality in a set of fixed moral preceptsfails. Hence, we try a second exploration, also based on a long history of thought.This approach argues that Nature is in some way fundamentally rational, andthat reason itself is an evolving concept. The most primitive amoeba show askeleton of rationality in their methods of nutrition and reproduction. Higherlivingforms may display quite elaborate rationality in their struggle to survive.So man, if he survives, will develop more and more elaborate and satisfactoryconcepts of rationality. The earliest rational goals were survival in any form.

74

C. WEST

CHURCHMAN

..

Then came comfortable survival, so that it was irrational to getwet orcold whenone didn't have to. Then came intellectual survival, so that it was irrational notto understand when one could understand.

This approach is very appealing on a number of grounds. It is more modestthan the moral precept. It doesn't say, "We have the final answer to rationality,"but rather "This is rational as we see it today." It allows for a constant re-exami-nation of the goals of man. Furthermore, in principle it permits objectivity, forit allows us to ask an empirical question : how is man evolving? If we can under-stand his evolution, we can understand what his rational goals really are. Forexample, if democracy is at a more advanced evolutionary stage of man's socialdevelopment than totalitarianism, then we can say that the advocates of totali-tarianism are irrational in today's world.

This theory of rationality made a lot of sense to thebiologists of the nineteenthand even the twentieth century. It also makes sense to today's evolutionaryindustrial theorists. Modern industry began with very crude machinery, crudelyoperated. After awhile men learned how to build better machines, but theyneglected the living standards of the worker. After awhile they were forced torecognize aworker'sclaims, but theycouldn't figureouthowto use him efficiently.Along came industrial engineering, and efficiency went up. Along came automa-tion, and it went up evenmore. Along came operationsresearch, and even greaterrefinements were introduced. At each stagewe redeveloped ournotion of rationalindustrialization. Today we don't hesitate to say that a management that ignoresworker rights or uses old methods of manufacturing is "backward." We thinkit is backward because it comes earlier in theevolutionary phases of industrializa-tion. Those of us that are honest about it expect that we will look backward tothe industrial theorist of two decades from now. God knows how irrational ourmethods may appearto be to the inhabitants of the twenty-third century.

It's all very happy thinking, this evolutionary concept of rationality. But italso has much of the feeling of naivete about it. At times it seems to be sayingthat any change is a good change, even if automation leads many citizens intoeconomic disaster, even if technology destroys individual creativeness, even ifscience blows us all to our doom. The next stage of industrial evolution may be1984, and therefore 1984 is rational! Get on with it at all costs; if change is pos-sible, do it !

Ifwe want to be honest, we have to admit that people are mean, arrogant, anddownright evil. Worst of all, they are stupid. They don't listen to good advice.They don't want the other fellow to put anything over on them. They all wantto be politicians; big, important politicians who make the important decisions.Some of the more shrewd want to be big scientists who will reallymake the im-portant decisions. It can't be my decision if it's made in accordance with a strictplan of development.It can't be very much at all if everyoneaccepts it as rational.

There is some comfort, it is true, in placing the responsibility for rationalitysquarely in the hands of collective mankind, rather than in the individual con-science. In a large world view, I can forget the crudities of my behavior and thatof my neighbor,because in the long sweepof things these crudities mean nothing.

ON RATIONAL

DECISION MAKING

75

i

v

Furthermore, the evolutionary theory seems to support an objective theory ofrationality, because it is at least conceivable that some day wewill have as satis-factory a theory of social evolution as we have today of biological evolution. Butthe theory doesn't answer our most pressing problem: is the way in which manevolves the rational way? We could say "Yes, by definition," so that no matterwhat man will come to be, what he will be will define our rational goals. But thisis an intolerable reply. Men fight to preserve what they take to be rational goals:freedom, love, beauty, knowledge. If they fail, shall we say they therefore foughtstupidly?

