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Monday, April 19, 2010

The Iron Cage That Holds Us Captive

As long-term unemployment rates reach their highest levels since the Great Depression, discussion continues about a potential downfall of American capitalism. Even if America emerges from this crisis with no significant changes to the economy, there is a certain theory of economics which currently holds us captive.

Max Weber (1864-1920) was a German sociologist who wrote extensively about what he called "the iron cage of rationality." He had in mind the idea that capitalist societies were becoming ever-more dependent upon a rationalist approach to economics. Rationalism is the theory which assumes that all decisions are made based upon a cost-benefit analysis. It assumes that companies and consumers alike base all of their decisions upon available facts and choose the course of action which entails the greatest benefits.

There are several problems with this approach. On a large scale, Weber considered that a strictly rational approach to decision making would become so fine-tuned that we would become trapped inside of limits which we would unknowingly set for ourselves, or within an "iron cage of rationality." As technology becomes more and more advanced, examples of this can be seen all around us. Have you ever tried to order from the McDonald's lunch menu one minute before breakfast ends? The McDonald's corporation is so bound by cost-benefit analyses that you can't order from their lunch menu one second before breakfast ends, let alone one minute.

I worked for a company once which tracked every second of my daily activities. At the end of each week, detailed statistical reports were compiled of every conceivable area in which I could make progress. But the reports were based solely upon statistics and technology and could not take any other aspect of the work environment into consideration. If I had engaged in consultation with the department head for three hours, my report would simply show that my productivity was three hours behind where it should have been. Plus the two minutes and eighteen seconds it would take me to walk to and from my office.

Another flaw in the idea of rational economics is the fact that consumers are not strictly rational. This idea assumes that when you go to the store to pick out a jar of peanut butter, you will take into account all of the ingredients in competing products, calculate the cost per ounce, and know precisely the reasons for which you wish to purchase the peanut butter. Unfortunately, this theory does not take into account the fact that consumers rarely govern their purchases by a strict cost-benefit analysis. Sometimes we're just hungry.

Companies today certainly use technology and rationalism to their advantage. With each successive year, corporations learn how to squeeze more labor out of every second of productivity and how to maximize every cent of available funds. However, this approach does not allow them to consider strategies that lie outside of a strictly numerical cost-benefit analysis. Their potential for progress is not unlimited, but rather confined within an economic cage that holds them captive. Furthermore, rationalism assumes that customers are completely rationale when they clearly are not.

Perhaps more importantly, however, rationalism assumes that society is concerned with nothing besides efficiency. The more capitalist societies trend in this direction, the less freedom its citizens will have to explore avenues which cannot be tracked, analyzed, and reported.

Sound extreme? Theories which attempt to explain large-scale interactions typically do.

But consider this: How often do you finish a project only to exclaim, "What a waste of time?"

To a certain extent, we are already held captive by the iron cage of rationality.

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