Not quite. There must be a difference between what men are or will be, andwhat they ought to be. The lulling comfort of evolutionary ethics is a delusion.Now one sensible thought is to say that men don't always turn out to be thepeople theywant to be. Whatever history man mayfollow, is indeed irrelevant tothe problem of rational goals. But what of the history man wanted to occur?Could we say that rationality is the foundation of man's deepest hopes andfondest dreams?

Perhaps we could say this if we knew how to. I said at the outset that therewerethreeexplorations we might make in search of rationality. Thefirst—thefixedmoral precept—is impractical. The second—theevolution of man's social state—isnaive. What is the third?

4. Third answer: rational conduct has a universal functionThe third is based on an earlier remark I let go by without much comment.

I said that the intellectual loves objectivity most of all. I could have said, just aswell, that he takes objective knowledge tobe a supremelyrational goal. In a way,this is our contemporaryparadox. Our strong emphasis on apositivist philosophyof science makes us say that science cannot determine the rational goals of man.But at the same time the very same philosophy says that objective knowledgeitself is a rational goal of scientists. How did it come toknow this?

Now at the end, I can come back to the management sciences and operationsresearch, to obtain just a hint of the solution of this paradox. Every operationsresearcher knows in his heart that the principle theme of his work is compromise :the compromise between objective knowledge and action. No project everre-sults in a system that works as the model says it ought to. It is simply a mistaketo picture the relationship between the researcher and the manager to be one inwhichresearch discovers what ought tobe done and "convinces" the manager todo it. Or that the manager "convinces" the researcher to keep quiet. Successfuloperations research, we often say, is the active cooperation of manager and re-searcher, in which each plays a necessary role in the development. The manager'srational objective is control; the researcher's is knowledge. Somehow, the twosacred goals of each become less important in the successful marriage of managersand researchers.

I said I would onlyend on a hint. I don't likean evolutionary theory of rationalgoals, because if matters go on in thefuture as they have in the past, the end ofman's evolution may be the most disastrously irrational state of affairs that is

76

C. WEST

CHURCHMAN

f

possible. But our concept of management science is that man can work on hisown evolution. He can work very hard on it, if he chooses to do so. One part ofthis work consists of the use of research to develop better systems. But the sys-

tems are only better if managersare also involved.The hint is this: the rational goals of manare those states that would evolve if

manager and scientist were to work together in bringing about change. "Work-ing together" is an overworked phrase these days. But we have begun to evolve avery special meaning of cooperation in the management sciences. This can beexpressed most succinctly as follows: management "works with" science when itdiscovers how science can become a way of managing. When I say that sciencecan become a way of managing, I don't imply automation or any other form ofmechanical decision making, because none of these is science. Science is thecreative and systematic discovery of knowledge. In operations research we arelearning how sciencecan be integrated into an organizationin such a manner thatit acts as a management function. Operations research is the process of lookingat science as a managementfunction.

The theme being developed here is this: a science that can only be conceivedas a discoverer of knowledge or a satisfier of intellectual curiosity is less rationalthan a science that can be conceived as managing as well.

By the same token, we should be able to look at management as a scientificfunction. This, indeed, is the manner in which research and development isevolving in our times. We can no longer think of science as individual behavior;it has clearly become a managed enterprise. As principles of the managementofscience evolve, we can expect that what we have hitherto called "scientificmethod" will become the management of science.

This is the hint as to the meaning of rationality: a social institution becomesrational to the extent that it can be considered to function like some other in-stitution. The evolution of the rationality of law will include the development oflaw as a social science. The evolution of the rationality of politics will includethe developmentof politics as an educational system.

In other words, it is impossible to determine the rationality of conduct interms of one framework alone, as the "fixed principle" theory demands. Nor isrational conduct simply a developmentalong certain lines, as the evolutionarytheory suggests. The test of the rationality of an institution, or a company, or aperson, is the determination of the manner in which X functions as V, whateverV may be.

In sum, I'm trying to say that a scientific study of behavior without soundmanagement can never determine the rationality of the behavior, just as a man-agement activity without science can never become rational management.